80 FR 20261 - Notice of Exemption Involving BNP Paribas, S.A. (BNP or the Applicant); Located in Paris, France
DEPARTMENT OF LABOR
Employee Benefits Security Administration Federal Register Volume 80, Issue 72 (April 15, 2015)
Employee Benefits Security Administration
Federal Register Volume 80, Issue 72 (April 15, 2015)
| Page Range | 20261-20268 | |
| FR Document | 2015-08672 |
[Federal Register Volume 80, Number 72 (Wednesday, April 15, 2015)] [Notices] [Pages 20261-20268] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-08672] ----------------------------------------------------------------------- DEPARTMENT OF LABOR Employee Benefits Security Administration [Prohibited Transaction Exemption 2015-06; Application No. D-11827] Notice of Exemption Involving BNP Paribas, S.A. (BNP or the Applicant); Located in Paris, France AGENCY: Employee Benefits Security Administration, U.S. Department of Labor. ACTION: Notice of Exemption. ----------------------------------------------------------------------- SUMMARY: This document contains a notice of exemption issued by the Department of Labor (the Department) from certain prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the Internal Revenue Code of 1986, as amended (the Code). The exemption affects the ability of certain entities with specified relationships to BNP to continue to rely upon the relief provided by Prohibited Transaction Class Exemption 84-14. DATES: Effective Date: This exemption is effective as of the earliest date a judgment of conviction against BNP is entered in either: (1) Case Number 14-cr-00460 (LGS) in the District Court for the Southern District of New York; or (2) Case Number 2014 NY 051231 in the Supreme Court of the State of New York, County of New York. FOR FURTHER INFORMATION CONTACT: Scott Ness, telephone (202) 693-8561, Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor (these are not toll-free numbers). SUPPLEMENTARY INFORMATION: On November 26, 2014, the Department of Labor (the Department) published a notice of proposed exemption in the Federal Register at 79 FR 70661, for certain entities with specified relationships to BNP to continue rely upon the relief provided by Prohibited Transaction Class Exemption (PTE) 84-14,\1\ notwithstanding judgments of conviction against BNP in: (1) Case Number 14-cr-00460 (LGS) in the District Court for the Southern District of New York for conspiracy to commit an offense against the United States in violation of Title 18, United States Code, Section 371, by conspiring to violate the International Emergency Economic Powers Act, codified at Title 50, United States Code, Section 1701 et seq., and regulations issued thereunder, and the Trading with the Enemy Act, codified at Title 50, United States Code Appendix, Section 1 et seq., and regulations issued thereunder; and (2) Case Number 2014 NY 051231 in the Supreme Court of the State of New York, County of New York for falsifying business records in the first degree, in violation of Penal Law Sec. 175.10, and conspiracy in the fifth degree, in violation of Penal Law Sec. 105.05(1). --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- The proposed exemption contains conditions described in the QPAM class exemption, as well as a set of additional conditions, that must be satisfied in order for asset managers with specified relationships to BNP to engage in the transactions described in the QPAM class exemption. The individual exemption was requested by BNP pursuant to section 408(a) of ERISA 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, 66644, October 27, 2011). Effective December 31, 1978, section 102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue administrative exemptions under section 4975(c)(2) of the Code to the Secretary of Labor. [[Page 20262]] 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 published in the Federal Register. During the comment period, the Department received two written comments on the proposed exemption, one from Public Citizen (a public interest group) in opposition of the exemption, and the other from BNP. A discussion of Public Citizen's comment and BNP's comment follows below. Any capitalized terms used herein that are not otherwise defined have the meanings ascribed to them in the Summary of Facts and Representations in the notice of proposed exemption. Public Citizen's Comments Relating to Criminal Activity of BNP Public Citizen stated that legal tools, such as denial of the exemption, should be used to prevent criminal behavior. Public Citizen further asserted that convicted entities should not be permitted to engage in ``[c]omplex or higher risk investments,'' and that the lack of a criminal record should be a prerequisite to manage investments. Public Citizen also questioned certain BNP representations that plans would incur substantial costs as a result of BNP Affiliated QPAMs and BNP Related QPAMs (collectively, the BNP QPAMs) losing their ability to rely upon the relief in PTE 84-14 due to the Convictions. Public Citizen stated further that while punishment that penalizes employees who did no wrong should be avoided, ``collateral damage'' cannot always justify an exemption. Instead, it argues that an appropriate inquiry should be whether plan clients of the affected BNP QPAMs receive better investment returns from investment activities requiring reliance on PTE 84-14 than they would otherwise receive. Department's Response The Department notes that PTE 84-14 was granted based on an effort to improve the administration of the prohibited transaction rules of ERISA. Those rules prohibit various transactions between plans and certain parties in interest. The prohibited transaction rules sweep very broadly and, in some circumstances, could work to prevent beneficial transactions. For example, large employers and funds necessarily engage in a wide range of transactions with parties in interest that pose little danger to plan participants. For example, all of the different service providers to plans are technically parties in interest. Accordingly, Congress gave the Department authority to issue exemptions from the broad reach of the prohibited transaction rules where it has determined that such exemptions are in the interest of, and protective of, affected plans and the participants and beneficiaries thereof, as well as administratively feasible. Prohibited Transaction Exemption 84-14 (the QPAM Exemption) is one such exemption. A QPAM is a ``Qualified Professional Asset Manager.'' By definition, QPAMs are large regulated banks, savings and loan associations, insurance companies or federally registered investment advisors that meet certain standards of size and independence. PTE 84- 14 permits these independent plan asset managers to engage in a variety of beneficial arm's length transactions with parties in interest that would otherwise be prohibited. Under Part I of the class exemption, QPAMs cannot: Engage in self-dealing transactions; act in their own interest or the interest of their affiliates; and/or engage in transactions with parties that are in a position to affect their independent judgment, such as persons with ownership interests in the QPAM. Primarily, PTE 84-14 simply permits QPAMs to engage in various arm's length transactions with parties in interest and obviates the need to undertake time consuming compliance checks for parties in interest, forego investment opportunities, or seek an individual exemption from the Department for each transaction. The conditions in the exemption were designed to ensure that the transactions covered therein are protective of and beneficial to affected plans. The scope of the anti-criminal provision set forth in section I(g)of PTE 84-14 is very broad and covers entities with various relationships to a convicted entity. Some of those entities may not have had the ability to influence the policies, procedures or practices of the convicted entity; and they may not have been in a position to be influenced by the policies, procedures or practices of the convicted entity. Nevertheless, a consequence of the conviction of an entity with a business relationship to one or more QPAMs is that the QPAMs lose the ability to rely on the exemption for 10 years following the date of the conviction, unless granted individual exemptions. In reviewing applications for such exemptions, the Department will on a case-by-case basis consider the circumstances relating to the loss of QPAM status, and the specific conditions necessary to prevent potential abuse. Of particular importance is the degree to which the investment and compliance operations of the QPAM can be sufficiently isolated from the influence of ``bad actors''. Based on such considerations, the Department has previously granted conditional individual exemptions that permit asset managers to continue to engage in the transactions described in PTE 84-14, notwithstanding that the asset managers were affiliated with, or otherwise related to, a convicted entity. The Department has carefully considered Public Citizen's argument that BNP's exemption application should be rejected in order to deter criminal activity, the Department has concluded, however, that the interests of plan participants would be better protected by imposition of the stringent conditions set forth herein. It is unclear that the denial of the exemption application would have any meaningful effect on BNP's behavior. Moreover, the final exemption granted herein should promote adherence to strict fiduciary standards, insulate plans from any bad actors, and provide much or all of the deterrent effect that would have been achieved through outright denial. In this regard, it should be emphasized that BNP itself cannot act as a QPAM under the terms of the exemption, and that the BNP QPAMs were not involved in the criminal activities that give rise to the Convictions. Nor is the Department aware of any evidence that the investment management activities of the BNP QPAMs were affected, in any way, by BNP's criminal activities. Moreover, denial of the requested exemption would deprive BNP-related asset managers from the ability to act as QPAMs. It would not bar them from continuing to manage plan assets, and such managers could continue to engage in a wide range of transactions on behalf of those plans. The Department also notes Public Citizen's comments regarding the complexity of the transactions engaged in by BNP QPAMs, the relative investment returns of funds managed by those QPAMs, and the cost to plans for switching to a new QPAM. Undoubtedly, these are important issues that should be considered by the independent plan fiduciaries who hire or retain BNP asset managers. The Department does not believe these considerations are relevant, however, to its determination as to whether the BNP QPAMs may continue to engage in the transactions described in PTE 84-14 in light of the Convictions. [[Page 20263]] Public Citizen's Comments Regarding BNP Employees Public Citizen states that none of the individuals involved in the conduct underlying the Convictions should be allowed to manage ERISA and IRA assets. Public Citizen additionally questions whether it can be verified that employees of the BNP QPAMs were not involved in the crimes, and asserts that BNP should identify the individuals that participated in the criminal conduct so that the Department can confirm that they are not involved in oversight of the BNP QPAMs. The Department's Response The Department believes that Public Citizen's concern is substantially addressed in the exemption as originally proposed, through Subsection I(f), which requires that each ``BNP Affiliated QPAM,'' as defined in the exemption, ensure that none of its employees or agents, if any, that were involved in the criminal conduct that underlies the Convictions will engage in transactions on behalf of any investment fund subject to ERISA and managed by such BNP Affiliated QPAM. Unlike the conditions which are subject to correction in conjunction with the audit requirement, Subsection I(f) is not correctable through the audit process. Rather, a failure to abide by this condition will immediately and irrevocably disqualify a BNP Affiliated QPAM from the relief in this exemption for the entire period of the exemption. As with every condition of the exemption, the BNP Affiliated QPAMs must be able, at all times, to adequately demonstrate that this requirement has been met. Public Citizen's Comment Regarding the Auditor Public Citizen also questions the independence of the auditor required under the proposed exemption, and makes a request that the auditor be chosen by the Department (or subject to the Department's approval), that the auditor's reports be made public, including a description of instances wherein BNP Affiliated QPAMs were required to take remedial action, and that the auditor's reports be provided to the Department so that it may review the auditor's findings. The Department's Response The Department notes that a robust audit conducted by a sophisticated independent auditor, for the entire period covered by this exemption, is an important condition for relief under this exemption. The Department has taken care to ensure the independence and rigor of the audit; it has tightened the stringency of the audit conditions from the original proposal; and it has enhanced its ability to exercise oversight, if necessary. For example, new Subsection I(h)(2) provides that the BNP Affiliated QPAMs and, if applicable, BNP, will provide the auditor ``unconditional access to its business, including, but not limited to: Its computer systems, business records, transactional data, workplace locations, training materials, and personnel.'' Former Subsections I(h)(2) through I(h)(8) have been renumbered as I(h)(3) through I(h)(9). In former Subsection I(h)(4), now Subsection I(h)(5), the Department substituted the word ``procedures'' for ``steps'' in the first sentence; the Department also added the phrase ``and compliance with'' to the second sentence to reinforce the requirement that the auditor test for operational compliance with the Policies and Training requirements. The Department also added a new Subsection I(h)(10), which requires the BNP Affiliated QPAMs and the auditor to submit to the Department ``(A) any engagement agreement(s) entered into pursuant to the engagement of the auditor under this exemption, and (B) any engagement agreement entered into with any other entities retained in connection with such QPAM's compliance with the Training or Policies conditions of this exemption, no later than nine months after the date of the earlier of the Convictions (and one month after the execution of any agreement thereafter).'' Additionally, the Department removed from former Subsection I(h)(5), now Subsection I(h)(6), the following two sentences: ``Upon request, the auditor shall provide OED with all of the relevant workpapers reflecting any instances of noncompliance. The workpapers shall include an explanation of any corrective or remedial actions taken by the respective BNP Affiliated QPAM.'' A similar requirement that will be more broadly applicable to all of Section I(h) was moved to new Subsection I(h)(11) and requires the auditor to provide to OED, upon request, ``all of the workpapers created and utilized in the course of the audit, including, but not limited to: The audit plan, audit testing, identification of any instances of noncompliance by the relevant BNP Affiliated QPAM, and an explanation of any corrective or remedial actions taken by the applicable BNP Affiliated QPAM.'' The Department does not endorse the selection of any particular auditor. The Department instead sets a threshold for determining independence on behalf of the auditor and requires expertise in the appropriate field. With this in mind, Subsection I(h)(1) expressly requires retention of an ``independent auditor, who has been prudently selected and who has appropriate technical training and proficiency with ERISA.'' In the event that the Applicant contemplates replacing the current auditor, the exemption now requires BNP to notify the Department as to the identity of the replacement auditor at least 30 days prior to any such replacement, and BNP must be prepared to demonstrate to the Department's satisfaction that such replaced auditor is independent of BNP, experienced in the matters that are the subject of the exemption, and capable of making the determinations required of this exemption. Importantly, the exemption language in Subsection I(h)(9), formerly Subsection I(h)(8), and new Subsection I(h)(11) expressly requires that the auditor's reports (including instances of remedial action taken) be submitted to the Department. Furthermore, the exemption contains a condition in Subsection I(g)(1)(v) requiring that the ``BNP Affiliated QPAM does not make any material misrepresentations or omit material information in its communications with such regulators with respect to ERISA-covered plans . . .'' which is an obligation specifically applicable to the audit reports submitted by the BNP Affiliated QPAMs and which is, therefore, a material condition for relief under this exemption. After the Department receives each audit report, the reports will become a part of the administrative record and available to the public through the Department's Public Disclosure Room. Public Citizen's Hearing Request Finally, Public Citizen requests that the Department hold a public hearing in connection with the proposed exemption. The Department's Response Pursuant to the Department's regulations at 29 CFR part 2570.46, the Department will grant a hearing request where it is necessary to fully explore material factual issues raised by the person who requested the hearing. The Department recognizes that Public Citizen's comment letter also contains numerous legal and policy objections that are similar to the legal and policy objections it raised during a public hearing the Department held on January 15, 2015. That public hearing related to a request by Credit Suisse AG for an individual exemption by Credit [[Page 20264]] Suisse AG, to permit Credit Suisse AG-related asset managers to continue to engage in the types of transactions described in the PTE 84-14, notwithstanding certain convictions that were impending against Credit Suisse AG. Given that the legal and policy issues raised by Public Citizen in this case are not novel and were also raised and fully developed by them at a public hearing, and do not raise significant relevant factual issues concerning BNP, the Department has concluded that there is no need to hold an additional hearing in this case. Accordingly, the Department has determined not to hold a hearing. BNP's Comment The Applicant's comment requests several confirmations regarding the conditions of the proposed exemption, and provides clarifications and additional information in support of the Summary of Facts and Representations in the proposed exemption. The Applicant's requests and clarifications, and the Department's responses thereto, are as follows: 1. Section I(e) The Applicant's comment requests confirmation with regard to Section I(e) of the proposed exemption, which provides that a BNP Affiliated QPAM will not use its authority or influence to direct an investment fund managed by the QPAM to enter into any transaction with BNP or engage BNP to provide additional services for a fee paid by the investment fund. The Applicant requests that the Department confirm that this condition would not disallow a BNP Affiliated QPAM from trading in markets where BNP provides local subcustody services to global custodians of ERISA plans that are unaffiliated with BNP. According to the Applicant, to the extent that a BNP Affiliated QPAM enters into a transaction in a market where BNP is the local subcustodian, BNP might receive additional compensation from such global custodian. The Department declines to provide the confirmation requested above. In this regard, the Department is concerned about the potential for self-dealing inasmuch as, depending on the facts and circumstances, a BNP Affiliated QPAM might effectively use its ``authority or influence to direct'' an investment fund to ``enter into'' a ``transaction with'' BNP or ``provide additional services, for a fee borne by'' the investment fund. The Department notes however, that it is not expressing a view on whether any particular transaction would constitute a separate prohibited transaction under ERISA or the Code. 2. Section I(g)(2) The Applicant's comment requests confirmation with regard to Section I(g)(2) of the proposed exemption, which requires that each BNP Affiliated QPAM immediately develop and implement a program of training (the Training) conducted at least annually for relevant asset management, legal, compliance, and internal audit personnel and that ``the Training shall be set forth in the Policies.'' The Applicant requests that the Department confirm that this condition requires the Policies to expressly provide for the Training, but that the actual Training materials may be separate from the Policies and need not be duplicated verbatim within the Policies. The Department notes that participation in the Training is a crucial component of adhering to the Policies and of the exemptive relief. Therefore, the Department confirms that the actual Training materials need not be duplicated within the Policies so long as the Policies provide for and incorporate the Training requirement and provide specific details regarding the Training materials, including the identification of the particular training program and the primary training materials, the effective date(s) of any training manuals, and a brief outline of any information on the topics covered within the materials. 3. Section I(h)(1) The Applicant's comment requests confirmation with regard to Section I(h)(1) of the proposed exemption. Section I(h)(1) requires that the BNP Affiliated QPAMs submit to an annual audit conducted by an independent auditor. Pursuant to this condition, the first audit must cover the first six months following the earlier of the convictions, with each subsequent audit covering a corresponding twelve-month period. The Applicant requests confirmation that the final audit need only cover the last six months of the disqualifying period under Section I(g) of PTE 84-14. The Department clarifies that the final audit need only cover the remaining period under which this individual exemption is required. The Department adds that because there are two simultaneous cases that will lead to two separate Convictions (federal and state) for the same underlying conduct, the final period may be slightly longer than six months. That is, this individual exemption is effective upon the earlier of the two Convictions, but will remain in effect until ten years after the later of the two Convictions. 4. Section I(l) The Applicant's comment requests confirmation with regard to Section I(l) of the proposed exemption, which requires BNP to provide to interested persons a notice of the proposed exemption along with a separate summary describing the facts that led to the Convictions, and a prominently displayed statement that the Convictions result in a failure to meet a condition in PTE 84-14. The Applicant requests confirmation that the notice to interested persons required in accordance with Section (I)(l) was required to be sent only to ERISA- covered plans and IRAs that were clients as of the date the proposal was published in the Federal Register, and with respect to which PTE 84-14 may be used. Furthermore, the Applicant notes that Part II of the Form ADV is provided to each new separately managed account client and to the sponsor of each pooled fund prior to the inception of any asset management mandate. In the case of any banks or other entities that are not Registered Investment Advisors (and therefore do not maintain a Form ADV), the following disclosure will be included in the asset management or other account agreement: ``In managing the account, [the Manager] may rely on the exemptive relief provided by U.S. Department of Labor Individual Prohibited Transaction Exemption 2015-[XX]. The exemption enables [Manager] to act as a ``qualified professional asset manager'' under PTE 84-14, notwithstanding the criminal conviction of an affiliate, BNP Paribas SA, for its role in certain U.S. dollar transactions involving parties subject to U.S. sanctions. [The Manager] was not involved in that conduct or that conviction. A copy of the proposed and final exemption may be found on the Department's Web site, [http://www.dol.gov/ebsa/regs/ind_exemptionsmain.html].'' The Department confirms that the Applicant properly interpreted the requirements related to notifying interested persons of the proposed exemption, subject to the understanding that prospectively, notice of BNP's conviction must appear in both Part I and Part II of the Form ADVs of the BNP Affiliated QPAMs that are Registered Investment Advisers (RIAs) and remain there for ten years, and, in the case of BNP Affiliated QPAMs that are not RIAs, the additional disclosure noted above must be included in the asset [[Page 20265]] management or other account agreement. 5. The BNP Affiliated QPAMs The Applicant's comment makes certain clarifications to Paragraph 6 of the Summary of Facts and Representations, which describes BNP's relationship with the BNP Affiliated QPAMs. In this regard, Paragraph 6 provides that, ``the BNP Affiliated QPAMs include Fisher Francis Trees and Watt, Inc., BNP Paribas Investment Partners Trust Company, BNP Paribas Asset Management, Inc., BancWest Investment Services, and Bishop Street Capital Management which are subsidiaries of Bank of the West and First Hawaiian Bank, respectively, which themselves provide fiduciary services to ERISA-covered plans and IRAs. The Applicant represents that each of the above-named entities are third tier affiliates of BNP, and BNP owns all or substantially all interests, directly or indirectly, in such entities.'' The Applicant's comment provides that the BNP subsidiaries described in Paragraph 6 either currently rely on PTE 84-14 or may wish to do so in the future on behalf of ERISA-covered plans or IRAs. The Applicant states further that the list of BNP Affiliated QPAMs may change at any time depending on an entity's ERISA-covered plan or IRA client base or a change in strategy. The Applicant also notes that, while the BNP Affiliated QPAMs identified as third-tier subsidiaries in the application are indeed third-tier subsidiaries, other entities identified as BNP Affiliated QPAMs may be on other tiers, such as First Hawaiian Bank and Bank of the West, which are second-tier subsidiaries. Nevertheless, according to the Applicant, BNP owns all or substantially all interests, directly or indirectly, in the entities identified as BNP Affiliated QPAMs. The Department takes note of the Applicant's clarifications to Paragraph 6 of the Summary of Facts and Representations. After giving full consideration to the entire record, including the written comments, subject to the Department's responses thereto, the Department has decided to grant the exemption. The complete application file, with copies of the comments, is available for public inspection in the Public Disclosure Room of the Employee Benefits Security Administration, Room N-1515, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210. For a more complete statement of the facts and representations supporting the Department's decision to grant this exemption, refer to the proposed exemption published in the Federal Register on November 26, 2014, at 79 FR 70661. 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 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 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) 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 Section I: Covered Transactions The BNP Affiliated QPAMs and the BNP Related QPAMs shall not be precluded from relying on the relief provided by Prohibited Transaction Class Exemption (PTE) 84-14 \2\ notwithstanding the Convictions (as defined in Section II(c)),\3\ provided the following conditions are satisfied: --------------------------------------------------------------------------- \2\ 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). \3\ Section I(g) generally provides that ``[n]either the QPAM nor any affiliate thereof . . . nor any owner . . . of a 5 percent or more interest in the QPAM is a person who within the 10 years immediately preceding the transaction has been either convicted or released from imprisonment, whichever is later, as a result of'' certain felonies including: (1) Conspiracy to commit an offense against the United States in violation of Title 18, United States Code, Section 371, by conspiring to violate the International Emergency Economic Powers Act, codified at Title 50, United States Code, Section 1701 et seq., and regulations issued thereunder, and the Trading with the Enemy Act, codified at Title 50, United States Code Appendix, Section 1 et seq., and regulations issued thereunder; and (2) Falsifying business records in the first degree, in violation of Penal Law Sec. 175.10, and conspiracy in the fifth degree, in violation of Penal Law Sec. 105.05(1). --------------------------------------------------------------------------- (a) Any failure of the BNP Affiliated QPAMs or the BNP Related QPAMs to satisfy Section I(g) of PTE 84-14 arose solely from the Convictions; (b) The BNP Affiliated QPAMs and the BNP Related QPAMs (including officers, directors, agents other than BNP, and employees of such QPAMs) did not participate in the criminal conduct of BNP that is the subject of the Convictions; (c) The BNP Affiliated QPAMs and the BNP Related QPAMs did not directly receive compensation in connection with the criminal conduct of BNP that is the subject of the Convictions; (d) The criminal conduct of BNP that is the subject of the Convictions did not directly or indirectly involve the assets of any plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or section 4975 of the Code (an IRA); (e) A BNP Affiliated QPAM will not use its authority or influence to direct an ``investment fund'' (as defined in Section VI(b) of PTE 84-14) that is subject to ERISA and managed by such BNP Affiliated QPAM to enter into any transaction with BNP or engage BNP to provide additional services to such investment fund, for a direct or indirect fee borne by such investment fund regardless of whether such transactions or services may otherwise be within the scope of relief provided by an administrative or statutory exemption; (f) Each BNP Affiliated QPAM will ensure that none of its employees or agents, if any, that were involved in the criminal conduct that underlies the Convictions will engage in transactions [[Page 20266]] on behalf of any ``investment fund'' (as defined in Section VI(b) of PTE 84-14) subject to ERISA and managed by such BNP Affiliated QPAM; (g)(1) Each BNP Affiliated QPAM immediately develops, implements, maintains, and follows written policies (the Policies) requiring and reasonably designed to ensure that: (i) The asset management decisions of the BNP Affiliated QPAM are conducted independently of BNP's management and business activities; (ii) the BNP Affiliated QPAM fully complies with ERISA's fiduciary duties and ERISA and the Code's prohibited transaction provisions and does not knowingly participate in any violations of these duties and provisions with respect to ERISA- covered plans and IRAs; (iii) the BNP Affiliated QPAM does not knowingly participate in any other person's violation of ERISA or the Code with respect to ERISA-covered plans and IRAs; (iv) any filings or statements made by the BNP Affiliated QPAM to regulators, including but not limited to, the Department of Labor, the Department of the Treasury, the Department of Justice, and the Pension Benefit Guaranty Corporation, on behalf of ERISA-covered plans or IRAs are materially accurate and complete, to the best of such QPAM's knowledge at that time; (v) the BNP Affiliated QPAM does not make material misrepresentations or omit material information in its communications with such regulators with respect to ERISA-covered plans or IRAs, or make material misrepresentations or omit material information in its communications with ERISA-covered plan and IRA clients; (vi) the BNP Affiliated QPAM complies with the terms of this exemption; and (vii) any violations of or failure to comply with items (ii) through (vi) are corrected promptly upon discovery and any such violations or compliance failures not promptly corrected are reported, upon discovering the failure to promptly correct, in writing to appropriate corporate officers, the head of Compliance and the General Counsel of the relevant BNP Affiliated QPAM, the independent auditor responsible for reviewing compliance with the Policies, and a fiduciary of any affected ERISA-covered plan or IRA where such fiduciary is independent of BNP; however, with respect to any ERISA-covered plan or IRA sponsored by an ``affiliate'' (as defined in Section VI(d) of PTE 84-14) of BNP or beneficially owned by an employee of BNP or its affiliates, such fiduciary does not need to be independent of BNP. BNP Affiliated QPAMs will not be treated as having failed to develop, implement, maintain, or follow the Policies, provided that they correct any instances of noncompliance promptly when discovered or when they reasonably should have known of the noncompliance (whichever is earlier), and provided that they adhere to the reporting requirements set forth in this item (vii); (2) Each Affiliated QPAM immediately develops and implements a program of training (the Training), conducted at least annually for relevant BNP Affiliated QPAM asset management, legal, compliance, and internal audit personnel; the Training shall be set forth in the Policies and, at a minimum, cover the Policies, ERISA and Code compliance (including applicable fiduciary duties and the prohibited transaction provisions) and ethical conduct, the consequences for not complying with the conditions of this exemption (including the loss of the exemptive relief provided herein), and prompt reporting of wrongdoing; (h)(1) Each BNP Affiliated QPAM submits to an audit conducted annually by an independent auditor, who has been prudently selected and who has appropriate technical training and proficiency with ERISA to evaluate the adequacy of, and compliance with, the Policies and Training described herein; the audit requirement must be incorporated in the Policies and the first of the audits must be completed no later than twelve (12) months after the earlier of the Convictions and must cover the first six-month period that begins on the date of the earlier of the Convictions; all subsequent audits must cover the following corresponding twelve-month periods and be completed no later than six (6) months after the period to which the audit applies; (2) To the extent necessary for the auditor, in its sole opinion, to complete its audit and comply with the conditions for relief described herein, each BNP Affiliated QPAM and, if applicable, BNP, will grant the auditor unconditional access to its business, including, but not limited to: Its computer systems, business records, transactional data, workplace locations, training materials, and personnel; (3) The auditor's engagement shall specifically require the auditor to determine whether each BNP Affiliated QPAM has developed, implemented, maintained, and followed Policies in accordance with the conditions of this exemption and developed and implemented the Training, as required herein; (4) The auditor's engagement shall specifically require the auditor to test each BNP Affiliated QPAM's operational compliance with the Policies and Training; (5) For each audit, the auditor shall issue a written report (the Audit Report) to BNP and the BNP Affiliated QPAM to which the audit applies that describes the procedures performed by the auditor during the course of its examination. The Audit Report shall include the auditor's specific determinations regarding the adequacy of, and compliance with, the Policies and Training; the auditor's recommendations (if any) with respect to strengthening such Policies and Training; and any instances of the respective BNP Affiliated QPAM's noncompliance with the written Policies and Training described in paragraph (g) above. Any determinations made by the auditor regarding the adequacy of the Policies and Training and the auditor's recommendations (if any) with respect to strengthening the Policies and Training of the respective BNP Affiliated QPAM shall be promptly addressed by such BNP Affiliated QPAM, and any actions taken by such BNP Affiliated QPAM to address such recommendations shall be included in an addendum to the Audit Report. Any determinations by the auditor that the respective BNP Affiliated QPAM has implemented, maintained, and followed sufficient Policies and Training shall not be based solely or in substantial part on an absence of evidence indicating noncompliance; (6) The auditor shall notify the respective BNP Affiliated QPAM of any instances of noncompliance identified by the auditor within five (5) business days after such noncompliance is identified by the auditor, regardless of whether the audit has been completed as of that date; (7) With respect to each Audit Report, an executive officer of the BNP Affiliated QPAM to which the Audit Report applies certifies in writing, under penalty of perjury, that the officer has reviewed the Audit Report and this exemption; addressed, corrected, or remediated any inadequacies identified in the Audit Report; and determined that the Policies and Training in effect at the time of signing are adequate to ensure compliance with the conditions of this exemption and with the applicable provisions of ERISA and the Code; (8) An executive officer of BNP reviews the Audit Report for each BNP Affiliated QPAM and certifies in writing, under penalty of perjury, that such officer has reviewed each Audit Report; [[Page 20267]] (9) Each BNP Affiliated QPAM provides its certified Audit Report to the Department's Office of Exemption Determinations (OED), Suite 400, 200 Constitution Avenue NW., Washington, DC 20210, no later than 30 days following its completion, and each BNP Affiliated QPAM makes its Audit Report unconditionally available for examination by any duly authorized employee or representative of the Department, other relevant regulators, and any fiduciary of an ERISA-covered plan or IRA, the assets of which are managed by such BNP Affiliated QPAM; (10) Each BNP Affiliated QPAM and the auditor will submit to OED (A) any engagement agreement(s) entered into pursuant to the engagement of the auditor under this exemption, and (B) any engagement agreement entered into with any other entities retained in connection with such QPAM's compliance with the Training or Policies conditions of this exemption, no later than nine months after the date of the earlier of the Convictions (and one month after the execution of any agreement thereafter); and (11) The auditor shall provide OED, upon request, all of the workpapers created and utilized in the course of the audit, including, but not limited to: The audit plan, audit testing, identification of any instances of noncompliance by the relevant BNP Affiliated QPAM, and an explanation of any corrective or remedial actions taken by the applicable BNP Affiliated QPAM; (12) BNP must notify the Department at least 30 days prior to any substitution of an auditor, except that no such replacement will meet the requirements of this paragraph unless and until BNP demonstrates to the Department's satisfaction that such new auditor is independent of BNP, experienced in the matters that are the subject of the exemption, and capable of making the determinations required of this exemption; (i) The BNP Affiliated QPAMs comply with each condition of PTE 84- 14, as amended, with the only exceptions being the violations of Section I(g) that are attributable to the Convictions; (j) Effective from the date of publication of this granted exemption in the Federal Register, with respect to each ERISA-covered plan or IRA for which a BNP Affiliated QPAM provides asset management or other discretionary fiduciary services, each BNP Affiliated QPAM agrees: (1) To comply with ERISA and the Code, as applicable to the particular ERISA-covered plan or IRA, and refrain from engaging in prohibited transactions; (2) not to waive, limit, or qualify the liability of the BNP Affiliated QPAM for violating ERISA or the Code or engaging in prohibited transactions; (3) not to require the ERISA- covered plan or IRA (or sponsor of such ERISA-covered plan or beneficial owner of such IRA) to indemnify the BNP Affiliated QPAM for violating ERISA or engaging in prohibited transactions, except for violations or prohibited transactions caused by an error, misrepresentation, or misconduct of a plan fiduciary or other party hired by the plan fiduciary who is independent of BNP; (4) not to restrict the ability of such ERISA-covered plan or IRA to terminate or withdraw from its arrangement with the BNP Affiliated QPAM; and (5) not to impose any fees, penalties, or charges for such termination or withdrawal with the exception of reasonable fees, appropriately disclosed in advance, that are specifically designed to prevent generally recognized abusive investment practices or specifically designed to ensure equitable treatment of all investors in a pooled fund in the event such withdrawal or termination may have adverse consequences for all other investors, provided that such fees are applied consistently and in like manner to all such investors. Within six (6) months of the date of publication of this granted exemption in the Federal Register, each BNP Affiliated QPAM will provide a notice to such effect to each ERISA-covered plan or IRA for which a BNP Affiliated QPAM provides asset management or other discretionary fiduciary services; (k) Each BNP Affiliated QPAM will maintain records necessary to demonstrate that the conditions of this exemption have been met for six (6) years following the date of any transaction for which such BNP Affiliated QPAM relies upon the relief in the exemption; (l) The BNP Affiliated QPAMs provided a notice of the proposed exemption along with a separate summary describing the facts that led to the Convictions, which has been submitted to the Department, and a prominently displayed statement that the Convictions result in a failure to meet a condition in PTE 84-14 to: (1) Each sponsor of an ERISA-covered plan and each beneficial owner of an IRA invested in an investment fund managed by a BNP Affiliated QPAM, or the sponsor of an investment fund in any case where a BNP Affiliated QPAM acts only as a sub-advisor to the investment fund; (2) each entity that may be a BNP Related QPAM; and (3) with respect to ERISA-covered plan and IRA investors in the Income Plus Fund, the identity of which is unknown, each distribution agent of the fund with a request that such distribution agent forward the documents to its clients. (m) A BNP Affiliated QPAM will not fail to meet the terms of this exemption solely because a BNP Related QPAM or a different BNP Affiliated QPAM fails to satisfy a condition for relief under this exemption. A BNP Related QPAM will not fail to meet the terms of this exemption solely because BNP, a BNP Affiliated QPAM, or a different BNP Related QPAM fails to satisfy a condition for relief under this exemption. Section II: Definitions (a) The term ``BNP Affiliated QPAM'' means a ``qualified professional asset manager'' (as defined in Section VI(a) \4\ of PTE 84-14) that relies on the relief provided by PTE 84-14 and with respect to which BNP is a current or future ``affiliate'' (as defined in Section VI(d) of PTE 84-14). The term ``BNP Affiliated QPAM'' excludes the parent entity, BNP. --------------------------------------------------------------------------- \4\ In general terms, a QPAM is an independent fiduciary that is a bank, savings and loan association, insurance company, or investment adviser that meets certain equity or net worth requirements and other licensure requirements and that has acknowledged in a written management agreement that it is a fiduciary with respect to each plan that has retained the QPAM. --------------------------------------------------------------------------- (b) The term ``BNP Related QPAM'' means any current or future ``qualified professional asset manager'' (as defined in Section VI(a) of PTE 84-14) that relies on the relief provided by PTE 84-14, and with respect to which BNP owns a direct or indirect five percent or more interest, but with respect to which BNP is not an ``affiliate'' (as defined in Section VI(d) of PTE 84-14). (c) The term ``Convictions'' means the judgments of conviction against BNP in: (1) Case Number 14-cr-00460 (LGS) in the District Court for the Southern District of New York for conspiracy to commit an offense against the United States in violation of Title 18, United States Code, Section 371, by conspiring to violate the International Emergency Economic Powers Act, codified at Title 50, United States Code, Section 1701 et seq., and regulations issued thereunder, and the Trading with the Enemy Act, codified at Title 50, United States Code Appendix, Section 1 et seq., and regulations issued thereunder; and (2) Case Number 2014 NY 051231 in the Supreme Court of the State of New York, County of New York for falsifying business records in the first degree, in violation of Penal Law Sec. 175.10, and conspiracy in the fifth degree, in violation of Penal Law Sec. 105.05(1). [[Page 20268]] Effective Date: This exemption is effective as of the earliest date a judgment of conviction against BNP is entered in either: (1) Case Number 14-cr-00460 (LGS) in the District Court for the Southern District of New York; or (2) Case Number 2014 NY 051231 in the Supreme Court of the State of New York, County of New York. Signed at Washington, DC, this 9th day of April 2015. Lyssa Hall, Director of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor. [FR Doc. 2015-08672 Filed 4-14-15; 8:45 am] BILLING CODE 4510-29-P
![Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 20261
Notice to Interested Persons exemption is administratively feasible, Case Number 2014 NY 051231 in the
Notice of the proposed exemption in the interests of the plan and of its Supreme Court of the State of New
will be given to all Union members participants and beneficiaries, and York, County of New York.
within 15 days of the publication of the protective of the rights of participants
FOR FURTHER INFORMATION CONTACT:
notice of proposed exemption in the and beneficiaries of the plan;
(3) The proposed exemptions, if Scott Ness, telephone (202) 693–8561,
Federal Register, by first class U.S. mail Office of Exemption Determinations,
granted, will be supplemental to, and
to the last known address of all such Employee Benefits Security
not in derogation of, any other
individuals, and by posting in the Administration, U.S. Department of
provisions of the Act and/or the Code,
Union hall in a prominent location. Labor (these are not toll-free numbers).
including statutory or administrative
Such notice will contain a copy of the
exemptions and transitional rules. SUPPLEMENTARY INFORMATION: On
notice of proposed exemption, as
Furthermore, the fact that a transaction November 26, 2014, the Department of
published in the Federal Register, and
is subject to an administrative or Labor (the Department) published a
a supplemental statement, as required
statutory exemption is not dispositive of notice of proposed exemption in the
pursuant to 29 CFR 2570.43(a)(2). The
whether the transaction is in fact a Federal Register at 79 FR 70661, for
supplemental statement will inform
prohibited transaction; and certain entities with specified
interested persons of their right to (4) The proposed exemptions, if
comment on and to request a hearing relationships to BNP to continue rely
granted, will be subject to the express
with respect to the pending exemption. upon the relief provided by Prohibited
condition that the material facts and
Written comments and hearing requests Transaction Class Exemption (PTE) 84–
representations contained in each
are due within 45 days of the 14,1 notwithstanding judgments of
application are true and complete, and
publication of the notice of proposed conviction against BNP in: (1) Case
that each application accurately
exemption in the Federal Register. All Number 14-cr-00460 (LGS) in the
describes all material terms of the
comments will be made available to the District Court for the Southern District
transaction which is the subject of the
public. of New York for conspiracy to commit
exemption.
Warning: Do not include any an offense against the United States in
personally identifiable information Signed at Washington, DC, this 9th day of violation of Title 18, United States
(such as name, address, or other contact April, 2015. Code, Section 371, by conspiring to
information) or confidential business Lyssa E. Hall, violate the International Emergency
information that you do not want Director, Office of Exemption Determinations, Economic Powers Act, codified at Title
publicly disclosed. All comments may Employee Benefits Security Administration. 50, United States Code, Section 1701 et
be posted on the Internet and can be [FR Doc. 2015–08565 Filed 4–14–15; 8:45 am] seq., and regulations issued thereunder,
retrieved by most Internet search BILLING CODE 4510–29–P and the Trading with the Enemy Act,
engines. codified at Title 50, United States Code
FOR FURTHER INFORMATION CONTACT: Appendix, Section 1 et seq., and
DEPARTMENT OF LABOR regulations issued thereunder; and (2)
Erica R. Knox of the Department,
telephone (202) 693–8644. (This is not Employee Benefits Security Case Number 2014 NY 051231 in the
a toll-free number.) Administration Supreme Court of the State of New
York, County of New York for falsifying
General Information [Prohibited Transaction Exemption 2015– business records in the first degree, in
The attention of interested persons is 06; Application No. D–11827] violation of Penal Law § 175.10, and
directed to the following: conspiracy in the fifth degree, in
Notice of Exemption Involving BNP
(1) The fact that a transaction is the violation of Penal Law § 105.05(1).
Paribas, S.A. (BNP or the Applicant);
subject of an exemption under section The proposed exemption contains
Located in Paris, France
408(a) of the Act and/or section conditions described in the QPAM class
4975(c)(2) of the Code does not relieve AGENCY: Employee Benefits Security exemption, as well as a set of additional
a fiduciary or other party in interest or Administration, U.S. Department of conditions, that must be satisfied in
disqualified person from certain other Labor. order for asset managers with specified
provisions of the Act and/or the Code, ACTION: Notice of Exemption. relationships to BNP to engage in the
including any prohibited transaction transactions described in the QPAM
provisions to which the exemption does SUMMARY: This document contains a
notice of exemption issued by the class exemption. The individual
not apply and the general fiduciary exemption was requested by BNP
responsibility provisions of section 404 Department of Labor (the Department)
from certain prohibited transaction pursuant to section 408(a) of ERISA and
of the Act, which, among other things, section 4975(c)(2) of the Code, and in
require a fiduciary to discharge his restrictions of the Employee Retirement
Income Security Act of 1974, as accordance with the procedures set
duties respecting the plan solely in the forth in 29 CFR part 2570, subpart B (76
interest of the participants and amended (ERISA), and the Internal
Revenue Code of 1986, as amended (the FR 66637, 66644, October 27, 2011).
beneficiaries of the plan and in a Effective December 31, 1978, section
prudent fashion in accordance with Code). The exemption affects the ability
of certain entities with specified 102 of the Reorganization Plan No. 4 of
section 404(a)(1)(b) of the Act; nor does 1978, 5 U.S.C. App. 1 (1996), transferred
it affect the requirement of section relationships to BNP to continue to rely
upon the relief provided by Prohibited the authority of the Secretary of the
401(a) of the Code that the plan must Treasury to issue administrative
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operate for the exclusive benefit of the Transaction Class Exemption 84–14.
exemptions under section 4975(c)(2) of
employees of the employer maintaining DATES: Effective Date: This exemption is
the Code to the Secretary of Labor.
the plan and their beneficiaries; effective as of the earliest date a
(2) Before an exemption may be judgment of conviction against BNP is 1 49 FR 9494 (March 13, 1984), as corrected at 50
granted under section 408(a) of the Act entered in either: (1) Case Number 14– FR 41430 (October 10, 1985), as amended at 70 FR
and/or section 4975(c)(2) of the Code, cr–00460 (LGS) in the District Court for 49305 (August 23, 2005), and as amended at 75 FR
the Department must find that the the Southern District of New York; or (2) 38837 (July 6, 2010).
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Written Comments providers to plans are technically QPAM status, and the specific
The Department invited all interested parties in interest. Accordingly, conditions necessary to prevent
persons to submit written comments Congress gave the Department authority potential abuse. Of particular
and/or requests for a public hearing to issue exemptions from the broad importance is the degree to which the
with respect to the notice of proposed reach of the prohibited transaction rules investment and compliance operations
where it has determined that such of the QPAM can be sufficiently isolated
exemption published in the Federal
exemptions are in the interest of, and from the influence of ‘‘bad actors’’.
Register. During the comment period,
protective of, affected plans and the Based on such considerations, the
the Department received two written
participants and beneficiaries thereof, as Department has previously granted
comments on the proposed exemption,
well as administratively feasible. conditional individual exemptions that
one from Public Citizen (a public Prohibited Transaction Exemption permit asset managers to continue to
interest group) in opposition of the 84–14 (the QPAM Exemption) is one engage in the transactions described in
exemption, and the other from BNP. such exemption. A QPAM is a PTE 84–14, notwithstanding that the
A discussion of Public Citizen’s ‘‘Qualified Professional Asset Manager.’’ asset managers were affiliated with, or
comment and BNP’s comment follows By definition, QPAMs are large otherwise related to, a convicted entity.
below. Any capitalized terms used regulated banks, savings and loan The Department has carefully
herein that are not otherwise defined associations, insurance companies or considered Public Citizen’s argument
have the meanings ascribed to them in federally registered investment advisors that BNP’s exemption application
the Summary of Facts and that meet certain standards of size and should be rejected in order to deter
Representations in the notice of independence. PTE 84–14 permits these criminal activity, the Department has
proposed exemption. independent plan asset managers to concluded, however, that the interests
Public Citizen’s Comments Relating to engage in a variety of beneficial arm’s of plan participants would be better
Criminal Activity of BNP length transactions with parties in protected by imposition of the stringent
interest that would otherwise be conditions set forth herein. It is unclear
Public Citizen stated that legal tools, prohibited. Under Part I of the class that the denial of the exemption
such as denial of the exemption, should exemption, QPAMs cannot: Engage in application would have any meaningful
be used to prevent criminal behavior. self-dealing transactions; act in their effect on BNP’s behavior. Moreover, the
Public Citizen further asserted that own interest or the interest of their final exemption granted herein should
convicted entities should not be affiliates; and/or engage in transactions promote adherence to strict fiduciary
permitted to engage in ‘‘[c]omplex or with parties that are in a position to standards, insulate plans from any bad
higher risk investments,’’ and that the affect their independent judgment, such actors, and provide much or all of the
lack of a criminal record should be a as persons with ownership interests in deterrent effect that would have been
prerequisite to manage investments. the QPAM. achieved through outright denial.
Public Citizen also questioned certain Primarily, PTE 84–14 simply permits In this regard, it should be
BNP representations that plans would QPAMs to engage in various arm’s emphasized that BNP itself cannot act as
incur substantial costs as a result of BNP length transactions with parties in a QPAM under the terms of the
Affiliated QPAMs and BNP Related interest and obviates the need to exemption, and that the BNP QPAMs
QPAMs (collectively, the BNP QPAMs) undertake time consuming compliance were not involved in the criminal
losing their ability to rely upon the checks for parties in interest, forego activities that give rise to the
relief in PTE 84–14 due to the investment opportunities, or seek an Convictions. Nor is the Department
Convictions. Public Citizen stated individual exemption from the aware of any evidence that the
further that while punishment that Department for each transaction. The investment management activities of the
penalizes employees who did no wrong conditions in the exemption were BNP QPAMs were affected, in any way,
should be avoided, ‘‘collateral damage’’ designed to ensure that the transactions by BNP’s criminal activities. Moreover,
cannot always justify an exemption. covered therein are protective of and denial of the requested exemption
Instead, it argues that an appropriate beneficial to affected plans. would deprive BNP-related asset
inquiry should be whether plan clients The scope of the anti-criminal managers from the ability to act as
of the affected BNP QPAMs receive provision set forth in section I(g)of PTE QPAMs. It would not bar them from
better investment returns from 84–14 is very broad and covers entities continuing to manage plan assets, and
investment activities requiring reliance with various relationships to a such managers could continue to engage
on PTE 84–14 than they would convicted entity. Some of those entities in a wide range of transactions on behalf
otherwise receive. may not have had the ability to of those plans.
influence the policies, procedures or The Department also notes Public
Department’s Response
practices of the convicted entity; and Citizen’s comments regarding the
The Department notes that PTE 84–14 they may not have been in a position to complexity of the transactions engaged
was granted based on an effort to be influenced by the policies, in by BNP QPAMs, the relative
improve the administration of the procedures or practices of the convicted investment returns of funds managed by
prohibited transaction rules of ERISA. entity. Nevertheless, a consequence of those QPAMs, and the cost to plans for
Those rules prohibit various the conviction of an entity with a switching to a new QPAM.
transactions between plans and certain business relationship to one or more Undoubtedly, these are important issues
parties in interest. The prohibited QPAMs is that the QPAMs lose the that should be considered by the
transaction rules sweep very broadly ability to rely on the exemption for 10 independent plan fiduciaries who hire
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and, in some circumstances, could work years following the date of the or retain BNP asset managers. The
to prevent beneficial transactions. For conviction, unless granted individual Department does not believe these
example, large employers and funds exemptions. considerations are relevant, however, to
necessarily engage in a wide range of In reviewing applications for such its determination as to whether the BNP
transactions with parties in interest that exemptions, the Department will on a QPAMs may continue to engage in the
pose little danger to plan participants. case-by-case basis consider the transactions described in PTE 84–14 in
For example, all of the different service circumstances relating to the loss of light of the Convictions.
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![20264 Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices
Suisse AG, to permit Credit Suisse AG- prohibited transaction under ERISA or in effect until ten years after the later of
related asset managers to continue to the Code. the two Convictions.
engage in the types of transactions
2. Section I(g)(2) 4. Section I(l)
described in the PTE 84–14,
notwithstanding certain convictions that The Applicant’s comment requests The Applicant’s comment requests
were impending against Credit Suisse confirmation with regard to Section confirmation with regard to Section I(l)
AG. I(g)(2) of the proposed exemption, of the proposed exemption, which
Given that the legal and policy issues which requires that each BNP Affiliated requires BNP to provide to interested
raised by Public Citizen in this case are QPAM immediately develop and persons a notice of the proposed
not novel and were also raised and fully implement a program of training (the exemption along with a separate
developed by them at a public hearing, Training) conducted at least annually summary describing the facts that led to
and do not raise significant relevant for relevant asset management, legal, the Convictions, and a prominently
factual issues concerning BNP, the compliance, and internal audit displayed statement that the
Department has concluded that there is personnel and that ‘‘the Training shall Convictions result in a failure to meet a
no need to hold an additional hearing in be set forth in the Policies.’’ The condition in PTE 84–14. The Applicant
this case. Accordingly, the Department Applicant requests that the Department requests confirmation that the notice to
has determined not to hold a hearing. confirm that this condition requires the interested persons required in
BNP’s Comment Policies to expressly provide for the accordance with Section (I)(l) was
Training, but that the actual Training required to be sent only to ERISA-
The Applicant’s comment requests materials may be separate from the covered plans and IRAs that were
several confirmations regarding the Policies and need not be duplicated clients as of the date the proposal was
conditions of the proposed exemption, verbatim within the Policies. published in the Federal Register, and
and provides clarifications and
The Department notes that with respect to which PTE 84–14 may
additional information in support of the
participation in the Training is a crucial be used. Furthermore, the Applicant
Summary of Facts and Representations
component of adhering to the Policies notes that Part II of the Form ADV is
in the proposed exemption. The
and of the exemptive relief. Therefore, provided to each new separately
Applicant’s requests and clarifications,
the Department confirms that the actual managed account client and to the
and the Department’s responses thereto,
are as follows: Training materials need not be sponsor of each pooled fund prior to the
duplicated within the Policies so long as inception of any asset management
1. Section I(e) the Policies provide for and incorporate mandate. In the case of any banks or
The Applicant’s comment requests the Training requirement and provide other entities that are not Registered
confirmation with regard to Section I(e) specific details regarding the Training Investment Advisors (and therefore do
of the proposed exemption, which materials, including the identification of not maintain a Form ADV), the
provides that a BNP Affiliated QPAM the particular training program and the following disclosure will be included in
will not use its authority or influence to primary training materials, the effective the asset management or other account
direct an investment fund managed by date(s) of any training manuals, and a agreement: ‘‘In managing the account,
the QPAM to enter into any transaction brief outline of any information on the [the Manager] may rely on the
with BNP or engage BNP to provide topics covered within the materials. exemptive relief provided by U.S.
additional services for a fee paid by the Department of Labor Individual
3. Section I(h)(1) Prohibited Transaction Exemption
investment fund. The Applicant
requests that the Department confirm The Applicant’s comment requests 2015–[XX]. The exemption enables
that this condition would not disallow confirmation with regard to Section [Manager] to act as a ‘‘qualified
a BNP Affiliated QPAM from trading in I(h)(1) of the proposed exemption. professional asset manager’’ under PTE
markets where BNP provides local Section I(h)(1) requires that the BNP 84–14, notwithstanding the criminal
subcustody services to global custodians Affiliated QPAMs submit to an annual conviction of an affiliate, BNP Paribas
of ERISA plans that are unaffiliated with audit conducted by an independent SA, for its role in certain U.S. dollar
BNP. According to the Applicant, to the auditor. Pursuant to this condition, the transactions involving parties subject to
extent that a BNP Affiliated QPAM first audit must cover the first six U.S. sanctions. [The Manager] was not
enters into a transaction in a market months following the earlier of the involved in that conduct or that
where BNP is the local subcustodian, convictions, with each subsequent audit conviction. A copy of the proposed and
BNP might receive additional covering a corresponding twelve-month final exemption may be found on the
compensation from such global period. The Applicant requests Department’s Web site, [http://
custodian. confirmation that the final audit need www.dol.gov/ebsa/regs/ind_
The Department declines to provide only cover the last six months of the exemptionsmain.html].’’
the confirmation requested above. In disqualifying period under Section I(g) The Department confirms that the
this regard, the Department is concerned of PTE 84–14. Applicant properly interpreted the
about the potential for self-dealing The Department clarifies that the final requirements related to notifying
inasmuch as, depending on the facts audit need only cover the remaining interested persons of the proposed
and circumstances, a BNP Affiliated period under which this individual exemption, subject to the understanding
QPAM might effectively use its exemption is required. The Department that prospectively, notice of BNP’s
‘‘authority or influence to direct’’ an adds that because there are two conviction must appear in both Part I
tkelley on DSK3SPTVN1PROD with NOTICES
investment fund to ‘‘enter into’’ a simultaneous cases that will lead to two and Part II of the Form ADVs of the BNP
‘‘transaction with’’ BNP or ‘‘provide separate Convictions (federal and state) Affiliated QPAMs that are Registered
additional services, for a fee borne by’’ for the same underlying conduct, the Investment Advisers (RIAs) and remain
the investment fund. The Department final period may be slightly longer than there for ten years, and, in the case of
notes however, that it is not expressing six months. That is, this individual BNP Affiliated QPAMs that are not
a view on whether any particular exemption is effective upon the earlier RIAs, the additional disclosure noted
transaction would constitute a separate of the two Convictions, but will remain above must be included in the asset
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![Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices 20265
management or other account Register on November 26, 2014, at 79 precluded from relying on the relief
agreement. FR 70661. provided by Prohibited Transaction
Class Exemption (PTE) 84–14 2
5. The BNP Affiliated QPAMs General Information
notwithstanding the Convictions (as
The Applicant’s comment makes The attention of interested persons is defined in Section II(c)),3 provided the
certain clarifications to Paragraph 6 of directed to the following: following conditions are satisfied:
the Summary of Facts and (1) The fact that a transaction is the (a) Any failure of the BNP Affiliated
Representations, which describes BNP’s subject of an exemption under section QPAMs or the BNP Related QPAMs to
relationship with the BNP Affiliated 408(a) of the Act or section 4975(c)(2) of satisfy Section I(g) of PTE 84–14 arose
QPAMs. In this regard, Paragraph 6 the Code does not relieve a fiduciary or solely from the Convictions;
provides that, ‘‘the BNP Affiliated other party in interest or disqualified (b) The BNP Affiliated QPAMs and
QPAMs include Fisher Francis Trees person from certain other provisions of the BNP Related QPAMs (including
and Watt, Inc., BNP Paribas Investment the Act and/or the Code, including any officers, directors, agents other than
Partners Trust Company, BNP Paribas prohibited transaction provisions to BNP, and employees of such QPAMs)
Asset Management, Inc., BancWest which the exemption does not apply did not participate in the criminal
Investment Services, and Bishop Street and the general fiduciary responsibility conduct of BNP that is the subject of the
Capital Management which are provisions of section 404 of the Act, Convictions;
subsidiaries of Bank of the West and which, among other things, require a (c) The BNP Affiliated QPAMs and
First Hawaiian Bank, respectively, fiduciary to discharge his duties the BNP Related QPAMs did not
which themselves provide fiduciary respecting the plan solely in the interest directly receive compensation in
services to ERISA-covered plans and of the participants and beneficiaries of connection with the criminal conduct of
IRAs. The Applicant represents that the plan and in a prudent fashion in BNP that is the subject of the
each of the above-named entities are accordance with section 404(a)(1)(B) of Convictions;
third tier affiliates of BNP, and BNP the Act; nor does it affect the (d) The criminal conduct of BNP that
owns all or substantially all interests, requirement of section 401(a) of the is the subject of the Convictions did not
directly or indirectly, in such entities.’’ Code that the plan must operate for the directly or indirectly involve the assets
The Applicant’s comment provides exclusive benefit of the employees of of any plan subject to Part 4 of Title I
that the BNP subsidiaries described in the employer maintaining the plan and of ERISA (an ERISA-covered plan) or
Paragraph 6 either currently rely on PTE their beneficiaries; section 4975 of the Code (an IRA);
84–14 or may wish to do so in the future (2) In accordance with section 408(a) (e) A BNP Affiliated QPAM will not
on behalf of ERISA-covered plans or of ERISA and section 4975(c)(2) of the use its authority or influence to direct
IRAs. The Applicant states further that Code, the Department makes the an ‘‘investment fund’’ (as defined in
the list of BNP Affiliated QPAMs may following determinations: The Section VI(b) of PTE 84–14) that is
change at any time depending on an exemption is administratively feasible, subject to ERISA and managed by such
entity’s ERISA-covered plan or IRA the exemption is in the interests of the BNP Affiliated QPAM to enter into any
client base or a change in strategy. The plan and of its participants and transaction with BNP or engage BNP to
Applicant also notes that, while the beneficiaries, and the exemption is provide additional services to such
BNP Affiliated QPAMs identified as protective of the rights of participants investment fund, for a direct or indirect
third-tier subsidiaries in the application fee borne by such investment fund
and beneficiaries of the plan;
are indeed third-tier subsidiaries, other regardless of whether such transactions
(3) The exemption is supplemental to,
entities identified as BNP Affiliated or services may otherwise be within the
and not in derogation of, any other
QPAMs may be on other tiers, such as scope of relief provided by an
provisions of ERISA, including statutory
First Hawaiian Bank and Bank of the administrative or statutory exemption;
or administrative exemptions and
West, which are second-tier (f) Each BNP Affiliated QPAM will
transitional rules. Furthermore, the fact
subsidiaries. Nevertheless, according to ensure that none of its employees or
that a transaction is subject to an
the Applicant, BNP owns all or agents, if any, that were involved in the
administrative or statutory exemption is
substantially all interests, directly or criminal conduct that underlies the
not dispositive of whether the
indirectly, in the entities identified as Convictions will engage in transactions
transaction is in fact a prohibited
BNP Affiliated QPAMs. The Department
transaction; and
takes note of the Applicant’s
(4) The availability of this exemption 2 49 FR 9494 (March 13, 1984), as corrected at 50
clarifications to Paragraph 6 of the FR 41430 (October 10, 1985), as amended at 70 FR
is subject to the express condition that
Summary of Facts and Representations. 49305 (August 23, 2005), and as amended at 75 FR
the material facts and representations 38837 (July 6, 2010).
After giving full consideration to the
contained in the application accurately 3 Section I(g) generally provides that ‘‘[n]either
entire record, including the written
describe all material terms of the the QPAM nor any affiliate thereof . . . nor any
comments, subject to the Department’s owner . . . of a 5 percent or more interest in the
transaction which is the subject of the
responses thereto, the Department has QPAM is a person who within the 10 years
exemption.
decided to grant the exemption. The immediately preceding the transaction has been
Accordingly, the following exemption either convicted or released from imprisonment,
complete application file, with copies of
is granted under the authority of section whichever is later, as a result of’’ certain felonies
the comments, is available for public including: (1) Conspiracy to commit an offense
408(a) of ERISA and section 4975(c)(2)
inspection in the Public Disclosure against the United States in violation of Title 18,
of the Code and in accordance with the
Room of the Employee Benefits Security United States Code, Section 371, by conspiring to
procedures set forth in 29 CFR part violate the International Emergency Economic
Administration, Room N–1515, U.S.
2570, subpart B (76 FR 66637, 66644, Powers Act, codified at Title 50, United States
tkelley on DSK3SPTVN1PROD with NOTICES
Department of Labor, 200 Constitution Code, Section 1701 et seq., and regulations issued
October 27, 2011):
Avenue NW., Washington, DC 20210. thereunder, and the Trading with the Enemy Act,
For a more complete statement of the Exemption codified at Title 50, United States Code Appendix,
facts and representations supporting the Section 1 et seq., and regulations issued thereunder;
Department’s decision to grant this Section I: Covered Transactions and (2) Falsifying business records in the first
degree, in violation of Penal Law § 175.10, and
exemption, refer to the proposed The BNP Affiliated QPAMs and the conspiracy in the fifth degree, in violation of Penal
exemption published in the Federal BNP Related QPAMs shall not be Law § 105.05(1).
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![20268 Federal Register / Vol. 80, No. 72 / Wednesday, April 15, 2015 / Notices
Effective Date: This exemption is FOR FURTHER INFORMATION CONTACT: Foundation on the Arts and Humanities
effective as of the earliest date a Questions regarding the funding Act of 1965.
judgment of conviction against BNP is opportunity announcements should be DATES: See SUPPLEMENTARY INFORMATION
entered in either: (1) Case Number 14– emailed to HarwoodGrants@dol.gov or section for meeting dates.
cr–00460 (LGS) in the District Court for directed to Heather Wanderski, Program ADDRESSES: The meetings will be held at
the Southern District of New York; or (2) Analyst, or Jim Barnes, Director, Office Constitution Center at 400 7th Street
Case Number 2014 NY 051231 in the of Training Programs and SW., Washington, DC 20506. See
Supreme Court of the State of New Administration, at 847–759–7700 (note SUPPLEMENTARY INFORMATION for meeting
York, County of New York. this is not a toll-free number). Personnel room numbers.
Signed at Washington, DC, this 9th day of will not be available to answer
FOR FURTHER INFORMATION CONTACT:
April 2015. questions after 5:00 p.m., ET. To obtain
further information on the Susan Lisette Voyatzis, Committee
Lyssa Hall, Management Officer, 400 7th Street
Director of Exemption Determinations,
Harwood Training Grant Program, visit
the OSHA Web site at: http:// SW., Room, 4060, Washington, DC
Employee Benefits Security Administration, 20506; (202) 606–8322; evoyatzis@
U.S. Department of Labor. www.osha.gov/dte/sharwood/
index.html. neh.gov. Hearing-impaired individuals
[FR Doc. 2015–08672 Filed 4–14–15; 8:45 am] who prefer to contact us by phone may
Questions regarding Grants.gov
BILLING CODE 4510–29–P
should be emailed to Support@ use NEH’s TDD terminal at (202) 606–
grants.gov or directed to the Grants.gov 8282.
Contact Center, at 1–800–518–4726 (toll SUPPLEMENTARY INFORMATION: Pursuant
DEPARTMENT OF LABOR
free number). The Contact Center is to section 10(a)(2) of the Federal
Occupational Safety and Health available 24 hours a day, 7 days a week. Advisory Committee Act (5 U.S.C.
Administration The Contact Center is closed on Federal App.), notice is hereby given of the
holidays. following meetings:
Susan Harwood Training Grant SUPPLEMENTARY INFORMATION:
1. Date: May 13, 2015.
Program, FY 2015 Time: 8:30 a.m. to 5:00 p.m.
Authority and Signature Room: 4002.
AGENCY: Occupational Safety and Health This meeting will discuss
Administration (OSHA), Labor. David Michaels, Ph.D., MPH,
Assistant Secretary of Labor for applications on the subjects of
ACTION: Notice of availability of funds Occupational Safety and Health, Education and Public Programs for
and funding opportunity directed the preparation of this notice. Digital Humanities: Implementation
announcements (FOA) for Targeted The authority for this notice is Section Grants, submitted to the Office of Digital
Topic Training and Capacity Building 21 of the Occupational Safety and Humanities.
grants. Health Act of 1970, (29 U.S.C. 670), 2. Date: May 14, 2015.
Public Law 113–235, and Secretary of Time: 8:30 a.m. to 5:00 p.m.
SUMMARY : This notice announces Labor’s Order No. 1–2012 (77 FR 3912). Room: 4002.
availability of approximately $3.5 This meeting will discuss
million for Susan Harwood Training Funding Opportunity Number: SHTG–
applications on the subject of
Program grants. Two separate funding FY–15–01 (Targeted Topic grants)
Visualization for Digital Humanities:
opportunity announcements are Funding Opportunity Number: SHTG–
Implementation Grants, submitted to the
available for Targeted Topic Training FY–15–02 (Capacity Building grants)
Office of Digital Humanities.
grants and Capacity Building grants. Catalog of Federal Domestic Assistance
Because these meetings will include
Two types of grants are being Number: 17.502.
review of personal and/or proprietary
announced under each funding Signed at Washington, DC, on April 6, financial and commercial information
opportunity. Funding Opportunity 2015. given in confidence to the agency by
Number SHTG–FY–15–01 will cover the David Michaels, grant applicants, the meetings will be
two types of Targeted Topic Training Assistant Secretary of Labor for Occupational closed to the public pursuant to sections
grants: Targeted Topic Training and Safety and Health. 552b(c)(4) and 552b(c)(6) of Title 5,
Targeted Topic Training and [FR Doc. 2015–08509 Filed 4–14–15; 8:45 am] U.S.C., as amended. I have made this
Educational Materials Development BILLING CODE 4510–26–P determination pursuant to the authority
grants. Funding Opportunity Number granted me by the Chairman’s
SHTG–FY–15–02 will cover the two Delegation of Authority to Close
types of Capacity Building grants: NATIONAL FOUNDATION ON THE Advisory Committee Meetings dated
Capacity Building Developmental and ARTS AND THE HUMANITIES July 19, 1993.
Capacity Building Pilot grants.
Dated: April 8, 2015.
DATES: Grant applications for both Meetings of Humanities Panel
Lisette Voyatzis,
Targeted Topic Training and Capacity AGENCY: National Endowment for the Committee Management Officer.
Building grants must be received Humanities. [FR Doc. 2015–08607 Filed 4–14–15; 8:45 am]
electronically by the Grants.gov system
ACTION: Notice of meetings. BILLING CODE 7536–01–P
no later than 11:59 p.m., ET, on
Tuesday, June 2, 2015. SUMMARY: The National Endowment for
tkelley on DSK3SPTVN1PROD with NOTICES
ADDRESSES: The complete Susan the Humanities will hold two meetings NATIONAL TRANSPORTATION
Harwood Training Grant Program of the Humanities Panel, a federal SAFETY BOARD
funding opportunity announcements advisory committee, during May, 2015.
and all information needed to apply for The purpose of the meetings is for panel Sunshine Act Meeting
these funding opportunities are review, discussion, evaluation, and
available at the Grants.gov Web site, recommendation of applications for TIME AND DATE: 9:30 a.m., Tuesday, April
http://www.grants.gov. financial assistance under the National 28, 2015.
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Document Created: 2015-12-18 11:13:02
Document Modified: 2015-12-18 11:13:02
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | Notice of Exemption. | |
| Contact | Scott Ness, telephone (202) 693-8561, Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor (these are not toll-free numbers). | |
| FR Citation | 80 FR 20261 |
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