82_FR_36362 82 FR 36214 - Proposed Exemptions From Certain Prohibited Transaction Restrictions

82 FR 36214 - Proposed Exemptions From Certain Prohibited Transaction Restrictions

DEPARTMENT OF LABOR
Employee Benefits Security Administration

Federal Register Volume 82, Issue 148 (August 3, 2017)

Page Range36214-36235
FR Document2017-16295

This document contains notices of pendency before the Department of Labor (the Department) of proposed exemptions from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). If granted, these proposed exemptions allow designated parties to engage in transactions that would otherwise be prohibited provided the conditions stated there in are met. This notice includes the following proposed exemptions: D- 11869, Liberty Mutual Insurance Company; and D-11916, Russell Investment Management, LLC (RIM), Russell Investments Capital, LLC (RICap), and their Affiliates.

Federal Register, Volume 82 Issue 148 (Thursday, August 3, 2017)
[Federal Register Volume 82, Number 148 (Thursday, August 3, 2017)]
[Notices]
[Pages 36214-36235]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-16295]



[[Page 36213]]

Vol. 82

Thursday,

No. 148

August 3, 2017

Part II





Department of Labor





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Employee Benefits Security Administration





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Proposed Exemptions From Certain Prohibited Transaction Restrictions; 
Notice

Federal Register / Vol. 82 , No. 148 / Thursday, August 3, 2017 / 
Notices

[[Page 36214]]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Proposed Exemptions From Certain Prohibited Transaction 
Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code). If granted, these proposed 
exemptions allow designated parties to engage in transactions that 
would otherwise be prohibited provided the conditions stated there in 
are met. This notice includes the following proposed exemptions: D-
11869, Liberty Mutual Insurance Company; and D-11916, Russell 
Investment Management, LLC (RIM), Russell Investments Capital, LLC 
(RICap), and their Affiliates.

DATES: All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice.

ADDRESSES: Comments and requests for a hearing should state: (1) The 
name, address, and telephone number of the person making the comment or 
request, and (2) the nature of the person's interest in the exemption 
and the manner in which the person would be adversely affected by the 
exemption. A request for a hearing must also state the issues to be 
addressed and include a general description of the evidence to be 
presented at the hearing.
    All written comments and requests for a hearing (at least three 
copies) should be sent via mail to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, U.S. 
Department of Labor, 200 Constitution Avenue NW., Suite 400, 
Washington, DC 20210. Attention: Application No. ___, stated in each 
Notice of Proposed Exemption or via private delivery service or courier 
to the Employee Benefits Security Administration (EBSA), Office of 
Exemption Determinations, U.S. Department of Labor, 122 C St. NW., 
Suite 400, Washington, DC 20001. Attention: Application No. ___, stated 
in each Notice of Proposed Exemption. Interested persons are also 
invited to submit comments and/or hearing requests to EBSA via email or 
FAX. Any such comments or requests should be sent either by email to: 
[email protected], by FAX to (202) 693-8474, or online through http://www.regulations.gov by the end of the scheduled comment period. The 
applications for exemption and the comments received will be available 
for public inspection in the Public Documents Room of the Employee 
Benefits Security Administration, U.S. Department of Labor, Room N-
1515, 200 Constitution Avenue NW., Washington, DC 20210.
    Warning: All comments will be made available to the public. Do not 
include any personally identifiable information (such as Social 
Security number, name, address, or other contact information) or 
confidential business information that you do not want publicly 
disclosed. All comments may be posted on the Internet and can be 
retrieved by most Internet search engines.

SUPPLEMENTARY INFORMATION: 

Notice To Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).
    The proposed exemptions were requested in applications filed 
pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the 
Code, and in accordance with procedures set forth in 29 CFR part 2570, 
subpart B (76 FR 66637, 66644, October 27, 2011).\1\ Effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type requested to the Secretary of 
Labor. Therefore, these notices of proposed exemption are issued solely 
by the Department.
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    \1\ The Department has considered exemption applications 
received prior to December 27, 2011 under the exemption procedures 
set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 
10, 1990).
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    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

Liberty Mutual Insurance Company

(Liberty Mutual or the Applicant)

Located in Boston, MA

[Application No. D-11869]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of 29 U.S.C. 1108 (section 408(a) of the Employee Retirement 
Income Security Act of 1974, as amended (ERISA or the Act)) and 26 
U.S.C. 4975(c)(2) (section 4975(c)(2) of the Internal Revenue Code of 
1986, as amended (the Code)), and in accordance with the procedures set 
forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 
2011).\2\ Effective December 31, 1978, section 102 of Reorganization 
Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority 
of the Secretary of the Treasury to issue exemptions of the type 
requested to the Secretary of Labor. Therefore, this notice of proposed 
exemption is issued solely by the Department. If the proposed exemption 
is granted, the restrictions of sections 406(a)(1)(A), 406(a)(1)(B), 
and 406(a)(1)(D) of ERISA and the sanctions resulting from the 
application of sections 4975(a) and 4975(b) of the Code, by reason of 
sections 4975(c)(1)(A), 4975(c)(1)(B), and 4975(c)(1)(D) of the Code, 
shall not apply to a transaction between a party in interest with 
respect to an employee benefit plan sponsored by Liberty Mutual or its 
affiliates (the Liberty Mutual Plan) and such Liberty Mutual Plan, as 
described in Part I of Prohibited Transaction Exemption 96-23 (PTE 96-
23),\3\ provided that the in-house asset manager (INHAM) for the 
Liberty Mutual Plan has discretionary control with respect to plan 
assets involved in the transaction, and certain conditions are 
satisfied.
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    \2\ For purposes of this proposed exemption, references to the 
provisions of section 406 of Title I of ERISA, unless otherwise 
specified, should be read to refer as well to the corresponding 
provisions of section 4975 of the Code.
    \3\ 61 FR 15975 (April 10, 1996), as amended at 76 FR 18255 
(April 1, 2011).
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Summary of Facts and Representations \4\
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    \4\ The Summary of Facts and Representations is based on the 
Applicant's representations and does not reflect the views of the 
Department, unless indicated otherwise.
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Background

    1. Liberty Mutual is an insurance company domiciled in the

[[Page 36215]]

Commonwealth of Massachusetts, engaged primarily in the provision of 
property and casualty insurance. Liberty Mutual is a wholly-owned 
subsidiary of Liberty Mutual Holding Company Inc. (Liberty Mutual 
Group), which, together with its subsidiaries and affiliates, is a 
diversified global insurer. Liberty Mutual Group is based in Boston, 
Massachusetts and currently operates in 30 countries, with 
approximately 900 offices worldwide and over 50,000 employees.
    2. Liberty Mutual Group established the Liberty Mutual Retirement 
Benefit Plan (the Retirement Plan) in 1951 in a consolidation of the 
Employees' Retirement Annuity Plan of Liberty Mutual, Liberty Mutual 
Fire and the Liberty Mutual Supplementary Pension Plan. Liberty Mutual 
represents that the Retirement Plan is a defined benefit plan providing 
benefits based on a cash balance formula and a final average pay 
formula. Liberty Mutual states that, as of December 31, 2014, the 
Retirement Plan had assets valued at $6.24 billion with 77,244 
participants and beneficiaries covered. Liberty Mutual represents that, 
prior to the enactment of ERISA, the Retirement Plan was funded under, 
and its assets were invested pursuant to, a group annuity contract. 
Liberty Mutual represents that the Retirement Plan continued to be 
funded and managed through the use of a group annuity contract, until 
2011, when the assets of the Retirement Plan were transferred to a 
trust, the Liberty Mutual Retirement Plan Master Trust (the Trust).\5\ 
According to Liberty Mutual, in 2011, Liberty Mutual established a 
separate investment management subsidiary, Liberty Mutual Group Asset 
Management Inc. (LMGAMI), described in more detail below, which was 
appointed as the Retirement Plan's investment manager. The Bank of New 
York Mellon became the Retirement Plan's trustee.
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    \5\ According to the Retirement Plan's Investment Policy 
Statement, effective October 24, 2014, a small portion of the 
Retirement Plan's legacy assets remain in the group annuity contract 
issued by Liberty Life Assurance Company of Boston. The Retirement 
Plan intends to transition all of its assets from the group annuity 
contract to the Trust.
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LMGAMI

    3. Liberty Mutual represents that LMGAMI became a registered 
investment adviser (an RIA) under the Investment Advisers Act of 1940, 
as amended (the Advisers Act) in May 2011. According to Liberty Mutual, 
there were several unrelated business objectives that motivated the 
decision to register LMGAMI as an RIA. First, Liberty Mutual owns a 
number of entities operating in, and incorporated under the laws of, 
non-U.S. jurisdictions. Liberty Mutual represents that, as with its 
U.S. operations, Liberty Mutual's preference is for LMGAMI to manage 
its assets internally in conjunction with the assets of other Liberty 
Mutual affiliates. Liberty Mutual states further that, at the time the 
decision was made to register LMGAMI as an RIA, the benefits derived 
from being able to internally manage more of Liberty Mutual's foreign 
operations, as well as the fees associated with managing institutional 
third party money, was expected to offset the financial, administrative 
and regulatory burdens associated with LMGAMI being an RIA.
    Furthermore, Liberty Mutual states that LMGAMI's registration as an 
RIA provided the collateral opportunity to transfer the assets of the 
Retirement Plan to a trust and to appoint LMGAMI as the Retirement 
Plan's discretionary investment manager, as permitted under ERISA. 
Liberty Mutual states that investing the assets of the Retirement Plan 
through an independent trust could provide the Retirement Plan access 
to investments that were otherwise not permitted or practical under the 
terms of a group annuity contract. When LMGAMI became an RIA, the 
assets of the Retirement Plan were transferred to the Trust and LMGAMI 
was appointed as the investment manager of the Retirement Plan and any 
other employee benefit plan maintained for the benefit of the employees 
of Liberty Mutual and its affiliated entities that is subject to the 
fiduciary responsibility provisions of Part IV of Title I of ERISA 
(collectively with the Retirement Plan, the Liberty Mutual Plans).
    4. The Department notes that the rules set forth in section 406 of 
ERISA proscribe certain ``prohibited transactions'' between plans and 
related parties with respect to those plans, known as ``parties in 
interest.'' Under section 3(14) of ERISA, parties in interest with 
respect to a plan include, among others, service providers with respect 
to the plan, and certain of their affiliates. The prohibited 
transaction provisions under section 406(a) of ERISA prohibit, in 
relevant part, sales, leases, loans or the provision of services 
between a party in interest and a plan (or an entity whose assets are 
deemed to constitute the assets of a plan), as well as the use of plan 
assets by or for the benefit of, or a transfer of plan assets to, a 
party in interest.\6\ Under the authority of ERISA section 408(a) and 
Code section 4975(c)(2), the Department has the authority to grant 
exemptions from such ``prohibited transactions'' in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 
66644, October 27, 2011).
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    \6\ The prohibited transaction provisions also include certain 
fiduciary prohibited transactions under section 406(b) of ERISA, 
which do not necessitate a transaction between a plan and a party in 
interest. These include transactions involving fiduciary self-
dealing, fiduciary conflicts of interest, and kickbacks to 
fiduciaries.
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    5. Liberty Mutual states that PTE 96-23 provides broad exemptive 
relief for transactions entered into on behalf of a plan at the 
direction of an ``in-house asset manager'' (i.e., an INHAM), an 
investment manager that manages assets for related employee benefit 
plans, upon meeting certain requirements. The principal part of the 
exemption is relief for transactions between an INHAM and persons who 
are parties in interest to the plan solely by reason of providing 
services to the plan or by reason of a relationship to such a service 
provider; and certain ``co-joint venturers'' with the plan's sponsoring 
employer. Among other things, in order to rely on the relief, the INHAM 
must adopt written policies and procedures designed to ensure 
compliance with the conditions of the exemption, and a qualified, 
independent auditor must annually conduct an audit of compliance with 
the policies and procedures and certain conditions of the exemption.\7\ 
Moreover, Liberty Mutual states that relief under PTE 96-23 is only 
available to entities that register as RIAs. Specifically, Part 
IV(a)(2) of PTE 96-23 defines an INHAM, in relevant part, as ``an 
investment adviser registered under the [Advisers Act.]'' The 
requirement that an INHAM be registered under the Advisers Act as an 
RIA was included, in addition to others, to ``help to ensure that the 
INHAM is an entity that has developed an appropriate level of expertise 
in financial and business matters.'' \8\ Liberty Mutual's 
representations regarding its experience and expertise are described in 
paragraph 27 below.
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    \7\ See 67 FR 18257, 18258 (April 1, 2011).
    \8\ See 60 FR 15600 (March 24, 1995).
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Decision To Withdraw RIA Status

    6. According to Liberty Mutual, LMGAMI determined that maintaining 
its RIA status was more burdensome than originally anticipated and 
would not further Liberty Mutual's business strategy. The Applicant 
states that, in its insurance business, Liberty Mutual invests 
significant amounts of capital in long-term investment vehicles (such 
as private capital transactions). The Applicant states that LMGAMI's

[[Page 36216]]

registration as an RIA was required to create strategic partnerships 
with a small number of large institutional investors with like 
objectives. By doing so, Liberty Mutual could enhance its ability to 
invest in such assets and provide additional diversification through 
such investments.
    7. Liberty Mutual represents that: Legislative changes such as 
those enacted under the Dodd-Frank Wall Street Reform and Consumer 
Protection Act; \9\ regulatory changes that substantially discounted 
the value of long-term illiquid investments for purposes of satisfying 
the capital requirements applicable to insurance companies and other 
financial services companies; and adverse changes in the capital 
treatment of such investments by credit rating agencies; combined to 
substantially diminish the appetite for such investments, among large 
institutions, and essentially derailed this business objective. As a 
result, the Applicant states, Liberty Mutual had no unaffiliated third 
party assets under management, and had no intention to seek to manage 
any such assets.
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    \9\ Public Law 111-203, 124 Stat. 1376 (2010).
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    8. Without any third-party assets under its management, the 
Applicant states that the rules and regulations pertaining to 
investments made by RIAs are inapplicable to Liberty Mutual's business 
model. Liberty Mutual represents that a significant part of its 
business is the investment of assets that belong to the insurance 
company. Thus, the efficient investment of substantial sums of its 
assets is critical to its ongoing operations. As a regulated insurance 
company, it must maintain certain statutory reserves and meet minimum 
standards of risk-based capital. Liberty Mutual is subject to 
regulation by state authorities that monitor its ongoing solvency and 
establish certain rules and procedures that must be followed with 
respect to the investments of its assets.
    9. Similarly, Liberty Mutual states the Advisers Act contains other 
rules and prohibitions intended to protect a third party investor from 
the adviser over-promoting its recommendations. The Applicant states 
that while such restrictions may be appropriate for protecting the 
interests of third-party investors, these conditions added substantial 
burdens for an entity managing billions of dollars of assets for an 
integrated group of affiliated financial services companies and did not 
provide any useful protection when LMGAMI was communicating with the 
sophisticated and financially astute officers of Liberty Mutual and its 
other affiliates.\10\
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    \10\ The Department notes that it is not expressing a view 
whether certain rules under the Advisers Act may be unduly 
burdensome or inappropriate in protecting Liberty Mutual's 
interests.
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    10. Liberty Mutual states that the Advisers Act imposes the 
safeguards and limitations contained therein because many of a given 
RIA's clients are individuals without significant sophistication and/or 
bargaining power and without any other statutory regime to protect them 
against any potential adviser misconduct. However, the only ``client'' 
money under Liberty Mutual's management is that of its own Retirement 
Plan. As such, the Applicant states that Liberty Mutual and LMGAMI are 
already legally compelled as fiduciaries to act in the Retirement 
Plan's best interests under provisions of section 404 of ERISA. Liberty 
Mutual and LMGAMI are expressly precluded from acting to the detriment 
of the Retirement Plan, and any action undertaken to benefit itself or 
any of its affiliates would be precluded by the provisions of section 
406 of ERISA (among others). Moreover, the Applicant states that 
Liberty Mutual has an economic interest in the performance of the 
Retirement Plan's assets, as ERISA and the Code make the company 
responsible for any shortfalls in the Retirement Plan's funding. Thus, 
Liberty Mutual states that it and the Retirement Plan have a 
commonality of interests when it comes to the success of the Retirement 
Plan's investments that is not typically present between an RIA and its 
client.\11\
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    \11\ The Department notes that this exemption does not provide 
relief for LMGAMI or any other Liberty Mutual entity to receive a 
fee in connection with any transaction described herein.
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    11. Thus, Liberty Mutual represents that while LMGAMI's status as 
an RIA afforded the benefits available under PTE 96-23 and the ability 
to manage the Retirement Plan's assets in a trusteed arrangement, the 
burdens for the business and its operations made continuing such status 
unacceptable. Liberty Mutual represents that LMGAMI filed a Form ADV-W 
with the Securities and Exchange Commission on October 27, 2014, to 
effect the withdrawal of its RIA status. As such, Liberty Mutual 
states, LMGAMI no longer qualifies to serve as an INHAM pursuant to PTE 
96-23.
    12. Upon LMGAMI discontinuing its RIA registration, Liberty Mutual, 
as an investment manager under section 3(38) of ERISA, assumed 
management responsibilities over the assets of the Retirement Plan 
under an investment management agreement with an effective date of 
October 27, 2014 (the IMA). LMGAMI continues to provide investment 
services to the Retirement Plan as a sub-adviser to Liberty Mutual, at 
no cost, pursuant to a sub-adviser agreement between Liberty Mutual and 
LMGAMI, effective October 27, 2014 (the SAA). Liberty Mutual submitted 
the IMA and the SAA to the Massachusetts Department of Insurance 
(Department of Insurance) on October 10, 2014, and the Department of 
Insurance approved the IMA and SAA on October 24, 2014.

Exemptive Relief Requested

    13. Liberty Mutual requests an individual exemption from sections 
406(a)(1)(A), 406(a)(1)(B), and 406(a)(1)(D) of ERISA with regard to 
the management by Liberty Mutual and its asset manager affiliates 
(collectively, the Liberty Mutual Asset Managers) of the plan assets of 
the Liberty Mutual Plans. In this regard, Liberty Mutual requests 
exemptive relief for certain party-in-interest transactions with 
respect to which the Liberty Mutual Asset Managers would engage in on 
behalf of a Liberty Mutual Plan if PTE 96-23 were available. Such 
transactions include arm's-length sales or exchanges of property, the 
provision of necessary services, and various commercially appropriate 
extensions of credit. According to Liberty Mutual, the requested relief 
includes transactions for which no other statutory or administrative 
exemptions are available, including, hedges of currency risks 
associated with investments denominated in foreign currencies, as well 
as transactions with regard to assets for which there is not an 
established market, such as real estate transactions, secondary 
investments in private equity vehicles, and certain private debt 
offerings of reliable borrowers.
    14. Liberty Mutual states that sections 3(14)(A) and 3(14)(B) of 
ERISA define the term ``party in interest'' to include, respectively, 
any fiduciary of a plan and any person providing services to a plan. 
Numerous entities currently provide, and will in the future continue to 
provide services to the Liberty Mutual Plans, including as brokers, 
custodians, investment advisers, consultants, actuaries or trustees, 
and therefore constitute parties in interest with respect to the 
Liberty Mutual Plans. Furthermore, section 3(14)(I) of ERISA defines 
the term ``party in interest'' to include certain entities (co-joint 
venturers) owning at least 10% of a joint venture in which an employer 
of employees participating in the plan (or its parent) has at least a 
50% interest.

[[Page 36217]]

    15. Liberty Mutual represents that section 406(a)(1)(A) of ERISA 
prohibits the sale or exchange, or leasing, of property between a plan 
and a party in interest. Liberty Mutual states that, to the extent that 
any service provider, such as a broker that provides brokerage services 
to a Liberty Mutual Plan or any co-joint venturer, sells any security 
(including a debt instrument) or other property to, or purchases a 
security or other property from, a Liberty Mutual Plan as a principal, 
a prohibited transaction would occur under section 406(a)(1)(A) of 
ERISA.
    16. Liberty Mutual represents that section 406(a)(1)(B) of ERISA 
prohibits the lending of money or other extension of credit between a 
plan and a party in interest. Thus, Liberty Mutual states, to the 
extent that any service provider to a Liberty Mutual Plan or a co-joint 
venturer of Liberty Mutual, such as a bank, holds a mortgage on real 
property that a Liberty Mutual Plan owns, or a broker extends credit to 
a Liberty Mutual Plan to effect a securities transaction, or a Liberty 
Mutual Plan purchases a debt obligation of any person that is also a 
service provider to such Liberty Mutual Plan or a co-joint venture of 
Liberty Mutual, a prohibited transaction would occur under section 
406(a)(1)(B) of ERISA.
    17. Liberty Mutual further states that section 406(a)(1)(D) of 
ERISA prohibits a fiduciary with respect to a plan from causing such 
plan to engage in a transaction, if such fiduciary knows or should know 
that such transaction constitutes a transfer to, or use by or for the 
benefit of, a party in interest, of any assets of such plan. As such, 
Liberty Mutual states, to the extent that any Liberty Mutual Asset 
Manager acting in a fiduciary capacity on behalf of any Liberty Mutual 
Plan were to allow such Liberty Mutual Plan to engage in a transaction 
with a service provider, such as the manager of an investment fund that 
is treated as plan assets under ERISA; or a co-joint venturer of 
Liberty Mutual; such transaction would involve the use or transfer to 
by such entity of the assets of the Liberty Mutual Plan, in violation 
of section 406(a)(1)(D) of ERISA.

Statutory Findings--In The Interest of Liberty Mutual Plans

    18. Liberty Mutual represents that the proposed exemption, if 
granted, would facilitate an efficient execution of the Liberty Mutual 
Plans' investment strategy, by permitting the Liberty Mutual Plans to 
engage in a series of commercially common, beneficial transactions with 
counterparties that may constitute ``parties in interest'' because of 
their status as service providers under section 3(14)(B) of ERISA.
    19. Liberty Mutual represents that, while section 408(b)(17) of 
ERISA generally permits the sale or exchange of property or the 
extension of credit between a plan and a person that is a service 
provider to such plan, there are certain transactions beneficial to the 
Retirement Plan, such as hedges of currency risks associated with 
investments denominated in foreign currencies, which cannot be effected 
in reliance on the available statutory exemptions. Liberty Mutual 
states that the Retirement Plan incorporates into its investment 
strategy investments covering a wide array of investment classes, 
including alternative investments. Liberty Mutual states that 
sophisticated counterparties to the Retirement Plan usually insist on 
representations and warranties that no prohibited transaction will 
occur as a result of a transaction.
    20. Furthermore, Liberty Mutual represents that, for common 
commercial transactions involving assets for which there is not an 
established market, such as real estate transactions, secondary 
investments in private equity vehicles, and certain private debt 
offerings of reliable borrowers, the requisite data to assure 
compliance with the statutory exemptions, such as demonstrating 
``adequate consideration'' with regard to transactions relying upon 
section 408(b)(17) of ERISA, may not be available or timely available. 
Without the availability of such market references, the availability of 
the statutory exemption under section 408(b)(l7) of ERISA is dependent 
on the judgment of the fiduciary acting on behalf of the investing 
plan. The Applicant represents that counterparties are sometimes 
unwilling to rely on a fiduciary's subjective determination of value, 
which often leads to additional time and expense (such as may arise 
from having to obtain additional independent appraisals of the value of 
the underlying assets from independent valuation firms at the expense 
of the plan) to complete an investment. The Applicant represents that 
counterparties may not wish to delay the consummation of the 
transaction in order to assure that such a valuation can be obtained, 
particularly if other investors are available that can rely on a 
statutory exemption such as PTE 96-23. Liberty Mutual states that, 
therefore, the requested exemption would facilitate the Retirement 
Plan's ability to properly diversify its investments and make it more 
competitive in procuring such assets for its own account.
    21. Liberty Mutual represents further that it requires relief for 
transactions between the plan and co-joint venturers, or entities that 
own at least 10% of a joint venture in which an employer of employees 
participating in the plan (or its parent) has at least a 50% interest 
and are described in section 3(14)(I) of ERISA. Liberty Mutual 
represents that its investment arm invests in assets through comingled 
investment vehicles as a part of its business model. For instance, the 
investment arm of Liberty mutual may invest in real estate with a joint 
venture partner and the joint venturer would own 10% and manage the 
real estate and Liberty Mutual would own the remaining interest in the 
real estate investment through its general account. Liberty Mutual 
states that it engages in such transactions with other investment 
vehicles also where they invest with a partnership or joint venture and 
Liberty owns least 50%. According to the Applicant, it is 
administratively burdensome to monitor every joint venture in which an 
employer participates in order to ensure that a plan maintained by such 
employer does not engage in commercially common, low-risk transactions 
with such entities.
    Liberty Mutual represents that, given the magnitude of the assets 
that it manages in the ordinary course of its business, Liberty Mutual 
makes numerous investments, including significant investments in real 
estate, private equity and other types of alternative investments. 
Liberty Mutual represents that, in the context of real estate 
investments, it is common for the developer of the property to hold a 
substantial minority interest in the investment, while the investor 
that finances the development of the property holds the majority 
interest. However, the developer, which has the expertise to develop 
the property effectively, would retain operational control over the 
management and development of the property. On the other hand, Liberty 
Mutual represents, in private equity investments, Liberty Mutual will 
often take a direct substantial ownership position or be a significant 
investor in an investment fund established to make investments in 
portfolio companies. To this end, it would not be uncommon for Liberty 
Mutual to have ownership of more than 10% and less than 50% in such 
private equity investments. Operational control over the portfolio 
companies will usually be vested in the sponsor of the fund or the lead 
investor in a direct investment. The Applicant represents that other 
kinds of alternative

[[Page 36218]]

investments are frequently structured in a similar fashion, where 
Liberty Mutual is a significant minority holder, but not a controlling 
investor and does not have any operational control over the investment 
or the investment vehicle managing the assets. As such, in the ordinary 
course of business, Liberty Mutual owns substantial passive interests 
in a very large number of investments where other partners in the 
investment, who have unique expertise in the particular investment 
category, have the control over the management of the underlying 
investments.
    Liberty Mutual represents that, compared to other employers, which 
generally engage in joint ventures only as part of their core business, 
Liberty Mutual most often engages in such relationships in its capacity 
as an investor. To this end, the Applicant represents that Liberty 
Mutual is a passive joint venture partner with a multitude of entities 
that ordinarily operate the applicable ventures independently from 
Liberty Mutual. If any Liberty Mutual Plan engaged in any transaction 
with such an entity, the counterparty representing the venture will 
conduct itself like any other independent, third party engaging in a 
commercial transaction. The Applicant represents that, to the extent 
that Liberty Mutual directs any investment on behalf of any Liberty 
Mutual Plan, it will be subject to ERISA's fiduciary responsibility 
provisions, both as a matter of law and as a condition of the 
exemption. Moreover, the Liberty Mutual Plan investors will often be 
investing side by side with the general account in those investments 
that are appropriate for the Plans. Thus, with regard to any such 
investment, the interests of Liberty Mutual and any Liberty Mutual Plan 
investor would be aligned.
    22. Liberty Mutual states that it has not charged, and will not 
charge in the future, the Retirement Plan fees for the investment 
management services that it provides, and does not seek reimbursement 
for the expenses it incurs in providing the services of its employees 
to manage the assets of the Retirement Plan. Liberty Mutual represents 
that, were the Liberty Mutual Plans to retain the services of similarly 
qualified third party investment managers, the operating expenses of 
the Liberty Mutual Plans would increase significantly. Liberty Mutual 
states that, absent exemptive relief, even if only alternative assets 
were turned over to third-party managers, the incremental annual cost 
to the Liberty Mutual Plans would be approximately $15 million.
    23. Liberty Mutual represents that, aside from the increased cost 
in fees, retaining third party managers is not the optimal approach for 
the investment of the Retirement Plan's assets. In this regard, Liberty 
Mutual states that having control over the Retirement Plan's assets 
provides it with the ability to increase investment returns in a manner 
that could not be achieved if multiple unaffiliated managers were 
retained to invest the Retirement Plan's assets.
    Liberty Mutual further represents that having control over the 
entire portfolio allows for efficiencies that can improve the ability 
to maximize returns and control investment risks by affording greater 
integration in the asset/liability management process. For example, 
with respect to managing interest rate risks, having multiple 
individual asset managers hedge their interest rate risk to a target 
(relative to liabilities) can result in inefficient trading. Some 
managers will be buying, while others will be selling. The Applicant 
represents that the net impact of having separate managers each manage 
the risk associated with the portion of the portfolio under their 
management can result in unnecessary transaction costs for the Liberty 
Mutual Plan.
    The Applicant states that having current oversight of the entire 
asset base allows for more efficient risk control. Setting investment 
criteria relative to benchmark levels is not a static process, as index 
weights adjust on a daily basis. The Applicant represents that, if the 
Liberty Mutual Plan wants to set an absolute aggregate (across stocks 
and bonds) energy exposure to 10% of assets under management, the 
various investment management agreements or guidelines with multiple 
managers would need to be adjusted more frequently than is practical.
    24. The Applicant states that as a matter of policy, certain 
counterparties will not engage in hedging transactions with plans in 
reliance on the service provider exemption under section 408(b)(l7) of 
ERISA. Others may do so only with regard to currencies that are widely 
traded and do not fluctuate significantly in value. Thus, according to 
Liberty Mutual, there have been and may in the future be occasions 
where it would be advantageous (and a normal precaution) for the 
Retirement Plan to put in place a currency hedge, or perhaps an 
interest rate hedge, as a secondary protection for an appropriate and 
attractive primary investment opportunity that cannot be effected 
without the benefit of the requested exemption. In such circumstances, 
the fiduciaries on behalf of the Retirement Plan would have to 
determine whether to forego the perceived beneficial investment 
opportunity or make the investment and assume the exposure to the risk 
that could otherwise be hedged.
    Liberty Mutual represents that counterparties are reluctant, or may 
refuse, to engage in transactions with plan investors relying on other 
potentially available exemptions that are dependent on fact specific 
considerations that can vary from transaction to transaction, such as 
is the case with regard to the relief provided under the ``service 
provider'' exemption set forth in section 408(b)(17) of ERISA.
    25. Liberty Mutual states that, if the exemption is granted, the 
continued absence of RIA status will not affect in any way the manner 
in which Liberty Mutual or LMGAMI manages the assets of Liberty Mutual 
Plans. Liberty Mutual represents that the fact that neither Liberty 
Mutual nor LMGAMI is an RIA does not preclude the Liberty Mutual Plans 
from any services or any transactions that Liberty Mutual or LMGAMI 
offers.
    26. Liberty Mutual represents that it has over 80 years of 
experience managing insurance company assets and it conducts extensive 
compliance training of investment personnel, including ERISA fiduciary 
training. Liberty Mutual and LMGAMI collectively employ approximately 
85 investment professionals dedicated to the investment of the assets 
under Liberty Mutual's management and control, with investment teams 
dedicated to distinct asset classes. Liberty Mutual states that its 
Chief Investment Officer has over 30 years of experience in the 
investment industry. Furthermore, Liberty Mutual states an investment 
compliance team monitors portfolio compliance in real time employing 
sophisticated software.

Statutory Findings--Protective of the Rights of Participants

    27. Liberty Mutual represents that state insurance laws regulate 
Liberty Mutual's financial condition and reporting requirements, the 
diversification of Liberty Mutual's investment portfolio, and types of 
investments that Liberty Mutual can undertake. Liberty Mutual states 
that it files audited annual financial statements and unaudited 
quarterly financial statements with the insurance authorities in all 50 
states, and is subject to robust, risk-focused inspections by state 
insurance regulators every three to five years. Liberty Mutual states 
that these inspections include extensive audits of its control systems 
and reviews of its operating procedures, investments and other 
transactions.

[[Page 36219]]

    28. Furthermore, the exemption will be subject to a suite of 
robust, protective conditions. The terms of transactions entered into 
in reliance of this exemption will be negotiated on behalf of the 
Liberty Mutual Plan by, or under the authority and general direction 
of, the Liberty Mutual Asset Manager, and either the Liberty Mutual 
Asset Manager or, so long as the Liberty Mutual Asset Manager retains 
full fiduciary responsibility with respect to the transaction, a sub-
adviser acting in accordance with written guidelines established and 
administered by the Liberty Mutual Asset Manager, makes the decision on 
behalf of the plan to enter into the transaction. Furthermore, the 
party in interest engaging in the transaction with the Liberty Mutual 
Plan may not have discretionary authority or control with respect to 
the investment of the Liberty Mutual Plan assets involved in the 
transaction and may not render investment advice (within the meaning of 
29 CFR 2510.3-21(c)) with respect to those assets.
    29. Liberty Mutual represents that, notwithstanding the withdrawal 
of its registration as an RIA under the Advisers Act, the exemption 
requires the Liberty Mutual Asset Manager to adopt, maintain, and 
follow policies and procedures (Policies) designed to ensure compliance 
with the conditions of this exemption, reinforce the Liberty Mutual 
Asset Manager's fiduciary duties, ensuring that the Liberty Mutual 
Asset Manager and its personnel operate within an impartial conduct 
standard in accordance with a duty of loyalty and prudence pursuant to 
section 404 of the Act with respect to the Liberty Mutual Plan when 
condu0cting business with, or on behalf of, the applicable Liberty 
Mutual Plan, and avoid conflicts of interest or risk exposure, 
including an investment allocation policy and best execution policy.
    30. Liberty Mutual represents that its control systems are tested 
three times per year, with regular internal and external audits. 
Nevertheless, the Department views a robust independent audit 
requirement as an essential condition for exemptive relief hereunder. 
Therefore, the exemption requires that the Liberty Mutual Asset Manager 
must submit to an audit conducted annually by an independent auditor. 
The audit must cover a consecutive twelve-month period beginning on the 
effective date of the exemption.
    31. The auditor must issue a written report (the Audit Report) to 
Liberty Mutual and the Liberty Mutual Asset Manager with respect to 
each audit that describes the procedures performed by the auditor 
during the course of its examination, to be completed within six months 
following the end of the 12-month period to which the audit relates. 
The Audit Report must include, among other things, the auditor's 
specific determinations regarding the compliance with the conditions 
for the exemption; the adequacy of, and compliance with, the Policies; 
the auditor's recommendations (if any) with respect to strengthening 
such Policies; and any instances of noncompliance with the conditions 
for the exemption or the Policies.
    32. The Liberty Mutual Asset Manager will make its Audit Report 
unconditionally available for examination by any duly authorized 
employee or representative of the Department, other relevant 
regulators, and any participant in a Liberty Mutual Plan.
    33. The Liberty Mutual Asset Managers will prepare and make 
available to all participants of, and beneficiaries entitled to receive 
benefits under, the Liberty Mutual Plans (the Eligible Recipients) a 
plain English, narrative brochure (the Brochure) that contains 
information comparable to that required by Part 2A of Form ADV filed 
under the Investment Advisers Act of 1940,\12\ modified such that the 
disclosure is relevant to Eligible Recipients with respect to the 
management of the applicable Liberty Mutual Plan. Liberty Mutual must 
also provide an annual update to the Brochure (the Updated Brochure), 
containing or accompanied by a summary of material changes.
---------------------------------------------------------------------------

    \12\ The Department understands that Form ADV is the uniform 
form used by investment advisers to register with both the 
Securities and Exchange Commission (SEC) and state securities 
authorities. The form consists of two parts. Part 2 requires 
investment advisers to prepare narrative brochures written in plain 
English that contain information such as the types of advisory 
services offered, the adviser's fee schedule, disciplinary 
information, conflicts of interest, and the educational and business 
background of management and key advisory personnel of the adviser. 
The brochure is the primary disclosure document that investment 
advisers provide to their clients.
---------------------------------------------------------------------------

    34. As an additional condition of the exemption, each Liberty 
Mutual Asset Manager must establish an internal compliance program that 
addresses the Liberty Mutual Asset Manager's performance of its 
fiduciary and substantive obligations under ERISA (the Compliance 
Program). Each Liberty Mutual Asset Manager must designate a chief 
compliance officer (the CCO), who must be knowledgeable about ERISA and 
have the authority to develop and enforce appropriate compliance 
policies and procedures for the Liberty Mutual Asset Manager. Also, as 
part of the Compliance Program, each Liberty Mutual Asset Manager must 
adopt and enforce a written code of ethics that, among other things, 
will reflect the Liberty Mutual Asset Manager's fiduciary duties to the 
Liberty Mutual Plans.
    35. Finally, the Liberty Mutual Asset Manager must act in the Best 
Interest of the Liberty Mutual Plan at the time of the transaction. 
Furthermore, the Liberty Mutual Asset Manager's statements about 
material conflicts of interest and any other matters relevant to the 
Liberty Mutual Asset Manager's relationship with the Liberty Mutual 
Plan, must not be materially misleading at the time they are made.

Statutory Findings--Administratively Feasible

    36. Liberty Mutual represents that the proposed exemption is 
administratively feasible. Liberty Mutual represents that it maintains 
substantial internal control systems regulating its financial reporting 
and related functions, including portfolio management, that are tested 
three times per year, with regular internal audits. Furthermore, as 
described above, the Liberty Mutual Asset Manager will be subject to 
robust annual audits to be conducted by an independent auditor. The 
Liberty Mutual Asset Manager must then make its Audit Report 
unconditionally available for examination by any duly authorized 
employee or representative of the Department, other relevant 
regulators, and any participant in a Liberty Mutual Plan.

Summary

    37. In summary, provided that the conditions described above are 
satisfied, the Department has tentatively determined that the relief 
sought by the Applicant satisfies the statutory requirements for an 
exemption under section 408(a) of ERISA.

Proposed Exemption Operative Language

Section I. Covered Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A), 406(a)(1)(B), and 406(a)(1)(D) of ERISA and the sanctions 
resulting from the application of sections 4975(a) and 4975(b) of the 
Code, by reason of sections 4975(c)(1)(A), 4975(c)(1)(B), and 
4975(c)(1)(D) of the Code, shall not apply to a transaction between a 
party in interest with respect to a Liberty Mutual Plan (as defined in 
Section II(h)) and such Liberty Mutual Plan, provided that the Liberty 
Mutual Asset Manager

[[Page 36220]]

(as defined in Section II(a)) has discretionary authority or control 
with respect to the assets of the Liberty Mutual Plan involved in the 
transaction and the following conditions are satisfied:
    (a) The terms of the transaction are negotiated on behalf of the 
Liberty Mutual Plan by, or under the authority and general direction 
of, the Liberty Mutual Asset Manager, and either the Liberty Mutual 
Asset Manager or, so long as the Liberty Mutual Asset Manager retains 
full fiduciary responsibility with respect to the transaction, a sub-
adviser acting in accordance with written guidelines established and 
administered by the Liberty Mutual Asset Manager, makes the decision on 
behalf of the Plan to enter into the transaction;
    (b) The transaction is not described in--
    (1) Prohibited Transaction Exemption 2006-16 (71 FR 63786, October 
31, 2006) (relating to securities lending arrangements) (as amended or 
superseded);
    (2) Prohibited Transaction Exemption 83-1 (48 FR 895, January 7, 
1983) (relating to acquisitions by plans of interests in mortgage 
pools) (as amended or superseded); or
    (3) Prohibited Transaction Exemption 88-59 (53 FR 24811, June 30, 
1988) (relating to certain mortgage financing arrangements) (as amended 
or superseded);
    (c) The transaction is not part of an arrangement, agreement, or 
understanding designed to violate or evade compliance with ERISA or the 
Code;
    (d) At the time the transaction is entered into, and at the time of 
any subsequent renewal or modification thereof that requires the 
consent of the Liberty Mutual Asset Manager, the terms of the 
transaction are at least as favorable to the Liberty Mutual Plan as the 
terms generally available in arm's length transactions between 
unrelated parties;
    (e) The party in interest dealing with the Liberty Mutual Plan:
    (1) Is a party in interest with respect to the Liberty Mutual Plan 
(including a fiduciary); either
    (A) Solely by reason of providing services to the Liberty Mutual 
Plan, or solely by reason of a relationship to a service provider 
described in section 3(14)(F), (G), (H) or (I) of ERISA; or
    (B) Solely by reason of being a 10-percent or more shareholder, 
partner or joint venturer, in a person, which is 50 percent or more 
owned by an employer of employees covered by the Liberty Mutual Plan 
(directly or indirectly in capital or profits), or the parent company 
of such an employer, provided that such person is not controlled by, 
controlling, or under common control with such employer; or
    (C) By reason of both (A) and (B) only; and
    (2) Does not have discretionary authority or control with respect 
to the investment of the Liberty Mutual Plan assets involved in the 
transaction and does not render investment advice (within the meaning 
of 29 CFR 2510.3-21(c)) with respect to those assets;
    (f) The party in interest dealing with the Liberty Mutual Plan is 
neither the Liberty Mutual Asset Manager nor a person related to the 
Liberty Mutual Asset Manager (within the meaning of Section II(d));
    (g) The Liberty Mutual Asset Manager adopts, maintains, and follows 
written policies and procedures (the Policies) that:
    (1) Are designed to assure compliance with the conditions of the 
exemption and its fiduciary responsibilities and avoid any conflicts of 
interest or risk exposure, including an investment allocation policy 
and best execution policy, and ensure that the Liberty Mutual Asset 
Manager and its personnel operate within an impartial conduct standard 
in accordance with a duty of loyalty and prudence pursuant to section 
404 of the Act with respect to the Liberty Mutual Plan when conducting 
business with, or on behalf of, the applicable Liberty Mutual Plan;
    (2) Describe the objective requirements of the exemption, and 
describe the steps adopted by the Liberty Mutual Asset Manager to 
assure compliance with each of these requirements:
    (A) The requirements of Section I of the exemption, including 
Section I(a) regarding the discretionary authority or control of the 
Liberty Mutual Asset Manager with respect to the plan assets involved 
in the transaction, in negotiating the terms of the transaction, and 
with regard to the decision on behalf of the Liberty Mutual Plan to 
enter into the transaction;
    (B) That any procedure for approval or veto of the transaction 
meets the requirements of Section I(a);
    (C) For a transaction described in Section I:
    (i) That the transaction is not entered into with any person who is 
excluded from relief under Section I(e)(1), Section I(e)(2), or Section 
I(f); and
    (ii) That the transaction is not described in any of the class 
exemptions listed in Section I(b);
    (3) Are reasonably designed to prevent the Liberty Mutual Asset 
Manager or its personnel from violating ERISA or other federal or state 
laws or regulations applicable with respect to the investment of the 
assets of the applicable Liberty Mutual Plan (Applicable Law);
    (4) Cover, at a minimum, the following areas to the extent 
applicable to the Liberty Mutual Asset Manager:
    (A) Portfolio management processes, including allocation of 
investment opportunities among any Liberty Mutual Plan and Liberty 
Mutual's proprietary investments, taking into account the investment 
objectives of the applicable Liberty Mutual Plan and any restrictions 
under Applicable Law;
    (B) Trading practices, including procedures by which the Liberty 
Mutual Asset Manager satisfies its best execution obligation, and 
allocates aggregated trades among all Liberty Mutual Plans and/or 
Liberty Mutual proprietary accounts for which it provides investment 
management services;
    (C) Personal trading activities of any employee of Liberty Mutual 
and its subsidiaries who has personal involvement and responsibility 
for investment decisions regarding the investment of the assets of the 
applicable Liberty Mutual Plan (an LM Advisory Employee);
    (D) The Liberty Mutual Asset Manager's policies regulating 
conflicts of interest;
    (E) The accuracy of disclosures, including account statements, made 
to the trustee(s) or fiduciaries of any Liberty Mutual Plan or to any 
regulators;
    (F) Safeguarding of Liberty Mutual Plan assets from conversion or 
inappropriate use by any LM Advisory Employee;
    (G) The accurate creation of required records and their maintenance 
in a manner that secures them from unauthorized alteration or use and 
protects them from untimely destruction;
    (H) Processes to value holdings of any Liberty Mutual Plan, to the 
extent, if any, that such valuation is within the control of the 
Liberty Mutual Asset Manager;
    (I) Safeguards for the privacy protection of records and 
information pertaining to each Liberty Mutual Plan; and
    (J) Business continuity plans; and
    (5) Any violations of or failure to comply with items (1) through 
(4) above 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 Chief

[[Page 36221]]

Compliance Officer (as described below in Section I(j)) of the Liberty 
Mutual Asset Manager, and the independent auditor described in Section 
I(h) below, and a fiduciary of the relevant Liberty Mutual Plan; the 
Liberty Mutual Asset Manager will not be treated as having failed to 
adopt, maintain, or follow the Policies, provided that it corrects any 
instances of noncompliance promptly when discovered or when they 
reasonably should have known of the noncompliance (whichever is 
earlier), and provided that it adheres to the reporting requirements 
set forth in this item (5);
    (h)(1) The Liberty Mutual Asset Manager submits to an audit 
conducted annually by an independent auditor, who has been prudently 
selected and who has the appropriate technical training or experience 
and proficiency with ERISA's fiduciary responsibility provisions and 
applicable securities laws to evaluate the adequacy of, and compliance 
with, the Policies described herein, and compliance with the 
requirements of the exemption, and so represents in writing. Upon the 
Department's request, the auditor must demonstrate its qualifications 
as required by this paragraph and its independence from Liberty Mutual. 
The audit must be incorporated into the Policies and cover a 
consecutive twelve-month period beginning on the effective date of the 
exemption. Each annual audit must be completed within six months 
following the end of the twelve-month period to which the audit 
relates;
    (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, and as permitted by law, the Liberty Mutual Asset 
Manager and, if applicable, Liberty Mutual, 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 must specifically require the auditor 
to determine whether the Liberty Mutual Asset Manager has complied with 
the conditions for the exemption, including the requirement to adopt, 
maintain, and follow Policies in Section I(g);
    (4) The auditor's engagement shall specifically require the auditor 
to test the Liberty Mutual Asset Manager's operational compliance with 
the exemption, including the Policies in Section I(g). In this regard, 
the auditor must test a sample of the Liberty Mutual Asset Manager's 
transactions involving the Liberty Mutual Plan sufficient in size and 
nature to afford the auditor a reasonable basis to determine the 
operational compliance with the Policies;
    (5) For each audit, the auditor shall issue a written report (the 
Audit Report) to Liberty Mutual and the Liberty Mutual Asset Manager 
that describes the procedures performed by the auditor during the 
course of its examination, to be completed within six months following 
the end of the twelve-month period to which the audit relates. The 
Audit Report shall include the auditor's specific determinations 
regarding the compliance with the conditions for the exemption; the 
adequacy of, and compliance with, the Policies; the auditor's 
recommendations (if any) with respect to strengthening such Policies; 
and any instances of noncompliance with the conditions for the 
exemption or the Policies described in paragraph (g) above. Any 
determinations made by the auditor regarding the adequacy of the 
Policies and the auditor's recommendations (if any) with respect to 
strengthening the Policies shall be promptly addressed by the Liberty 
Mutual Asset Manager, and any actions taken by the Liberty Mutual Asset 
Manager to address such recommendations shall be included in an 
addendum to the Audit Report. Any determinations by the auditor that 
the Liberty Mutual Asset Manager has adopted, maintained, and followed 
sufficient Policies shall not be based solely or in substantial part on 
an absence of evidence indicating noncompliance. In this last regard, 
any finding that the Liberty Mutual Asset Manager has complied with the 
requirements under this subsection must be based on evidence that 
demonstrates the Liberty Mutual Asset Manager has actually adopted, 
maintained, and followed the Policies required by this exemption;
    (6) The auditor shall notify the Liberty Mutual Asset Manager and 
Liberty Mutual of any instances of noncompliance with the conditions 
for the exemption or the Policies 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, the General Counsel or the 
Chief Compliance Officer (described in Section I(j)) of the Liberty 
Mutual Asset Manager certifies in writing, under penalty of perjury, 
that the officer has reviewed the Audit Report and this exemption; 
addressed, corrected, or remedied any inadequacies identified in the 
Audit Report; and determined that the Policies 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) A senior executive officer with a direct reporting line to the 
highest ranking compliance officer of Liberty Mutual reviews the Audit 
Report and certifies in writing, under penalty of perjury, that such 
officer has reviewed each Audit Report; and
    (9) The Liberty Mutual Asset Manager makes its Audit Report 
unconditionally available for examination by any duly authorized 
employee or representative of the Department, other relevant 
regulators, and any participant in a Liberty Mutual Plan;
    (i) The Liberty Mutual Asset Manager will prepare and make 
available to all participants of, and beneficiaries entitled to receive 
benefits under, the Liberty Mutual Plans (the Eligible Recipients) a 
plain English, narrative brochure (the Brochure) that contains all 
substantive information, comparable to that required by Part 2A of Form 
ADV filed under the Investment Advisers Act of 1940, but modified such 
that the disclosure is relevant to Eligible Recipients with respect to 
the management of the applicable Liberty Mutual Plan;
    (1) The Brochure shall include, among other things:
    (A) The Liberty Mutual Asset Manager's investment strategy with 
respect to the applicable Liberty Mutual Plan;
    (B) The Liberty Mutual Asset Manager's policies regarding conflicts 
of interest;
    (C) Any disciplinary information related to employees of the 
Liberty Mutual Asset Manager; and
    (D) A prominent statement that the Eligible Recipients may request 
a copy of the Policies, with instructions on how to make such request 
and receive such copy;
    (2) The Liberty Mutual Asset Manager must make the Brochure 
available to the Eligible Recipients: (1) with respect to any Liberty 
Mutual Plan for which Liberty Mutual or its affiliate is then acting as 
an investment manager, within 90 days of the effective date of this 
exemption; and (2) with respect to any other Liberty Mutual Plan for 
which any Liberty Mutual Asset Manager thereafter becomes an investment 
manager, within ten (10) business days of the date that the applicable 
Investment Management Agreement or Sub-Adviser Agreement with a Liberty 
Mutual Plan becomes effective;
    (3) Liberty Mutual annually updates such brochure (the Updated 
Brochure), containing or accompanied by a

[[Page 36222]]

summary of material changes. Each Updated Brochure that is made 
available following the completion of the first audit required with 
respect to any Liberty Mutual Asset Manager in accordance with this 
exemption must include a prominently displayed statement indicating 
that the Liberty Mutual Asset Manager has completed the required audit, 
and must also provide clear instructions for obtaining a copy of the 
audit;
    (4) The Liberty Mutual Asset Manager will be deemed to have met the 
requirements pertaining to the provision of the Brochure and the 
Updated Brochure if it makes such documents available to the Eligible 
Recipients through a prominently displayed link on a Web site (the Plan 
Benefits Web site) where it makes available information to the Eligible 
Recipients about their benefits and rights under the applicable Liberty 
Mutual Plan (Plan Information), and contact information for an 
appropriate representative of Liberty Mutual to direct inquiries from 
the Eligible Recipients, which is readily available to such Eligible 
Recipients. Notwithstanding the above, the Liberty Mutual Asset Manager 
will not be deemed to have met the requirements of this subparagraph 
unless it provides notice of the Plan Benefits Web site, and the link 
to the Brochure and Updated Brochure at least once annually, to all 
Eligible Recipients;
    (5) For any such Eligible Recipient to whom Liberty Mutual makes 
Plan Information available by hard copy or other means (Supplemental 
Delivery), the Brochure and the Updated Brochure must be provided to 
such Eligible Recipient at the same time and by the same means that 
Plan Information is provided;
    (6) The Liberty Mutual Asset Manager will also provide supplements 
to the Brochure (each, a Brochure Supplement) that contain information 
about any LM Advisory Employee, including the LM Advisory Employee's 
educational background, business experience, other business activities, 
and disciplinary history;
    (7) Each Brochure Supplement must be made available in the same 
manner as the Brochure, and must be posted to the Plan Benefits Web 
site, not later than 90 days following the date that any such LM 
Advisory Employee begins to provide advisory services to that Liberty 
Mutual Plan. Such Brochure Supplement must be included with the next 
Updated Brochure included in the material provided to any Eligible 
Recipient receiving such Updated Brochure by Supplemental Delivery;
    (8) With respect to any individuals who become Eligible Recipients 
with respect to any Liberty Mutual Plan for which Liberty Mutual or its 
affiliate is then acting as an investment manager (the New Eligible 
Recipients) after the delivery of the Brochure to the Eligible 
Recipients with respect to the Liberty Mutual Plan, the Liberty Mutual 
Asset Manager will provide a copy of the Brochure as well as the most 
recent Updated Brochure, if applicable, and any Brochure Supplements 
related to LM Advisory Employees employed by the Liberty Mutual Asset 
Manager at the time the New Eligible Recipients became Eligible 
Recipients, within 90 days of the New Eligible Recipients becoming 
Eligible Recipients with respect to the Liberty Mutual Plan. The 
Liberty Mutual Asset Manager will be deemed to have met the disclosure 
requirements pertaining to the New Eligible Recipients if it makes the 
applicable documents available to the New Eligible Recipients through a 
prominently displayed link on the Plan Benefits Web site described in 
section I(i)(4) of this exemption. Notwithstanding the above, the 
Liberty Mutual Asset Manager will not be deemed to have met the 
requirements of this subparagraph unless it provides notice of the Plan 
Benefits Web site, and the link to the Brochure, Updated Brochure, and 
Brochure Supplements to all New Eligible Recipients. For any such New 
Eligible Recipient to whom Liberty Mutual makes Plan Information 
available by Supplemental Delivery, the Brochure and the Updated 
Brochure must be provided to such New Eligible Recipient at the same 
time and by the same means that Plan Information is provided;
    (j) Each Liberty Mutual Asset Manager must establish an internal 
compliance program that addresses the Liberty Mutual Asset Manager's 
performance of its fiduciary and substantive obligations under ERISA 
(the Compliance Program);
    (1) Each Liberty Mutual Asset Manager must designate a Chief 
Compliance Officer (the CCO), who must be knowledgeable about ERISA and 
have the authority to develop and enforce appropriate compliance 
policies and procedures for the Liberty Mutual Asset Manager;
    (2) As part of the Compliance Program, each Liberty Mutual Asset 
Manager must adopt and enforce a written code of ethics that, among 
other things, will reflect the Liberty Mutual Asset Manager's fiduciary 
duties to the Liberty Mutual Plans. At a minimum, the Liberty Mutual 
Asset Manager's code of ethics must:
    (A) Set forth a minimum standard of conduct for all LM Advisory 
Employees and any other employees of the Liberty Mutual Asset Manager 
whose responsibilities include assisting the LM Advisory Employees in 
managing the investments of any Liberty Mutual Plan (the LM 
Facilitating Employees);
    (B) Require LM Advisory Employees and LM Facilitating Employees to 
comply with Applicable Law in fulfilling their investment management 
duties to the Liberty Mutual Plans;
    (C) Require each LM Advisory Employee to report his or her 
securities holdings at the later of the time that the person becomes an 
LM Advisory Employee or within 90 days after this exemption becomes 
effective and at least once annually thereafter and to make a report at 
least once quarterly of all personal securities transactions in 
reportable securities to the Liberty Mutual Asset Manager's CCO or 
other designated person;
    (D) Require the CCO or other designated persons to pre-approve 
investments by any LM Advisory Employee in IPOs or limited offerings;
    (E) Require each LM Advisory Employee or LM Facilitating Employees 
to promptly report any violation of Applicable Law to the Liberty 
Mutual Asset Manager's CCO or other designated person;
    (F) Require the Liberty Mutual Asset Manager to provide training on 
applicable law and to obtain a written acknowledgment from each LM 
Advisory Employee documenting his/her agreement to abide by the code of 
ethics, the Policies, and applicable law; and
    (G) Require the Liberty Mutual Asset Manager to keep records of any 
violations of applicable law and of any actions taken against the 
violators;
    (k) The Liberty Mutual Asset Manager must act in the Best Interest 
of the Liberty Mutual Plan at the time of the transaction. For purposes 
of this paragraph, a Liberty Mutual Asset Manager acts in the ``Best 
Interest'' of the Liberty Mutual Plan when the Liberty Mutual Asset 
Manager acts with the care, skill, prudence, and diligence under the 
circumstances then prevailing that a prudent person acting in a like 
capacity and familiar with such matters would use in the conduct of an 
enterprise of a like character and with like aims, based on the 
investment objectives, risk tolerance, financial circumstances, and 
needs of the Liberty Mutual Plan, without regard to the financial or 
other interests of the Liberty Mutual Asset Manager, any affiliate or 
other party;

[[Page 36223]]

    (l) The Liberty Mutual Asset Manager's statements about material 
conflicts of interest and any other matters relevant to the Liberty 
Mutual Asset Manager's relationship with the Liberty Mutual Plan, are 
not materially misleading at the time they are made. For purposes of 
this paragraph, a ``material conflict of interest'' exists when a 
Liberty Mutual Asset Manager has a financial interest that a reasonable 
person would conclude could affect the exercise of its best judgment as 
a Liberty Mutual Asset Manager; and
    (m) The Liberty Mutual Asset Manager will not charge any asset 
management fees or receive any fee in connection with transactions 
covered by this exemption.

Section II. Definitions

    (a) The term ``Liberty Mutual Asset Manager'' means Liberty Mutual 
or any organization that is either a direct or indirect 80 percent or 
more owned subsidiary of Liberty Mutual, or a direct or indirect 80 
percent more owned subsidiary of a parent organization of Liberty 
Mutual, provided that such Liberty Mutual Asset Manager:
    (1) Is an insurance company which is qualified under the laws of 
more than one State to manage, acquire, or dispose of any assets of a 
plan, which company has, as of the last day of its most recent fiscal 
year, net worth (capital, paid-in and contributed surplus, unassigned 
surplus, contingency reserves, group contingency reserves, and special 
reserves) in excess of $1,000,000;
    (2) Is subject to supervision and examination by a State authority 
having supervision over insurance companies and is subject to periodic 
audits by applicable State insurance regulators in accordance with the 
requirements of applicable state law, which, under current law, would 
be no less than once every five years;
    (3) Has any arrangements between it and any Liberty Mutual Plan 
reviewed by the applicable State insurance regulators, including any 
investment management agreements (or revisions thereto) with the 
Liberty Mutual Plan and sub-advisor agreements with any other Liberty 
Mutual Asset Managers, the results of which will be made available 
without limitation to the independent auditor conducting the audit 
required under Section I(i);
    (4) As of the last day of its most recent fiscal year, has under 
its management and control total assets in excess of $1 billion; and
    (5) Together with its affiliates, maintains Liberty Mutual Plans 
holding aggregate assets of at least $500 million as of the last day of 
each Liberty Mutual Plan's reporting year;
    (b) For purposes of Sections II(a) and II(h), an ``affiliate'' of a 
Liberty Mutual Asset Manager means a member of either (1) a controlled 
group of corporations (as defined in section 414(b) of the Code) of 
which the Liberty Mutual Asset Manager is a member, or (2) a group of 
trades or businesses under common control (as defined in section 414(c) 
of the Code) of which the Liberty Mutual Asset Manager is a member; 
provided that ``50 percent'' shall be substituted for ``80 percent'' 
wherever ``80 percent'' appears in section 414(b) or 414(c) of the Code 
or the rules thereunder;
    (c) The term ``party in interest'' means a person described in 
section 3(14) of ERISA and includes a ``disqualified person'' as 
defined in section 4975(e)(2) of the Code;
    (d) A Liberty Mutual Asset Manager is ``related'' to a party in 
interest for purposes of Section I(f) of this exemption, if, as of the 
last day of its most recent calendar quarter: (i) The Liberty Mutual 
Asset Manager (or a person controlling, or controlled by, the Liberty 
Mutual Asset Manager) owns a ten percent or more interest in the party 
in interest; or (ii) the party in interest (or a person controlling, or 
controlled by, the party in interest) owns a 10 percent or more 
interest in the Liberty Mutual Asset Manager.
    For purposes of this definition:
    (1) The term ``interest'' means with respect to ownership of an 
entity--
    (A) The combined voting power of all classes of stock entitled to 
vote or the total value of the shares of all classes of stock of the 
entity if the entity is a corporation,
    (B) The capital interest or the profits interest of the entity if 
the entity is a partnership, or
    (C) The beneficial interest of the entity if the entity is a trust 
or unincorporated enterprise; and
    (2) A person is considered to own an interest if, other than in a 
fiduciary capacity, the person has or shares the authority--
    (A) To exercise any voting rights or to direct some other person to 
exercise the voting rights relating to such interest, or
    (B) To dispose or to direct the disposition of such interest; and
    (3) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual;
    (e) For purposes of this exemption, the time as of which any 
transaction occurs is the date upon which the transaction is entered 
into. In addition, in the case of a transaction that is continuing, the 
transaction shall be deemed to occur until it is terminated. Nothing in 
this paragraph shall be construed as exempting a transaction entered 
into by a plan which becomes a transaction described in section 406 of 
ERISA or section 4975 of the Code while the transaction is continuing, 
unless the conditions of the exemption were met either at the time the 
transaction was entered into or at the time the transaction would have 
become prohibited but for this exemption. In determining compliance 
with the conditions of the exemption at the time that the transaction 
was entered into for purposes of the preceding sentence, Section I(e) 
will be deemed satisfied if the transaction was entered into between a 
Liberty Mutual Plan and a person who was not then a party in interest;
    (f) The term ``LMGAMI'' means Liberty Mutual Group Asset Management 
Inc., a separate investment management subsidiary of Liberty Mutual;
    (g) The term ``Liberty Mutual'' means Liberty Mutual Insurance 
Company; and
    (h) The term ``Liberty Mutual Plan'' means the Liberty Mutual 
Retirement Benefit Plan and any other employee benefit plan subject to 
the fiduciary responsibility provisions of Part IV of Title I of ERISA 
maintained by Liberty Mutual or an affiliate of Liberty Mutual, and 
covering the employees of such entities.
    Effective Date: The proposed exemption, if granted, will be 
effective as of the date that a final notice of granted exemption is 
published in the Federal Register.

Notice to Interested Persons

    Notice of the proposed exemption will be given to all Interested 
Persons within 15 days of the publication of the notice of proposed 
exemption in the Federal Register, by first class U.S. mail to the last 
known address of all such individuals. Such notice will contain a copy 
of the notice of proposed exemption, as published in the Federal 
Register, and a supplemental statement, as required pursuant to 29 CFR 
2570.43(a)(2). The supplemental statement will inform interested 
persons of their right to comment on the pending exemption. Written 
comments are due within 45 days of the publication of the notice of 
proposed exemption in the Federal Register.
    All comments will be made available to the public.
    Warning: If you submit a comment, EBSA recommends that you include 
your name and other contact

[[Page 36224]]

information in the body of your comment, but DO NOT submit information 
that you consider to be confidential, or otherwise protected (such as 
Social Security number or an unlisted phone number) or confidential 
business information that you do not want publicly disclosed. All 
comments may be posted on the Internet and can be retrieved by most 
Internet search engines.

FOR FURTHER INFORMATION CONTACT: Scott Ness of the Department, 
telephone (202) 693-8561. (This is not a toll-free number.)

Russell Investment Management, LLC (RIM), Russell Investments Capital, 
LLC (RICap), and Their Affiliates (Collectively, Russell Investments or 
the Applicants) Located in Seattle, WA

[Application No. D-11916]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of 29 U.S.C. 1108 (section 408(a) of the Act) and 26 U.S.C. 
(section 4975(c)(2) of the Code), in accordance with the procedures set 
forth in 29 CFR part 2570, subpart B (76 FR 46637, 66644, October 27, 
2011). Effective December 31, 1978, section 102 of Reorganization Plan 
No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, this notice of proposed exemption is 
issued solely by the Department. If the exemption is granted, the 
restrictions of sections 406(a)(1)(D) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of sections 4975(c)(1)(D) through (F) of the Code,\13\ shall 
not apply, effective June 1, 2016, to:
---------------------------------------------------------------------------

    \13\ For purposes of this proposed exemption reference to 
specific provisions of Title I of the Act, unless otherwise 
specified, should be read to refer as well to the corresponding 
provisions of the Code.
---------------------------------------------------------------------------

    (a) The receipt of a fee by Russell Investments, from an open-end 
investment company or open-end investment companies (Affiliated 
Fund(s)), in connection with the direct investment in shares of any 
such Affiliated Fund, by an employee benefit plan or by employee 
benefit plans (Client Plan(s)), where Russell Investments serves as a 
fiduciary with respect to such Client Plan, and where Russell 
Investments: (1) Provides investment advisory services, or similar 
services to any such Affiliated Fund; and (2) provides to any such 
Affiliated Fund other services (Secondary Service(s)); and
    (b) In connection with the indirect investment by a Client Plan in 
shares of an Affiliated Fund through investment in a pooled investment 
vehicle or pooled investment vehicles (Collective Fund(s)), where 
Russell Investments serves as a fiduciary with respect to such Client 
Plan, the receipt of fees by Russell Investments from: (1) An 
Affiliated Fund for the provision of investment advisory services, or 
similar services by Russell Investments to any such Affiliated Fund; 
and (2) an Affiliated Fund for the provision of Secondary Services by 
Russell Investments to any such Affiliated Fund.

Summary of Facts and Representations \14\
---------------------------------------------------------------------------

    \14\ The Summary of Facts and Representations is based on the 
Applicants' representations, unless indicated otherwise.
---------------------------------------------------------------------------

Background

    1. On October 6, 2015, the Department granted Prohibited 
Transaction Exemption 2015-17 (PTE 2015-17) to Frank Russell Company 
and Affiliates (collectively, FRC). PTE 2015-17 provides conditional 
relief to FRC for the receipt of a fee from an Affiliated Fund, in 
connection with a Client Plan's direct investment in shares of an 
Affiliated Fund, or a Client Plan's indirect investment in shares of an 
Affiliated Fund, through investment in a pooled investment vehicle (the 
Collective Fund), where FRC: (a) Serves as a fiduciary with respect to 
such Client Plan, and (b) provides to such Affiliated Fund, investment 
advisory services or similar services, and Secondary Services, if 
certain conditions are met.
    PTE 2015-17 defines FRC as ``Frank Russell Company and any 
affiliate thereof,'' and ``affiliate'' as ``[a]ny person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with the person.'' While PTE 2015-17 was 
nominally granted to ``Frank Russell Company and Affiliates,'' the 
primary intended beneficiaries of the relief provided were two entities 
operating as ``Russell Investments''--Russell Investment Management, 
LLC (RIM) and Russell Investments Capital, LLC (RICap), each of which 
qualified as an ``affiliate'' of FRC within the meaning of PTE 2015-17. 
However, as of June 1, 2016, RIM and RICap no longer were under the 
control of, or common control with, FRC and, thus, no longer are 
``affiliates'' of FRC within the meaning of PTE 2015-17.
    On June 1, 2016, London Stock Exchange Group PLC (LSEG), FRC's 
ultimate parent company, sold Russell Investments for $1.15 billion to 
certain holding companies ultimately owned by certain private equity 
funds sponsored by TA Associates Management, LP and Reverence Capital 
Partners LP (the Sale). Following the Sale, FRC continues to operate as 
a wholly-owned subsidiary of LSEG, whereas RIM and RICap continue to 
operate as ``Russell Investments.'' Because FRC is no longer affiliated 
with Russell Investments by reason of the Sale, the Applicants have 
requested a new exemption that would apply the relief provided under 
PTE 2015-17 to the recently sold entities comprising Russell 
Investments.

Russell Investments

    2. Russell Investments is a global asset management firm providing 
investment management products and services to individuals and 
institutions in 47 different countries. As of June 30, 2016, Russell 
Investments had approximately $244 billion in assets under management. 
Among the companies currently comprising Russell Investments are RIM 
and RICap.
    RIM is an investment adviser registered with the U.S. Securities 
and Exchange Commission. RIM provides investment advisers and broker/
dealers with model strategies designed to optimize asset allocation 
strategies based on various investment principles, and may also provide 
marketing assistance and subject matter expertise to these investment 
advisers. RIM may also provide objective setting, asset allocation, 
fund and manager selection services directly to pension plans or other 
institutional clients. As of December 31, 2016, RIM had total assets 
under management of over $40.4 billion, all of which was discretionary.
    RICap is also an investment adviser registered with the U.S. 
Securities and Exchange Commission. RICap provides general investment 
advisory services and acts as an adviser to separate account clients as 
well as several private, private equity and hedge funds offered to 
select institutional investors. RICap advises private investment funds 
which involve privately negotiated equity and equity-related 
investments. As of December 31, 2016, RICap had approximately $8.3 
billion in assets under management, all of which was discretionary.

Investment Products and Services

    3. The Applicants represent that, in the United States, certain 
affiliates of Russell Investments make investments in mutual funds and 
collective

[[Page 36225]]

investment funds available to Client Plans, and develop investment 
products and services for such Client Plans. The investment products 
include open-end investment companies registered under the Investment 
Company Act of 1940, as amended, for which RIM serves as an investment 
adviser or sub-adviser (i.e., the Affiliated Funds). Russell 
Investments may also serve as dividend disbursing agent, shareholder 
servicing agent, transfer agent, fund accountant, or provider of some 
other Secondary Services, including brokerage services, to an 
Affiliated Fund.
    The Applicants state that other investment products provided by 
Russell Investments include bank-maintained common or collective trust 
funds and other similar pooled funds including, potentially, insurance 
company pooled separate accounts (Collective Funds) managed by Russell 
Investments Trust Company, a RIM affiliate.
    4. The Applicants represent that the services provided by Russell 
Investments may include various types of investment advisory and/or 
investment management services which may be rendered at the individual 
Plan level, the Collective Fund level, or the Affiliated Fund level. 
According to the Applicants, Plan investment advisory, investment 
management and similar services include money manager selection, cash 
management, individual security selection and trading strategies, as 
well as various asset allocation strategies involving asset class 
selection and rebalancing, including target date fund ``glidepath'' 
strategies. Such services include Russell Investments' Adaptive 
Retirement Accounts asset allocation service, under which RIM provides 
individualized asset allocation advice to defined contribution plan 
participants.
    5. The Applicants also represent that a Russell Investments entity 
acting as a fiduciary may cause a Client Plan to invest directly in one 
or more Affiliated Funds. It is also possible, the Applicants state, 
that a Russell Investments entity acting as a fiduciary to plans 
participating in a Collective Fund may cause a Client Plan to invest 
indirectly in Affiliated Funds by directing the investment of a 
Collective Fund in which a Client Plan participates into one or more 
Affiliated Funds.

Prohibited Transactions

    6. Section 3(14)(A) and (B) of the Act defines the term ``party in 
interest'' to include, respectively, any fiduciary of a plan and any 
person providing services to a plan. Section 3(21)(A) of the Act 
provides, in relevant part, that a person is a fiduciary with respect 
to a plan to the extent that the person: (i) Exercises any 
discretionary authority or control respecting management of the Plan or 
any authority or control respecting management or disposition of its 
assets, or (ii) renders investment advice for a fee or other 
compensation, direct or indirect, with respect to any moneys or other 
property of a plan or has any authority or responsibility to do so.
    Russell Investments may currently serve, and may in the future 
serve, as investment adviser, investment manager, trustee, or other 
fiduciary with respect to Client Plans. Accordingly, pursuant to 
section 3(21)(A)(i) and (ii) of the Act, Russell Investments may 
currently be, or may in the future be, a fiduciary with respect to 
Client Plans which engage in the proposed transactions. As a fiduciary, 
Russell Investments may currently be, or may in the future be a party 
in interest with respect to Client Plans which engage in the 
transactions described in Section I of this proposed exemption.
    Section 406(a)(l)(D) of the Act prohibits a fiduciary with respect 
to a plan from causing such plan to engage in a transaction, if such 
fiduciary knows or should know, that such transaction constitutes a 
transfer to, or use by or for the benefit of, a party in interest, of 
any assets of such plan. Where Russell Investments, as investment 
adviser or manager to a Client Plan, invests plan assets, directly or 
indirectly, in shares of a collective fund or a mutual fund that is 
managed or advised by Russell Investments, the investment purchase 
transaction violates section 406(a)(1)(D) of the Act.
    Under section 406(b) of the Act, a fiduciary with respect to a plan 
may not: (a) Deal with the assets of a plan in his own interest or for 
his own account, (b) act, in his individual or in any other capacity in 
any transaction involving a plan on behalf of a party (or represent a 
party) whose interests are adverse to the interests of such plan or the 
interests of its participants or beneficiaries, or (c) receive any 
consideration for his own personal account from any party dealing with 
a plan in connection with a transaction involving the assets of such 
plan.
    Russell Investments, as investment manager or investment adviser to 
a Client Plan, may invest plan assets, or cause the investment of plan 
assets, directly or indirectly, in shares of a collective fund or 
mutual fund, from which Russell Investments receives compensation. Such 
added compensation would violate section 406(b)(1) and (b)(2) of the 
Act.
    With respect to section 406(b)(3) of the Act, Russell Investments, 
as investment manager or investment adviser to a Client Plan, may 
receive investment advisory fees and ``secondary services'' fees from 
one or more collective funds or mutual funds in connection with a 
Client Plan's investment in such funds, subject to the terms and 
conditions of this proposed exemption, if granted. Such payments would 
implicate section 406(b)(3) of ERISA.

Prohibited Transaction Exemption 77-4 (PTE 77-4)

    7. The Applicants represent that all of the Russell Investments 
entities to which the exemption would apply are currently part of the 
same controlled group. In this regard, Russell Investments maintains 
that--if and to the extent that Russell Investments invests Client Plan 
assets (directly or indirectly via Collective Funds) in Affiliated 
Funds, such Russell Investments entities can rely on the relief 
provided pursuant to PTE 77-4 (42 FR 18732 (April 8, 1977)), except as 
described below. PTE 77-4 exempts certain purchases and sales by a plan 
of shares of a registered, open-ended investment company, where the 
investment adviser of such fund: (a) Is a plan fiduciary or affiliated 
with a plan fiduciary; and (b) is not an employer of employees covered 
by the plan.
    8. Russell Investments represents that the requested relief is 
essentially the same as that afforded by PTE 77-4, with the exception 
of the use of a ``negative consent'' procedure, as discussed below for: 
(a) Approving Fee Increases with respect to Affiliated Funds, and (b) 
approving in advance the addition of Affiliated Funds (not previously 
authorized) as investments ``inside'' a Russell Investments Collective 
Fund, subject to notice and a right to terminate the original approval 
at the time a new Affiliated Fund is proposed to be added.
    Russell Investments maintains that obtaining advance written 
approval from a Second Fiduciary can be difficult, particularly in the 
case of a Collective Fund, where a Second Fiduciary from every 
investing Client Plan must provide written approval before fees payable 
to Russell Investments by an Affiliated Fund in which such Client Plans 
invest indirectly via a Collective Fund can be increased, or before a 
new investment in an Affiliated Fund that was not previously authorized 
can be made. Affirmative consent may also be difficult to obtain in a 
timely fashion in the context of smaller Client Plans.

[[Page 36226]]

Negative Consent for Fee Increases

    9. Russell Investments requests a negative consent procedure for: 
(a) Any increase in the rate of a fee previously authorized in writing 
by the Second Fiduciary of an affected Client Plan; (b) any increase in 
any fee that results from an addition of services for which a fee is 
charged; (c) any increase in any fee that results from a decrease in 
the number or kind of services performed for such fee over an existing 
rate for such service previously authorized by the Second Fiduciary; 
and (d) any increase in a fee that results from Russell Investments 
changing from one of the fee methods to another of the fee methods.
    To obtain negative consent authorization with regard to a Fee 
Increase, Russell Investments must provide certain disclosures, in 
writing, thirty (30) days in advance of any proposed Fee Increase, 
including but not limited to any Fee Increase for Secondary Services, 
as such services are described below. Such disclosures would be 
delivered by regular mail or personal delivery (or if the Second 
Fiduciary consents by electronic means), and are to be accompanied by a 
Termination Form and instructions on the use of such form.
    The exemption would permit Russell Investments to implement a Fee 
Increase, without waiting until the expiration of the thirty (30) day 
period, provided that implementation of such Fee Increase does not 
start before Russell Investments delivers to each affected Client Plan 
the Notice of Intent of Change of Fees, as described in Section II(k), 
and provided further that any affected Client Plan receives a cash 
credit equal to its pro rata share of such Fee Increase, for the period 
from the date of the implementation of such Fee Increase to the earlier 
of the date of the termination of the investment or the thirtieth 
(30th) day after the date Russell Investments delivers the Notice of 
Change of Fee to the Second Fiduciary of each affected Client Plan. In 
addition, Russell Investments must pay to each affected Client Plan 
interest on such cash credit. An independent auditor, on at least an 
annual basis, will verify the proper crediting of the pro rata share of 
each such Fee Increase and interest. An audit report shall be completed 
by such auditor no later than six (6) months after the period to which 
it relates.
    Failure of the Second Fiduciary to return the Termination Form or 
to provide some other written notification of the intent to terminate 
within a certain period of time will be deemed to be approval of the 
proposed Fee Increase, including but not limited to an increase in the 
fee for Secondary Services.

Negative Consent for New Affiliated Funds

    10. The exemption would further permit a Russell Investments 
Collective Fund holding the assets of a Client Plan, such as a Target 
Date Fund, to purchase shares of an Affiliated Fund not previously 
affirmatively authorized by the Second Fiduciary of such Client Plan, 
provided: (a) The organizational document of such Collective Fund 
expressly provides for the addition of one or more Affiliated Funds to 
the portfolio of such Collective Fund and such organizational document 
is disclosed initially to such Client Plan; and (b) Russell Investments 
satisfies the requirements of the negative consent procedure for 
obtaining the approval of the Second Fiduciary for each Client Plan 
invested in such Collective Fund at the time Russell Investments 
proposes to add an Affiliated Fund to such Collective Fund's portfolio.
    Specifically, the Second Fiduciary of each Client Plan invested in 
such Collective Fund would receive in advance: (a) A notice of Russell 
Investments' intent to add an Affiliated Fund to the portfolio of such 
Collective Fund; and (b) certain disclosures in writing, including a 
summary prospectus of such Affiliated Fund.
    The disclosures are delivered by regular mail or personal delivery 
(or if the Second Fiduciary consents, by electronic means), and are 
accompanied by a Termination Form and instructions on the use of such 
form.
    Failure of the Second Fiduciary to return the Termination Form or 
to provide some other written notification of the intent to terminate 
within a certain period of time will be deemed to be approval of the 
investment by such Collective Fund in such Affiliated Fund.
    Authorizations for fee increases and new affiliated funds may also 
be made affirmatively, in writing, by a Second Fiduciary, in a manner 
that is otherwise consistent with the requirements of the exemption.
    11. Russell Investments represents that because the Second 
Fiduciary of each Client Plan will receive all of the necessary 
disclosures and will have an opportunity to terminate the investment in 
any Affiliated Fund without penalty, such Client Plan and its 
participants and beneficiaries are adequately protected. Further, 
Russell Investments states that to the extent it finds it desirable to 
create an Affiliated Fund with new investment goals, the negative 
consent procedure will facilitate the addition of an Affiliated Fund 
into the portfolios of Russell Investments' Collective Funds.

Electronic Disclosures

    12. Russell Investments may utilize electronic mail with hyperlinks 
to documents required to be disclosed by this proposed exemption. 
Russell Investments will ``actively'' satisfy the various disclosure 
requirements of this proposed exemption by transmitting emails, rather 
than relying on ``passive'' postings on a Web site. Russell Investments 
represents that this method of disclosure will be consistent with the 
Department's regulations at 29 CFR 2520.104b-l. Russell Investments 
represents that Client Plans which do not authorize electronic delivery 
will receive in advance hard copies of the documents required to be 
disclosed, and hard copies of documents will also be available on 
request.

Termination

    13. A Client Plan invested directly in shares of an Affiliated Fund 
or invested indirectly through a Collective Fund will have an 
opportunity to terminate and withdraw from investment in such 
Affiliated Fund, and, as applicable, to terminate and withdraw from 
investment in such Collective Fund in the event of a Fee Increase and 
in the event of the addition of an Affiliated Fund to the portfolio of 
a Collective Fund. In this regard, a Second Fiduciary will be provided 
with a Termination Form at least annually and may terminate the 
authorization to invest directly in shares of an Affiliated Fund or 
indirectly through a Collective Fund, at will, without penalty to a 
Client Plan. Termination of the authorization by the Second Fiduciary 
of a Client Plan investing directly in shares of an Affiliated Fund 
will result in such Client Plan withdrawing from such Affiliated Fund. 
Termination of the authorization by the Second Fiduciary of a Client 
Plan investing indirectly in shares of an Affiliated Fund through a 
Collective Fund will result in such Client Plan withdrawing from such 
Collective Fund.
    Generally, Russell Investments will process timely requests for 
withdrawal from an Affiliated Fund within one (1) business day. 
Withdrawal from a Collective Fund will generally be processed within 
the same time frame, subject to rules designed to ensure orderly 
withdrawals and fairness for the withdrawing Client Plans and non-
withdrawing Client Plans, but in no event shall such withdrawal be 
implemented by Russell Investments more than five (5) business days 
after

[[Page 36227]]

receipt by Russell Investments of a Termination Form or other written 
notification of intent to terminate investment in such Collective Fund 
from the Second Fiduciary acting on behalf of the withdrawing Client 
Plan. Russell Investments will pay interest on the settlement amount 
for the period from receipt by Russell Investments of a Termination 
Form or other written notification of intent to terminate from the 
Second Fiduciary, acting on behalf of the withdrawing Client Plan, to 
the date Russell Investments pays the settlement amount, plus interest 
thereon.
    From the date a Client Plan terminates its investment in an 
Affiliated Fund, such Client Plan will not be subject to pay a pro rata 
share of the fees received by Russell Investments from such Affiliated 
Fund. Likewise, from the date a Client Plan terminates its investment 
in a Collective Fund, such Client Plan will not be subject to pay a pro 
rata share of the fees received by Russell Investments from such 
Collective Fund, nor will such Client Plan be subject to changes in the 
portfolio of such Collective Fund, including a pro rata share of any 
Affiliated Fund-Level Advisory Fee arising from the investment by such 
Collective Fund in an Affiliated Fund.

Receipt of Fees Pursuant to the Fee Methods

    14. The exemption, if granted, includes conditions which detail 
various methods which ensure that Russell Investments complies with the 
prohibition against a Client Plan paying double investment management 
fees, investment advisory, and similar fees for the assets of Client 
Plans invested directly in shares of an Affiliated Fund or invested 
indirectly in shares of an Affiliated Fund though a Collective Fund. 
These methods are described below in Section II(a)(l)-(3).

Receipt of Fees for Secondary Services

    15. Russell Investments may also receive various fees and expenses 
for ``Secondary Services,'' which are services other than investment 
management services, investment advisory services, and any similar 
service, which are provided by Russell Investments to an Affiliated 
Fund. These services include accounting, administrative and brokerage 
services. It is represented that all fees for Secondary Services 
received by Russell Investments at this time are paid to Russell 
Investments directly by the Affiliated Funds. The negative consent 
procedure applicable for a Fee Increase for Secondary Services is 
discussed above.
    Russell Investments affiliates may receive commissions for the 
performance of brokerage services for the mutual funds. Under the 
conditions of this proposed exemption, if an Affiliated Fund places 
brokerage transactions with Russell Investments, Russell Investments 
will provide the Second Fiduciary of each such Client Plan, at least 
annually, the disclosure described in Section II(o) of this proposed 
exemption.

Statutory Findings

    16. According to the Applicants, the use of a Termination Form will 
provide both a record and a regular reminder to the Second Fiduciary of 
a Client Plan of such plan's rights vis-[agrave]-vis investing in 
Affiliated Funds, either directly or indirectly through a Collective 
Fund. Further the Applicants state that with very narrow exceptions 
relating to the negative consent authorizations described above, all of 
the conditions of PTE 77-4, as amended and/or restated, must be met.
    17. The Applicants represent that the proposed exemption is in the 
interest of Client Plans, because it will allow Russell Investments to 
manage or advise with respect to the assets of such Client Plans 
invested in shares of an Affiliated Fund, either directly or indirectly 
through a Collective Fund, in an efficient or timely manner and on 
terms that might not otherwise be available without exemptive relief.
    18. The Applicants represent that the proposed exemption is 
protective of Client Plans because: (a) Prior to any investment by a 
Client Plan directly or indirectly in shares of an Affiliated Fund, 
such investment must be authorized by the Second Fiduciary of such 
Client Plan, based on full and detailed written disclosure concerning 
such Affiliated Fund; (b) Fee Increases and Affiliated Fund additions 
to the portfolios of Collective Funds will be monitored and approved by 
the Second Fiduciary, who will have the ability to avoid the effect of 
such Fee Increases of Affiliated Fund additions; (c) Client Plan 
investments in shares of an Affiliated Fund, either directly or 
indirectly, will be subject to the ongoing ability of the Second 
Fiduciary of such Client Plan to terminate such investment, without 
penalty to such Client Plan; (d) Russell Investments will provide to 
such Second Fiduciary, in addition to certain initial disclosures, 
ongoing disclosures regarding such Affiliated Funds; and (e) Russell 
Investments, in its fiduciary capacity, will: (i) Act in the Best 
Interest of the Client Plans; (ii) charge fees which are reasonable in 
relation to the total services it provides to Client Plans; and (iii) 
not make misleading statements to Client Plans regarding recommended 
investments, fees, material conflicts of interest, and any other 
matters relevant to a Client Plan's investment decisions.

Summary

    19. Given the conditions described below, the Department has 
tentatively determined that the relief sought by the Applicants 
satisfies the statutory requirements for an exemption under section 
408(a) of the Act.

Proposed Exemption Operative Language

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act (or ERISA) and in accordance 
with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 
46637, 66644, October 27, 2011).

Section I. Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(D) and 406(b) of the Act, and the sanctions resulting from 
the application of section 4975 of the Code, by reason of sections 
4975(c)(1)(D) through (F) of the Code, shall not apply, effective June 
1, 2016, to:
    (a) The receipt of a fee by Russell Investments, from an Affiliated 
Fund, in connection with the direct investment in shares of any such 
Affiliated Fund, by a Client Plan, where Russell Investments serves as 
a fiduciary with respect to such Client Plan, and where Russell 
Investments:
    (1) Provides investment advisory services, or similar services to 
any such Affiliated Fund; and
    (2) Provides to any such Affiliated Fund other services (Secondary 
Service(s)), as defined below in Section IV(i); and
    (b) In connection with the indirect investment by a Client Plan in 
shares of an Affiliated Fund through investment in a pooled investment 
vehicle or pooled investment vehicles (Collective Fund(s)), where 
Russell Investments serves as a fiduciary with respect to such Client 
Plan, the receipt of fees by Russell Investments from:
    (1) An Affiliated Fund for the provision of investment advisory 
services, or similar services by Russell Investments to any such 
Affiliated Fund; and
    (2) An Affiliated Fund for the provision of Secondary Services by 
Russell Investments to any such Affiliated Fund; provided that the

[[Page 36228]]

conditions, as set forth below, were satisfied, as of June 1, 2016, the 
effective date of this exemption, and continue to be satisfied 
thereafter.

Section II. Specific Conditions

    (a)(1) Each Client Plan which is invested directly in shares of an 
Affiliated Fund either:
    (i) Does not pay to Russell Investments, for the entire period of 
such investment, any investment management fee, any investment advisory 
fee, or any similar fee at the plan-level (the Plan-Level Management 
Fee), as defined below in Section IV(m), with respect to any of the 
assets of such Client Plan which are invested directly in shares of 
such Affiliated Fund; or
    (ii) Pays to Russell Investments a Plan-Level Management Fee, based 
on total assets of such Client Plan under management by Russell 
Investments at the plan-level, from which a credit has been subtracted 
from such Plan-Level Management Fee, where the amount subtracted 
represents such Client Plan's pro rata share of any investment advisory 
fee and any similar fee (the Affiliated Fund Level Advisory Fee), as 
defined below in Section IV(o), paid by such Affiliated Fund to Russell 
Investments.
    If, during any fee period, in the case of a Client Plan invested 
directly in shares of an Affiliated Fund, such Client Plan has prepaid 
its Plan Level Management Fee, and such Client Plan purchases shares of 
an Affiliated Fund directly, the requirement of this Section 
II(a)(1)(ii) shall be deemed met with respect to such prepaid Plan-
Level Management Fee, if, by a method reasonably designed to accomplish 
the same, the amount of the prepaid Plan-Level Management Fee that 
constitutes the fee with respect to the assets of such Client Plan 
invested directly in shares of an Affiliated Fund:
    (A) Is anticipated and subtracted from the prepaid Plan-Level 
Management Fee at the time of the payment of such fee; or
    (B) Is returned to such Client Plan, no later than during the 
immediately following fee period; or
    (C) Is offset against the Plan-Level Management Fee for the 
immediately following fee period or for the fee period immediately 
following thereafter.
    For purposes of Section II(a)(1)(ii), a Plan-Level Management Fee 
shall be deemed to be prepaid for any fee period, if the amount of such 
Plan-Level Management Fee is calculated as of a date not later than the 
first day of such period.
    (2) Each Client Plan invested in a Collective Fund the assets of 
which are not invested in shares of an Affiliated Fund:
    (i) Does not pay to Russell Investments for the entire period of 
such investment any Plan-Level Management Fee with respect to any 
assets of such Client Plan invested in such Collective Fund.
    The requirements of this Section II(a)(2)(i) do not preclude the 
payment of a Collective Fund-Level Management Fee by such Collective 
Fund to Russell Investments, based on the assets of such Client Plan 
invested in such Collective Fund; or
    (ii) Does not pay to Russell Investments for the entire period of 
such investment any Collective Fund-Level Management Fee with respect 
to any assets of such Client Plan invested in such Collective Fund.
    The requirements of this Section II(a)(2)(ii) do not preclude the 
payment of a Plan-Level Management Fee by such Client Plan to Russell 
Investments, based on total assets of such Client Plan under management 
by Russell Investments at the plan-level; or
    (iii) Such Client Plan pays to Russell Investments a Plan-Level 
Management Fee, based on total assets of such Client Plan under 
management by Russell Investments at the plan-level, from which a 
credit has been subtracted from such Plan-Level Management Fee (the 
``Net'' Plan-Level Management Fee), where the amount subtracted 
represents such Client Plan's pro rata share of any Collective Fund-
Level Management Fee paid by such Collective Fund to Russell 
Investments.
    The requirements of this Section II(a)(2)(iii) do not preclude the 
payment of a Collective Fund-Level Management Fee by such Collective 
Fund to Russell Investments, based on the assets of such Client Plan 
invested in such Collective Fund.
    (3) Each Client Plan invested in a Collective Fund, the assets of 
which are invested in shares of an Affiliated Fund:
    (i) Does not pay to Russell Investments for the entire period of 
such investment any Plan-Level Management Fee (including any ``Net'' 
Plan-Level Management Fee, as described, above, in Section 
II(a)(2)(ii)), and does not pay directly to Russell Investments or 
indirectly to Russell Investments through the Collective Fund for the 
entire period of such investment any Collective Fund-Level Management 
Fee with respect to the assets of such Client Plan which are invested 
in such Affiliated Fund; or
    (ii) Pays indirectly to Russell Investments a Collective Fund-Level 
Management Fee, in accordance with Section II(a)(2)(i) above, based on 
the total assets of such Client Plan invested in such Collective Fund, 
from which a credit has been subtracted from such Collective Fund-Level 
Management Fee, where the amount subtracted represents such Client 
Plan's pro rata share of any Affiliated Fund-Level Advisory Fee paid to 
Russell Investments by such Affiliated Fund; and does not pay to 
Russell Investments for the entire period of such investment any Plan-
Level Management Fee with respect to any assets of such Client Plan 
invested in such Collective Fund; or
    (iii) Pays to Russell Investments a Plan-Level Management Fee, in 
accordance with Section II(a)(2)(ii) above, based on the total assets 
of such Client Plan under management by Russell Investments at the 
plan-level, from which a credit has been subtracted from such Plan-
Level Management Fee, where the amount subtracted represents such 
Client Plan's pro rata share of any Affiliated Fund-Level Advisory Fee 
paid to Russell Investments by such Affiliated Fund; and does not pay 
directly to Russell Investments or indirectly to Russell Investments 
through the Collective Fund for the entire period of such investment 
any Collective Fund-Level Management Fee with respect to any assets of 
such Client Plan invested in such Collective Fund; or
    (iv) Pays to Russell Investments a ``Net'' Plan-Level Management 
Fee, in accordance with Section II(a)(2)(iii) above, from which a 
further credit has been subtracted from such ``Net'' Plan-Level 
Management Fee, where the amount of such further credit which is 
subtracted represents such Client Plan's pro rata share of any 
Affiliated Fund-Level Advisory Fee paid to Russell Investments by such 
Affiliated Fund.
    Provided that the conditions of this proposed exemption are 
satisfied, the requirements of Section II(a)(1)(i)-(ii) and Section 
II(a)(3)(i)-(iv) do not preclude the payment of an Affiliated Fund-
Level Advisory Fee by an Affiliated Fund to Russell Investments under 
the terms of an investment advisory agreement adopted in accordance 
with section 15 of the Investment Company Act of 1940 (the Investment 
Company Act). Further, the requirements of Section II(a)(1)(i)-(ii) and 
Section II(a)(3)(i)-(iv) do not preclude the payment of a fee by an 
Affiliated Fund to Russell Investments for the provision by Russell 
Investments of Secondary Services to such Affiliated Fund under the 
terms of a duly adopted agreement between Russell Investments and such 
Affiliated Fund.
    For the purpose of Section II(a)(1)(ii) and Section II(a)(3)(ii)-
(iv), in

[[Page 36229]]

calculating a Client Plan's pro rata share of an Affiliated Fund-Level 
Advisory Fee, Russell Investments must use an amount representing the 
``gross'' advisory fee paid to Russell Investments by such Affiliated 
Fund. For purposes of this paragraph, the ``gross'' advisory fee is the 
amount paid to Russell Investments by such Affiliated Fund, including 
the amount paid by such Affiliated Fund to sub-advisers.
    (b) The purchase price paid and the sales price received by a 
Client Plan for shares in an Affiliated Fund purchased or sold 
directly, and the purchase price paid and the sales price received by a 
Client Plan for shares in an Affiliated Fund purchased or sold 
indirectly through a Collective Fund, is the net asset value per share 
(NAV), as defined below in Section IV(f), at the time of the 
transaction, and is the same purchase price that would have been paid 
and the same sales price that would have been received for such shares 
by any other shareholder of the same class of shares in such Affiliated 
Fund at that time.\15\
---------------------------------------------------------------------------

    \15\ The selection of a particular class of shares of an 
Affiliated Fund as an investment for a Client Plan indirectly 
through a Collective Fund is a fiduciary decision that must be made 
in accordance with the provisions of section 404(a) of the Act.
---------------------------------------------------------------------------

    (c) Russell Investments, including any officer and any director of 
Russell Investments, does not purchase any shares of an Affiliated Fund 
from, and does not sell any shares of an Affiliated Fund to, any Client 
Plan which invests directly in such Affiliated Fund, and Russell 
Investments, including any officer and director of Russell Investments, 
does not purchase any shares of any Affiliated Fund from, and does not 
sell any shares of an Affiliated Fund to, any Collective Fund in which 
a Client Plan invests indirectly in shares of such Affiliated Fund.
    (d) No sales commissions, no redemption fees, and no other similar 
fees are paid in connection with any purchase and in connection with 
any sale by a Client Plan directly in shares of an Affiliated Fund, and 
no sales commissions, no redemption fees, and no other similar fees are 
paid by a Collective Fund in connection with any purchase, and in 
connection with any sale, of shares in an Affiliated Fund by a Client 
Plan indirectly through such Collective Fund. However, this Section 
II(d) does not prohibit the payment of a redemption fee, if:
    (1) Such redemption fee is paid only to an Affiliated Fund; and
    (2) The existence of such redemption fee is disclosed in the 
summary prospectus for such Affiliated Fund in effect both at the time 
of any purchase of shares in such Affiliated Fund and at the time of 
any sale of such shares.
    (e) The combined total of all fees received by Russell Investments 
is not in excess of reasonable compensation within the meaning of 
section 408(b)(2) of the Act, for services provided:
    (1) By Russell Investments to each Client Plan;
    (2) By Russell Investments to each Collective Fund in which a 
Client Plan invests;
    (3) By Russell Investments to each Affiliated Fund in which a 
Client Plan invests directly in shares of such Affiliated Fund; and
    (4) By Russell Investments to each Affiliated Fund in which a 
Client Plan invests indirectly in shares of such Affiliated Fund 
through a Collective Fund.
    (f) Russell Investments does not receive any fees payable pursuant 
to Rule 12b-1 under the Investment Company Act in connection with the 
transactions covered by this proposed exemption;
    (g) No Client Plan is an employee benefit plan sponsored or 
maintained by Russell Investments.
    (h)(1) In the case of a Client Plan investing directly in shares of 
an Affiliated Fund, a second fiduciary (the Second Fiduciary), as 
defined below in Section IV(h), acting on behalf of such Client Plan, 
receives, in writing, in advance of any investment by such Client Plan 
directly in shares of such Affiliated Fund, a full and detailed 
disclosure via first class mail or via personal delivery of (or, if the 
Second Fiduciary consents to such means of delivery, through electronic 
email, in accordance with Section II(q), as set forth below) 
information concerning such Affiliated Fund, including but not limited 
to the items listed below:
    (i) A current summary prospectus issued by each such Affiliated 
Fund;
    (ii) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for:
    (A) Investment advisory and similar services to be paid to Russell 
Investments by each Affiliated Fund;
    (B) Secondary Services to be paid to Russell Investments by each 
such Affiliated Fund; and
    (C) All other fees to be charged by Russell Investments to such 
Client Plan and to each such Affiliated Fund and all other fees to be 
paid to Russell Investments by each such Client Plan and by each such 
Affiliated Fund;
    (iii) The reasons why Russell Investments may consider investment 
directly in shares of such Affiliated Fund by such Client Plan to be 
appropriate for such Client Plan;
    (iv) A statement describing whether there are any limitations 
applicable to Russell Investments with respect to which assets of such 
Client Plan may be invested directly in shares of such Affiliated Fund, 
and if so, the nature of such limitations; and
    (v) Upon the request of the Second Fiduciary acting on behalf of 
such Client Plan, a copy of the Notice of Proposed Exemption (the 
Notice), a copy of the final exemption, if granted, and any other 
reasonably available information regarding the transactions which are 
the subject of this proposed exemption.
    (2) In the case of a Client Plan whose assets are proposed to be 
invested in a Collective Fund after such Collective Fund has begun 
investing in shares of an Affiliated Fund, a Second Fiduciary, acting 
on behalf of such Client Plan, receives, in writing, in advance of any 
investment by such Client Plan in such Collective Fund, a full and 
detailed disclosure via first class mail or via personal delivery (or, 
if the Second Fiduciary consents to such means of delivery, through 
electronic email, in accordance with Section II(q), as set forth below) 
of information concerning such Collective Fund and information 
concerning each such Affiliated Fund in which such Collective Fund is 
invested, including but not limited to the items listed, below:
    (i) A current summary prospectus issued by each such Affiliated 
Fund;
    (ii) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for:
    (A) Investment advisory and similar services to be paid to Russell 
Investments by each Affiliated Fund;
    (B) Secondary Services to be paid to Russell Investments by each 
such Affiliated Fund; and
    (C) All other fees to be charged by Russell Investments to such 
Client Plan, to such Collective Fund, and to each such Affiliated Fund 
and all other fees to be paid to Russell Investments by such Client 
Plan, by such Collective Fund, and by each such Affiliated Fund;
    (iii) The reasons why Russell Investments may consider investment 
by such Client Plan in shares of each such Affiliated Fund indirectly 
through such Collective Fund to be appropriate for such Client Plan;
    (iv) A statement describing whether there are any limitations 
applicable to Russell Investments with respect to which assets of such 
Client Plan may be invested indirectly in shares of each such 
Affiliated Fund through such

[[Page 36230]]

Collective Fund, and if so, the nature of such limitations;
    (v) Upon the request of the Second Fiduciary, acting on behalf of 
such Client Plan, a copy of the Notice, a copy of the final exemption, 
if granted, and any other reasonably available information regarding 
the transactions which are the subject of this proposed exemption; and
    (vi) A copy of the organizational documents of such Collective Fund 
which expressly provide for the addition of one or more Affiliated 
Funds to the portfolio of such Collective Fund.
    (3) In the case of a Client Plan whose assets are proposed to be 
invested in a Collective Fund before such Collective Fund has begun 
investing in shares of any Affiliated Fund, a Second Fiduciary, acting 
on behalf of such Client Plan, receives, in writing, in advance of any 
investment by such Client Plan in such Collective Fund, a full and 
detailed disclosure via first class mail or via personal delivery (or, 
if the Second Fiduciary consents to such means of delivery through 
electronic email, in accordance with Section II(q), as set forth below) 
of information, concerning such Collective Fund, including but not 
limited to, the items listed below:
    (i) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for all fees 
to be charged by Russell Investments to such Client Plan and to such 
Collective Fund and all other fees to be paid to Russell Investments by 
such Client Plan, and by such Collective Fund;
    (ii) Upon the request of the Second Fiduciary, acting on behalf of 
such Client Plan, a copy of the Notice, a copy of the final exemption, 
if granted, and any other reasonably available information regarding 
the transactions which are the subject of this proposed exemption; and
    (iii) A copy of the organizational documents of such Collective 
Fund which expressly provide for the addition of one or more Affiliated 
Funds to the portfolio of such Collective Fund.
    (i) On the basis of the information, described above in Section 
II(h), a Second Fiduciary, acting on behalf of a Client Plan:
    (1) Authorizes in writing the investment of the assets of such 
Client Plan, as applicable:
    (i) Directly in shares of an Affiliated Fund;
    (ii) Indirectly in shares of an Affiliated Fund through a 
Collective Fund where such Collective Fund has already invested in 
shares of an Affiliated Fund; and
    (iii) In a Collective Fund which is not yet invested in shares of 
an Affiliated Fund but whose organizational document expressly provides 
for the addition of one or more Affiliated Funds to the portfolio of 
such Collective Fund; and
    (2) Authorizes in writing, as applicable:
    (i) The Affiliated Fund-Level Advisory Fee received by Russell 
Investments for investment advisory services and similar services 
provided by Russell Investments to such Affiliated Fund;
    (ii) The fee received by Russell Investments for Secondary Services 
provided by Russell Investments to such Affiliated Fund;
    (iii) The Collective Fund-Level Management Fee received by Russell 
Investments for investment management, investment advisory, and similar 
services provided by Russell Investments to such Collective Fund in 
which such Client Plan invests;
    (iv) The Plan-Level Management Fee received by Russell Investments 
for investment management and similar services provided by Russell 
Investments to such Client Plan at the plan-level; and
    (v) The selection by Russell Investments of the applicable fee 
method, as described above in Section II(a)(1)-(3).
    All authorizations made by a Second Fiduciary pursuant to this 
Section II(i) must be consistent with the responsibilities, 
obligations, and duties imposed on fiduciaries by Part 4 of Title I of 
the Act;
    (j)(1) Any authorization, described above in Section II(i), and any 
authorization made pursuant to negative consent, as described below in 
Section II(k) and in Section II(l), made by a Second Fiduciary, acting 
on behalf of a Client Plan, shall be terminable at will by such Second 
Fiduciary, without penalty to such Client Plan (including any fee or 
charge related to such penalty), upon receipt by Russell Investments 
via first class mail, via personal delivery, or via electronic email of 
a written notification of the intent of such Second Fiduciary to 
terminate any such authorization;
    (2) A form (the Termination Form), expressly providing an election 
to terminate any authorization, described above in Section II(i), or to 
terminate any authorization made pursuant to negative consent, as 
described below in Section II(k) and in Section II(l), with 
instructions on the use of such Termination Form, must be provided to 
such Second Fiduciary at least annually, either in writing via first 
class mail or via personal delivery (or if such Second Fiduciary 
consents to such means of delivery through electronic email, in 
accordance with Section II(q), as set forth below). However, if a 
Termination Form has been provided to such Second Fiduciary pursuant to 
Section II(k) or pursuant to Section II(l) below, then a Termination 
Form need not be provided pursuant to this Section II(j), until at 
least six (6) months, but no more than twelve (12) months, have 
elapsed, since the prior Termination Form was provided;
    (3) The instructions for the Termination Form must include the 
following statements:
    (i) Any authorization, described above in Section II(i), and any 
authorization made pursuant to negative consent, as described below in 
Section II(k) or in Section II(l), is terminable at will by a Second 
Fiduciary, acting on behalf of a Client Plan, without penalty to such 
Client Plan, upon receipt by Russell Investments via first class mail 
or via personal delivery or via electronic email of the Termination 
Form, or some other written notification of the intent of such Second 
Fiduciary to terminate such authorization;
    (ii) Within thirty (30) days from the date the Termination Form is 
sent to such Second Fiduciary by Russell Investments, the failure by 
such Second Fiduciary to return such Termination Form or the failure by 
such Second Fiduciary to provide some other written notification of the 
Client Plan's intent to terminate any authorization, described in 
Section II(i), or intent to terminate any authorization made pursuant 
to negative consent, as described below in Section II(k) or in Section 
II(l), will be deemed to be an approval by such Second Fiduciary;
    (4) In the event that a Second Fiduciary, acting on behalf of a 
Client Plan, at any time returns a Termination Form or returns some 
other written notification of intent to terminate any authorization, as 
described above in Section II(i), or intent to terminate any 
authorization made pursuant to negative consent, as described below in 
Section II(k) or in Section II(l);
    (i)(A) In the case of a Client Plan which invests directly in 
shares of an Affiliated Fund, the termination will be implemented by 
the withdrawal of all investments made by such Client Plan in the 
affected Affiliated Fund, and such withdrawal will be effected by 
Russell Investments within one (1) business day of the date that 
Russell Investments receives such Termination Form or receives from the 
Second Fiduciary, acting on behalf of such Client Plan,

[[Page 36231]]

some other written notification of intent to terminate any such 
authorization;
    (B) From the date a Second Fiduciary, acting on behalf of a Client 
Plan that invests directly in shares of an Affiliated Fund, returns a 
Termination Form or returns some other written notification of intent 
to terminate such Client Plan's investment in such Affiliated Fund, 
such Client Plan will not be subject to pay a pro rata share of any 
Affiliated Fund-Level Advisory Fee and will not be subject to pay any 
fees for Secondary Services paid to Russell Investments by such 
Affiliated Fund, or any other fees or charges;
    (ii)(A) In the case of a Client Plan which invests in a Collective 
Fund, the termination will be implemented by the withdrawal of such 
Client Plan from all investments in such affected Collective, and such 
withdrawal will be implemented by Russell Investments within such time 
as may be necessary for withdrawal in an orderly manner that is 
equitable to the affected withdrawing Client Plan and to all non-
withdrawing Client Plans, but in no event shall such withdrawal be 
implemented by Russell Investments more than five business (5) days 
after the day Russell Investments receives from the Second Fiduciary, 
acting on behalf of such withdrawing Client Plan, a Termination Form or 
receives some other written notification of intent to terminate the 
investment of such Client Plan in such Collective Fund, unless such 
withdrawal is otherwise prohibited by a governmental entity with 
jurisdiction over the Collective Fund, or the Second Fiduciary fails to 
instruct Russell Investments as to where to reinvest or send the 
withdrawal proceeds; and
    (B) From the date Russell Investments receives from a Second 
Fiduciary, acting on behalf of a Client Plan, that invests in a 
Collective Fund, a Termination Form or receives some other written 
notification of intent to terminate such Client Plan's investment in 
such Collective Fund, such Client Plan will not be subject to pay a pro 
rata share of any fees arising from the investment by such Client Plan 
in such Collective Fund, including any Collective Fund-Level Management 
Fee, nor will such Client Plan be subject to any other charges to the 
portfolio of such Collective Fund, including a pro rata share of any 
Affiliated Fund-Level Advisory Fee and any fee for Secondary Services 
arising from the investment by such Collective Fund in an Affiliated 
Fund.
    (k)(1) Russell Investments, at least thirty (30) days in advance of 
the implementation of each fee increase (Fee Increase(s)), as defined 
below in Section IV(l), must provide in writing via first class mail or 
via personal delivery (or if the Second Fiduciary consents to such 
means of delivery through electronic email, in accordance with Section 
II(q), as set forth below), a notice of change in fees (the Notice of 
Change in Fees) (which may take the form of a proxy statement, letter, 
or similar communication which is separate from the summary prospectus 
of such Affiliated Fund) and which explains the nature and the amount 
of such Fee Increase to the Second Fiduciary of each affected Client 
Plan. Such Notice of Change in Fees shall be accompanied by a 
Termination Form and by instructions on the use of such Termination 
Form, as described above in Section II(j)(3);
    (2) Subject to the crediting, interest-payback, and other 
requirements below, for each Client Plan affected by a Fee Increase, 
Russell Investments may implement such Fee Increase without waiting for 
the expiration of the 30-day period, described above in Section 
II(k)(1), provided Russell Investments does not begin implementation of 
such Fee Increase before the first day of the 30-day period, described 
above in Section II(k)(1), and provided further that the following 
conditions are satisfied:
    (i) Russell Investments delivers, in the manner described in 
Section II(k)(1), to the Second Fiduciary for each affected Client 
Plan, the Notice of Change of Fees, as described in Section II(k)(1), 
accompanied by the Termination Form and by instructions on the use of 
such Termination Form, as described above in Section II(j)(3);
    (ii) Each affected Client Plan receives from Russell Investments a 
credit in cash equal to each such Client Plan's pro rata share of such 
Fee Increase to be received by Russell Investments for the period from 
the date of the implementation of such Fee Increase to the earlier of:
    (A) The date when an affected Client Plan, pursuant to Section 
II(j), terminates any authorization, as described above in Section 
II(i), or terminates any negative consent authorization, as described 
in Section II(k) or in Section II(l); or
    (B) The 30th day after the day that Russell Investments delivers to 
the Second Fiduciary of each affected Client Plan the Notice of Change 
of Fees, described in Section II(k)(1), accompanied by the Termination 
Form and by the instructions on the use of such Termination Form, as 
described above in Section II(j)(3).
    (iii) Russell Investments pays to each affected Client Plan the 
cash credit, as described above in Section II(k)(2)(ii), with interest 
thereon, no later than five (5) business days following the earlier of:
    (A) The date such affected Client Plan, pursuant to Section II(j), 
terminates any authorization, as described above in Section II(i), or 
terminates, any negative consent authorization, as described in Section 
II(k) or in Section II(l); or
    (B) The 30th day after the day that Russell Investments delivers to 
the Second Fiduciary of each affected Client Plan, the Notice of Change 
of Fees, described in Section II(k)(1), accompanied by the Termination 
Form and instructions on the use of such Termination Form, as described 
above in Section II(j)(3);
    (iv) Interest on the credit in cash is calculated at the prevailing 
Federal funds rate plus two percent (2%) for the period from the day 
Russell Investments first implements the Fee Increase to the date 
Russell Investments pays such credit in cash, with interest thereon, to 
each affected Client Plan;
    (v) An independent accounting firm (the Auditor) at least annually 
audits the payments made by Russell Investments to each affected Client 
Plan, audits the amount of each cash credit, plus the interest thereon, 
paid to each affected Client Plan, and verifies that each affected 
Client Plan received the correct amount of cash credit and the correct 
amount of interest thereon;
    (vi) Such Auditor issues an audit report of its findings no later 
than six (6) months after the period to which such audit report 
relates, and provides a copy of such audit report to the Second 
Fiduciary of each affected Client Plan; and
    (3) Within thirty (30) days from the date Russell Investments sends 
to the Second Fiduciary of each affected Client Plan, the Notice of 
Change of Fees and the Termination Form, the failure by such Second 
Fiduciary to return such Termination Form and the failure by such 
Second Fiduciary to provide some other written notification of the 
Client Plan's intent to terminate the authorization, described in 
Section II(i), or to terminate the negative consent authorization, as 
described in Section II(k) or in Section II(l), will be deemed to be an 
approval by such Second Fiduciary of such Fee Increase.
    (l) Effective upon the date that the final exemption is granted, in 
the case of (a) a Client Plan which has received the disclosures 
detailed in Section II(h)(2)(i), II(h)(2)(ii)(A), II(h)(2)(ii)(B), 
II(h)(2)(ii)(C), II(h)(2)(iii), II(h)(2)(iv),

[[Page 36232]]

II(h)(2)(v), and II(h)(2)(vi), and which has authorized the investment 
by such Client Plan in a Collective Fund in accordance with Section 
II(i)(1)(ii) above, and (b) a Client Plan which has received the 
disclosures detailed in Section II(h)(3)(i), II(h)(3)(ii), and 
II(h)(3)(iii), and which has authorized investment by such Client Plan 
in a Collective Fund, in accordance with Section II(i)(1)(iii) above, 
the authorization pursuant to negative consent in accordance with this 
Section II(l), applies to:
    (1) The purchase, as an addition to the portfolio of such 
Collective Fund, of shares of an Affiliated Fund (a New Affiliated 
Fund) where such New Affiliated Fund has not been previously authorized 
pursuant to Section II(i)(1)(ii), or, as applicable, Section 
II(i)(1)(iii), and such Collective Fund may commence investing in such 
New Affiliated Fund without further written authorization from the 
Second Fiduciary of each Client Plan invested in such Collective Fund, 
provided that:
    (i) The organizational documents of such Collective Fund expressly 
provide for the addition of one or more Affiliated Funds to the 
portfolio of such Collective Fund, and such documents were disclosed in 
writing via first class mail or via personal delivery (or, if the 
Second Fiduciary consents to such means of delivery, through electronic 
email, in accordance with Section II(q)) to the Second Fiduciary of 
each such Client Plan invested in such Collective Fund, in advance of 
any investment by such Client Plan in such Collective Fund;
    (ii) At least thirty (30) days in advance of the purchase by a 
Client Plan of shares of such New Affiliated Fund indirectly through a 
Collective Fund, Russell Investments provides, either in writing via 
first class or via personal delivery (or if the Second Fiduciary 
consents to such means of delivery through electronic email, in 
accordance with Section II(q)) to the Second Fiduciary of each Client 
Plan having an interest in such Collective Fund, full and detailed 
disclosures about such New Affiliated Fund, including but not limited 
to:
    (A) A notice of Russell Investments' intent to add a New Affiliated 
Fund to the portfolio of such Collective Fund, where such notice may 
take the form of a proxy statement, letter, or similar communication 
that is separate from the summary prospectus of such New Affiliated 
Fund to the Second Fiduciary of each affected Client Plan;
    (B) Such notice of Russell Investments' intent to add a New 
Affiliated Fund to the portfolio of such Collective Fund shall be 
accompanied by the information described in Section II(h)(2)(i), 
II(h)(2)(ii)(A), II(h)(2)(ii)(B), II(h)(2)(ii)(C), II(h)(2)(iii), 
II(h)(2)(iv), and II(2)(v) with respect to each such New Affiliated 
Fund proposed to be added to the portfolio of such Collective Fund; and
    (C) A Termination Form and instructions on the use of such 
Termination Form, as described in Section II(j)(3); and
    (2) Within thirty (30) days from the date Russell Investments sends 
to the Second Fiduciary of each affected Client Plan, the information 
described above in Section II(l)(1)(ii), the failure by such Second 
Fiduciary to return the Termination Form or to provide some other 
written notification of the Client Plan's intent to terminate the 
authorization described in Section II(i)(1)(ii), or, as appropriate, to 
terminate the authorization, described in Section II(i)(1)(iii), or to 
terminate any authorization, pursuant to negative consent, as described 
in this Section II(l), will be deemed to be an approval by such Second 
Fiduciary of the addition of a New Affiliated Fund to the portfolio of 
such Collective Fund in which such Client Plan invests, and will result 
in the continuation of the authorization of Russell Investments to 
engage in the transactions which are the subject of this proposed 
exemption with respect to such New Affiliated Fund.
    (m) Russell Investments is subject to the requirement to provide 
within a reasonable period of time any reasonably available information 
regarding the covered transactions that the Second Fiduciary of such 
Client Plan requests Russell Investments to provide.
    (n) All dealings between a Client Plan and an Affiliated Fund, 
including all such dealings when such Client Plan is invested directly 
in shares of such Affiliated Fund and when such Client Plan is invested 
indirectly in such shares of such Affiliated Fund through a Collective 
Fund, are on a basis no less favorable to such Client Plan, than 
dealings between such Affiliated Fund and other shareholders of the 
same class of shares in such Affiliated Fund.
    (o) In the event a Client Plan invests directly in shares of an 
Affiliated Fund, and, as applicable, in the event a Client Plan invests 
indirectly in shares of an Affiliated Fund through a Collective Fund, 
if such Affiliated Fund places brokerage transactions with Russell 
Investments, Russell Investments will provide to the Second Fiduciary 
of each such Client Plan, so invested, at least annually a statement 
specifying:
    (1) The total, expressed in dollars, of brokerage commissions that 
are paid to Russell Investments by each such Affiliated Fund;
    (2) The total, expressed in dollars, of brokerage commissions that 
are paid by each such Affiliated Fund to brokerage firms unrelated to 
Russell Investments;
    (3) The average brokerage commissions per share, expressed as cents 
per share, paid to Russell Investments I by each such Affiliated Fund; 
and
    (4) The average brokerage commissions per share, expressed as cents 
per share, paid by each such Affiliated Fund to brokerage firms 
unrelated to Russell Investments;
    (p)(1) Russell Investments provides to the Second Fiduciary of each 
Client Plan invested directly in shares of an Affiliated Fund with the 
disclosures, as set forth below, and at the times set forth below in 
Section II(p)(1)(i), II(p)(1)(ii), II(p)(1)(iii), II(p)(1)(iv), and 
II(p)(1)(v), either in writing via first class mail or via personal 
delivery (or if the Second Fiduciary consents to such means of 
delivery, through electronic email, in accordance with Section II(q) as 
set forth below):
    (i) Annually, with a copy of the current summary prospectus for 
each Affiliated Fund in which such Client Plan invests directly in 
shares of such Affiliated Fund;
    (ii) Upon the request of such Second Fiduciary, a copy of the 
statement of additional information for each Affiliated Fund in which 
such Client Plan invests directly in shares of such Affiliated Fund 
which contains a description of all fees paid by such Affiliated Fund 
to Russell Investments;
    (iii) With regard to any Fee Increase received by Russell 
Investments pursuant to Section II(k)(2), a copy of the audit report 
referred to in Section II(k)(2)(v) within sixty (60) days of the 
completion of such audit report;
    (iv) Oral or written responses to the inquiries posed by the Second 
Fiduciary of such Client Plan, as such inquiries arise; and
    (v) Annually, with a Termination form, as described in Section 
II(j)(1), and instructions on the use of such form, as described in 
Section II(j)(3), except that if a Termination Form has been provided 
to such Second Fiduciary, pursuant to Section II(k) or pursuant to 
Section II(l), then a Termination Form need not be provided again 
pursuant to this Section II(p)(1)(v) until at least six (6) months but 
no more than twelve (12) months have elapsed since a Termination Form 
was provided.
    (2) Russell Investments provides to the Second Fiduciary of each 
Client

[[Page 36233]]

Plan invested in a Collective Fund, with the disclosures, as set forth 
below, and at the times set forth below in Section II(p)(2)(i), 
II(p)(2)(ii), II(p)(2)(iii), II(p)(2)(iv), II(p)(2)(v), II(p)(2)(vi), 
II(p)(2)(vii), and II(p)(2)(viii), either in writing via first class 
mail or via personal delivery (or if the Second Fiduciary consents to 
such means of delivery, through electronic email, in accordance with 
Section II(q), as set forth below:
    (i) Annually, with a copy of the current summary prospectus for 
each Affiliated Fund in which such Client Plan invests indirectly in 
shares of such Affiliated Fund through each such Collective Fund;
    (ii) Upon the request of such Second Fiduciary, a copy of the 
statement of additional information for each Affiliated Fund in which 
such Client Plan invests indirectly in shares of such Affiliated Fund 
through each such Collective Fund which contains a description of all 
fees paid by such Affiliated Fund to Russell Investments;
    (iii) Annually, with a statement of the Collective Fund-Level 
Management Fee for investment management, investment advisory or 
similar services paid to Russell Investments by each such Collective 
Fund, regardless of whether such Client Plan invests in shares of an 
Affiliated Fund through such Collective Fund;
    (iv) A copy of the annual financial statement of each such 
Collective Fund in which such Client Plan invests, regardless of 
whether such Client Plan invests in shares of an Affiliated Fund 
through such Collective Fund, within sixty (60) days of the completion 
of such financial statement;
    (v) With regard to any Fee Increase received by Russell Investments 
pursuant to Section II(k)(2), a copy of the audit report referred to in 
Section II(k)(2)(v) within sixty (60) days of the completion of such 
audit report;
    (vi) Oral or written responses to the inquiries posed by the Second 
Fiduciary of such Client Plan as such inquiries arise;
    (vii) For each Client Plan invested indirectly in shares of an 
Affiliated Fund through a Collective Fund, a statement of the 
approximate percentage (which may be in the form of a range) on an 
annual basis of the assets of such Collective Fund that was invested in 
Affiliated Funds during the applicable year; and
    (viii) Annually, with a Termination Form, as described in Section 
II(j)(1), and instructions on the use of such form, as described in 
Section II(j)(3), except that if a Termination Form has been provided 
to such Second Fiduciary, pursuant to Section II(k) or pursuant to 
Section II(l), then a Termination Form need not be provided again 
pursuant to this Section II(p)(2)(viii) until at least six (6) months 
but no more than twelve (12) months have elapsed since a Termination 
Form was provided.
    (q) Any disclosure required herein to be made by Russell 
Investments to a Second Fiduciary may be delivered by electronic email 
containing direct hyperlinks to the location of each such document 
required to be disclosed, which are maintained on a Web site by Russell 
Investments, provided:
    (1) Russell Investments obtains from such Second Fiduciary prior 
consent in writing to the receipt by such Second Fiduciary of such 
disclosure via electronic email;
    (2) Such Second Fiduciary has provided to Russell Investments a 
valid email address; and
    (3) The delivery of such electronic email to such Second Fiduciary 
is provided by Russell Investments in a manner consistent with the 
relevant provisions of the Department's regulations at 29 CFR 
2520.104b-1(c) (substituting the word ``Russell Investments'' for the 
word ``administrator'' as set forth therein, and substituting the 
phrase ``Second Fiduciary'' for the phrase ``the participant, 
beneficiary or other individual'' as set forth therein).
    (r) The authorizations described in Sections II(k) or II(l) may be 
made affirmatively, in writing, by a Second Fiduciary, in a manner that 
is otherwise consistent with the requirements of those sections.
    (s) All of the conditions of PTE 77-4, as amended and/or restated, 
are met. Notwithstanding this, if PTE 77-4 is amended and/or restated, 
the requirements of paragraph (e) therein will be deemed to be met with 
respect to authorizations described in Section II(l) above, but only to 
the extent the requirements of Section II(l) are met. Similarly, if PTE 
77-4 is amended and/or restated, the requirements of paragraph (f) 
therein will be deemed to be met with respect to authorizations 
described in Section II(k) above, if the requirements of Section II(k) 
are met.
    (t) Standards of Impartial Conduct. If Russell Investments is a 
fiduciary within the meaning of section 3(21)(A)(i) or (ii) of the Act, 
or section 4975(e)(3)(A) or (B) of the Code, with respect to the assets 
of a Client Plan involved in the transaction, Russell Investments must 
comply with the following conditions with respect to the transaction: 
(1) Russell Investments acts in the Best Interest (as defined below, in 
Section IV(q)) of the Client Plan, at the time of the Transaction; (2) 
all compensation received by Russell Investments in connection with the 
transaction in relation to the total services the fiduciary provides to 
the Client Plan does not exceed reasonable compensation within the 
meaning of section 408(b)(2) of the Act; and (3) Russell Investments' 
statements about recommended investments, fees, material conflicts of 
interest,\16\ and any other matters relevant to a Client Plan's 
investment decisions are not materially misleading at the time they are 
made.
---------------------------------------------------------------------------

    \16\ A ``material conflict of interest'' exists when a fiduciary 
has a financial interest that could affect the exercise of its best 
judgment as a fiduciary in rendering advice to a Client Plan. For 
this purpose, the failure of Russell Investments to disclose a 
material conflict of interest relevant to the services it is 
providing to a Client Plan, or other actions it is taking in 
relation to a Client Plan's investment decisions, is deemed to be a 
misleading statement.
---------------------------------------------------------------------------

    For purposes of this section, Russell Investments acts in the 
``Best Interest'' of the Client Plan when Russell Investments acts with 
the care, skill, prudence, and diligence under the circumstances then 
prevailing that a prudent person would exercise based on the investment 
objectives, risk tolerance, financial circumstances, and needs of the 
plan or IRA, without regard to the financial or other interests of the 
fiduciary, any affiliate or other party.

Section III. General Conditions

    (a) Russell Investments maintains for a period of six (6) years the 
records necessary to enable the persons, described below in Section 
III(b), to determine whether the conditions of this proposed exemption 
have been met, except that:
    (1) A prohibited transaction will not be considered to have 
occurred, if solely because of circumstances beyond the control of 
Russell Investments, the records are lost or destroyed prior to the end 
of the six-year period; and
    (2) No party in interest other than Russell Investments shall be 
subject to the civil penalty that may be assessed under section 502(i) 
of the Act or to the taxes imposed by section 4975(a) and (b) of the 
Code, if the records are not maintained or are not available for 
examination, as required below by Section III(b).
    (b)(1) Except as provided in Section III(b)(2) and notwithstanding 
any provisions of section 504(a)(2) of the Act, the records referred to 
in Section III(a) are unconditionally available at their customary 
location for examination during normal business hours by:
    (i) Any duly authorized employee or representative of the 
Department or the

[[Page 36234]]

Internal Revenue Service, or the Securities & Exchange Commission;
    (ii) Any fiduciary of a Client Plan invested directly in shares of 
an Affiliated Fund, any fiduciary of a Client Plan who has the 
authority to acquire or to dispose of the interest in a Collective Fund 
in which a Client Plan invests, any fiduciary of a Client Plan invested 
indirectly in an Affiliated Fund through a Collective Fund where such 
fiduciary has the authority to acquire or to dispose of the interest in 
such Collective Fund, and any duly authorized employee or 
representative of such fiduciary; and
    (iii) Any participant or beneficiary of a Client Plan invested 
directly in shares of an Affiliated Fund or invested in a Collective 
Fund, and any participant or beneficiary of a Client Plan invested 
indirectly in shares of an Affiliated Fund through a Collective Fund, 
and any representative of such participant or beneficiary; and
    (2) None of the persons described in Section III(b)(1)(ii) and 
(iii) shall be authorized to examine trade secrets of Russell 
Investments, or commercial or financial information which is privileged 
or confidential.

Section IV. Definitions

    For purposes of this proposed exemption:
    (a) The term ``Russell Investments'' means RIM (f/k/a Russell 
Investment Management Company), RICap, and any affiliate thereof, as 
defined below, in Section IV(c).
    (b) The term ``Client Plan(s)'' means a 401(k) plan(s), an 
individual retirement account(s), other tax-qualified plan(s), and 
other plan(s) as defined in the Act and Code, but does not include any 
employee benefit plan sponsored or maintained by Russell Investments, 
as defined above in Section IV(a).
    (c) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (d) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (e) The term ``Affiliated Fund(s)'' means Russell Investment 
Company, a series of mutual funds managed by RIM, and any other 
diversified open-end investment company or companies registered with 
the Securities and Exchange Commission under the Investment Company 
Act, as amended, established and maintained by Russell Investments now 
or in the future for which Russell Investments serves as an investment 
adviser.
    (f) The term ``net asset value per share'' and the term ``NAV'' 
mean the amount for purposes of pricing all purchases and sales of 
shares of an Affiliated Fund, calculated by dividing the value of all 
securities, determined by a method as set forth in the summary 
prospectus for such Affiliated Fund and in the statement of additional 
information, and other assets belonging to such Affiliated Fund or 
portfolio of such Affiliated Fund, less the liabilities charged to each 
such portfolio or each such Affiliated Fund, by the number of 
outstanding shares.
    (g) The term ``relative'' means a relative as that term is defined 
in section 3(15) of the Act (or a member of the family as that term is 
defined in section 4975(e)(6) of the Code), or a brother, a sister, or 
a spouse of a brother or a sister.
    (h) The term ``Second Fiduciary'' means the fiduciary of a Client 
Plan who is independent of and unrelated to Russell Investments. For 
purposes of this proposed exemption, the Second Fiduciary will not be 
deemed to be independent of and unrelated to Russell Investments if:
    (1) Such Second Fiduciary, directly or indirectly, through one or 
more intermediaries, controls, is controlled by, or is under common 
control with Russell Investments;
    (2) Such Second Fiduciary, or any officer, director, partner, 
employee, or relative of such Second Fiduciary, is an officer, 
director, partner, or employee of Russell Investments (or is a relative 
of such person); or
    (3) Such Second Fiduciary, directly or indirectly, receives any 
compensation or other consideration for his or her personal account in 
connection with any transaction described in this proposed exemption. 
If an officer, director, partner, or employee of Russell Investments 
(or relative of such person) is a director of such Second Fiduciary, 
and if he or she abstains from participation in:
    (i) The decision of a Client Plan to invest in and to remain 
invested in shares of an Affiliated Fund directly, the decision of a 
Client Plan to invest in shares of an Affiliated Fund indirectly 
through a Collective Fund, and the decision of a Client Plan to invest 
in a Collective Fund that may in the future invest in shares of an 
Affiliated Fund;
    (ii) Any authorization in accordance with Section II(i), and any 
authorization, pursuant to negative consent, as described in Section 
II(k) or in Section II(l); and
    (iii) The choice of such Client Plan's investment adviser, then 
Section IV(h)(2) above shall not apply.
    (i) The term ``Secondary Service(s)'' means a service or services 
other than an investment management service, investment advisory 
service, and any similar service which is provided by Russell 
Investments to an Affiliated Fund, including, but not limited to, 
custodial, accounting, administrative services, and brokerage services. 
Russell Investments may also serve as a dividend disbursing agent, 
shareholder servicing agent, transfer agent, fund accountant, or 
provider of some other Secondary Service, as defined in this Section 
IV(i).
    (j) The term ``Collective Fund(s)'' means a separate account of an 
insurance company, as defined in section 2510.3-101(h)(1)(iii) of the 
Department's plan assets regulations,\17\ maintained by Russell 
Investments, and a bank-maintained common or collective investment 
trust maintained by Russell Investments.
---------------------------------------------------------------------------

    \17\ 51 FR 41262 (November 13, 1986).
---------------------------------------------------------------------------

    (k) The term ``business day'' means any day that:
    (1) Russell Investments is open for conducting all or substantially 
all of its business; and
    (2) The New York Stock Exchange (or any successor exchange) is open 
for trading.
    (l) The term ``Fee Increase(s)'' includes any increase by Russell 
Investments in a rate of a fee previously authorized in writing by the 
Second Fiduciary of each affected Client Plan pursuant to Section 
II(i)(2)(i)-(iv) above, and in addition includes, but is not limited 
to:
    (1) Any increase in any fee that results from the addition of a 
service for which a fee is charged;
    (2) Any increase in any fee that results from a decrease in the 
number of services and any increase in any fee that results from a 
decrease in the kind of service(s) performed by Russell Investments for 
such fee over an existing rate of fee for each such service previously 
authorized by the Second Fiduciary, in accordance with Section 
II(i)(2)(i)-(iv) above; and
    (3) Any increase in any fee that results from Russell Investments 
changing from one of the fee methods, as described above in Section 
II(a)(1)-(3), to using another of the fee methods, as described above 
in Section II(a)(1)-(3).

[[Page 36235]]

    (m) The term ``Plan-Level Management Fee'' includes any investment 
management fee, investment advisory fee, and any similar fee paid by a 
Client Plan to Russell Investments for any investment management 
services, investment advisory services, and similar services provided 
by Russell Investments to such Client Plan at the plan-level. The term 
``Plan-Level Management Fee'' does not include a separate fee paid by a 
Client Plan to Russell Investments for asset allocation service(s) 
(Asset Allocation Service(s)), as defined below in Section IV(p), 
provided by Russell Investments to such Client Plan at the plan-level.
    (n) The term ``Collective Fund-Level Management Fee'' includes any 
investment management fee, investment advisory fee, and any similar fee 
paid by a Collective Fund to Russell Investments for any investment 
management services, investment advisory services, and any similar 
services provided by Russell Investments to such Collective Fund at the 
collective fund level.
    (o) The term ``Affiliated Fund-Level Advisory Fee'' includes any 
investment advisory fee and any similar fee paid by an Affiliated Fund 
to Russell Investments under the terms of an investment advisory 
agreement adopted in accordance with section 15 of the Investment 
Company Act.
    (p) The term ``Asset Allocation Service(s)'' means a service or 
services to a Client Plan relating to the selection of appropriate 
asset classes or target-date ``glidepath'' and the allocation or 
reallocation (including rebalancing) of the assets of a Client Plan 
among the selected asset classes. Such services do not include the 
management of the underlying assets of a Client Plan, the selection of 
specific funds or manager, and the management of the selected 
Affiliated Funds or Collective Funds.
    (q) The term ``Best Interest'' means acting with the care, skill, 
prudence, and diligence under the circumstances then prevailing that a 
prudent person acting in a like capacity and familiar with such matters 
would use in the conduct of an enterprise of a like character and with 
like aims, based on the investment objectives, risk tolerance, 
financial circumstances, and needs of the plan or IRA, without regard 
to the financial or other interests of Russell Investments, any 
affiliate or other party.
    Effective Date: If granted, this proposed exemption will be 
effective as of June 1, 2016.

Notice to Interested Persons

    Those persons who may be interested in the publication in the 
Federal Register of the Notice include each Client Plan invested 
directly in shares of an Affiliated Fund, each Client Plan invested 
indirectly in shares of an Affiliated Fund through a Collective Fund, 
and each plan for which Russell Investments provides discretionary 
management services at the time the proposed exemption is published in 
the Federal Register.
    It is represented that notification will be provided to each of 
these interested persons by first class mail, within fifteen (15) 
calendar days of the date of the publication of the Notice in the 
Federal Register. Such mailing will contain a copy of the Notice, as it 
appears in the Federal Register on the date of publication, plus a copy 
of the Supplemental Statement, as required, pursuant to 29 CFR 
2570.43(b)(2), which will advise such interested persons of their right 
to comment and to request a hearing. The Department must receive all 
written comments and requests for a hearing no later than forty-five 
(45) days from the date of the publication of the Notice in the Federal 
Register.
    All comments will be made available to the public.
    Warning: Do not include any personally identifiable information 
(such as name, address, or other contact information) or confidential 
business information that you do not want publicly disclosed. All 
comments may be posted on the Internet and can be retrieved by most 
Internet search engines.

FOR FURTHER INFORMATION CONTACT:  Mr. Joseph Brennan of the Department, 
telephone (202) 693-8456. (This is not a toll-free number.)
General Information
    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions 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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, 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 proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 28th day of July, 2017.
 Lyssa E. Hall,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2017-16295 Filed 8-2-17; 8:45 am]
 BILLING CODE 4510-29-P



                                                   36214                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   DEPARTMENT OF LABOR                                     Notice of Proposed Exemption.                         with the Department for a complete
                                                                                                           Interested persons are also invited to                statement of the facts and
                                                   Employee Benefits Security                              submit comments and/or hearing                        representations.
                                                   Administration                                          requests to EBSA via email or FAX. Any
                                                                                                                                                                 Liberty Mutual Insurance Company
                                                                                                           such comments or requests should be
                                                   Proposed Exemptions From Certain                        sent either by email to: e-OED@dol.gov,               (Liberty Mutual or the Applicant)
                                                   Prohibited Transaction Restrictions                     by FAX to (202) 693–8474, or online                   Located in Boston, MA
                                                   AGENCY: Employee Benefits Security                      through http://www.regulations.gov by
                                                                                                           the end of the scheduled comment                      [Application No. D–11869]
                                                   Administration, Labor.
                                                   ACTION: Notice of Proposed Exemptions.                  period. The applications for exemption                Proposed Exemption
                                                                                                           and the comments received will be                        The Department is considering
                                                   SUMMARY:   This document contains                       available for public inspection in the                granting an exemption under the
                                                   notices of pendency before the                          Public Documents Room of the                          authority of 29 U.S.C. 1108 (section
                                                   Department of Labor (the Department) of                 Employee Benefits Security                            408(a) of the Employee Retirement
                                                   proposed exemptions from certain of the                 Administration, U.S. Department of                    Income Security Act of 1974, as
                                                   prohibited transaction restrictions of the              Labor, Room N–1515, 200 Constitution                  amended (ERISA or the Act)) and 26
                                                   Employee Retirement Income Security                     Avenue NW., Washington, DC 20210.                     U.S.C. 4975(c)(2) (section 4975(c)(2) of
                                                   Act of 1974 (ERISA or the Act) and/or                     Warning: All comments will be made                  the Internal Revenue Code of 1986, as
                                                   the Internal Revenue Code of 1986 (the                  available to the public. Do not include               amended (the Code)), and in accordance
                                                   Code). If granted, these proposed                       any personally identifiable information               with the procedures set forth in 29 CFR
                                                   exemptions allow designated parties to                  (such as Social Security number, name,                part 2570, subpart B (76 FR 66637,
                                                   engage in transactions that would                       address, or other contact information) or             66644, October 27, 2011).2 Effective
                                                   otherwise be prohibited provided the                    confidential business information that                December 31, 1978, section 102 of
                                                   conditions stated there in are met. This                you do not want publicly disclosed. All               Reorganization Plan No. 4 of 1978, 5
                                                   notice includes the following proposed                  comments may be posted on the Internet                U.S.C. App. 1 (1996), transferred the
                                                   exemptions: D–11869, Liberty Mutual                     and can be retrieved by most Internet                 authority of the Secretary of the
                                                   Insurance Company; and D–11916,                         search engines.                                       Treasury to issue exemptions of the type
                                                   Russell Investment Management, LLC                      SUPPLEMENTARY INFORMATION:                            requested to the Secretary of Labor.
                                                   (RIM), Russell Investments Capital, LLC                                                                       Therefore, this notice of proposed
                                                   (RICap), and their Affiliates.                          Notice To Interested Persons
                                                                                                                                                                 exemption is issued solely by the
                                                   DATES: All interested persons are invited                 Notice of the proposed exemptions                   Department. If the proposed exemption
                                                   to submit written comments or requests                  will be provided to all interested                    is granted, the restrictions of sections
                                                   for a hearing on the pending                            persons in the manner agreed upon by                  406(a)(1)(A), 406(a)(1)(B), and
                                                   exemptions, unless otherwise stated in                  the applicant and the Department                      406(a)(1)(D) of ERISA and the sanctions
                                                   the Notice of Proposed Exemption,                       within 15 days of the date of publication             resulting from the application of
                                                   within 45 days from the date of                         in the Federal Register. Such notice                  sections 4975(a) and 4975(b) of the
                                                   publication of this Federal Register                    shall include a copy of the notice of                 Code, by reason of sections
                                                   Notice.                                                 proposed exemption as published in the                4975(c)(1)(A), 4975(c)(1)(B), and
                                                   ADDRESSES: Comments and requests for                    Federal Register and shall inform                     4975(c)(1)(D) of the Code, shall not
                                                   a hearing should state: (1) The name,                   interested persons of their right to                  apply to a transaction between a party
                                                   address, and telephone number of the                    comment and to request a hearing                      in interest with respect to an employee
                                                   person making the comment or request,                   (where appropriate).                                  benefit plan sponsored by Liberty
                                                   and (2) the nature of the person’s                        The proposed exemptions were                        Mutual or its affiliates (the Liberty
                                                   interest in the exemption and the                       requested in applications filed pursuant              Mutual Plan) and such Liberty Mutual
                                                   manner in which the person would be                     to section 408(a) of the Act and/or                   Plan, as described in Part I of Prohibited
                                                   adversely affected by the exemption. A                  section 4975(c)(2) of the Code, and in                Transaction Exemption 96–23 (PTE 96–
                                                   request for a hearing must also state the               accordance with procedures set forth in               23),3 provided that the in-house asset
                                                   issues to be addressed and include a                    29 CFR part 2570, subpart B (76 FR                    manager (INHAM) for the Liberty
                                                   general description of the evidence to be               66637, 66644, October 27, 2011).1                     Mutual Plan has discretionary control
                                                   presented at the hearing.                               Effective December 31, 1978, section                  with respect to plan assets involved in
                                                      All written comments and requests for                102 of Reorganization Plan No. 4 of                   the transaction, and certain conditions
                                                   a hearing (at least three copies) should                1978, 5 U.S.C. App. 1 (1996), transferred             are satisfied.
                                                   be sent via mail to the Employee                        the authority of the Secretary of the                 Summary of Facts and
                                                   Benefits Security Administration                        Treasury to issue exemptions of the type              Representations 4
                                                   (EBSA), Office of Exemption                             requested to the Secretary of Labor.
                                                   Determinations, U.S. Department of                      Therefore, these notices of proposed                  Background
                                                   Labor, 200 Constitution Avenue NW.,                     exemption are issued solely by the                      1. Liberty Mutual is an insurance
                                                   Suite 400, Washington, DC 20210.                        Department.                                           company domiciled in the
                                                   Attention: Application No. lll,                           The applications contain
                                                   stated in each Notice of Proposed                       representations with regard to the                       2 For purposes of this proposed exemption,

                                                                                                           proposed exemptions which are                         references to the provisions of section 406 of Title
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                                                   Exemption or via private delivery
                                                                                                                                                                 I of ERISA, unless otherwise specified, should be
                                                   service or courier to the Employee                      summarized below. Interested persons                  read to refer as well to the corresponding provisions
                                                   Benefits Security Administration                        are referred to the applications on file              of section 4975 of the Code.
                                                   (EBSA), Office of Exemption                                                                                      3 61 FR 15975 (April 10, 1996), as amended at 76

                                                   Determinations, U.S. Department of                        1 The Department has considered exemption           FR 18255 (April 1, 2011).
                                                                                                           applications received prior to December 27, 2011         4 The Summary of Facts and Representations is
                                                   Labor, 122 C St. NW., Suite 400,                        under the exemption procedures set forth in 29 CFR    based on the Applicant’s representations and does
                                                   Washington, DC 20001. Attention:                        part 2570, subpart B (55 FR 32836, 32847, August      not reflect the views of the Department, unless
                                                   Application No. lll, stated in each                     10, 1990).                                            indicated otherwise.



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                                                                                 Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                                       36215

                                                   Commonwealth of Massachusetts,                            entities operating in, and incorporated              of ERISA section 408(a) and Code
                                                   engaged primarily in the provision of                     under the laws of, non-U.S.                          section 4975(c)(2), the Department has
                                                   property and casualty insurance. Liberty                  jurisdictions. Liberty Mutual represents             the authority to grant exemptions from
                                                   Mutual is a wholly-owned subsidiary of                    that, as with its U.S. operations, Liberty           such ‘‘prohibited transactions’’ in
                                                   Liberty Mutual Holding Company Inc.                       Mutual’s preference is for LMGAMI to                 accordance with the procedures set
                                                   (Liberty Mutual Group), which, together                   manage its assets internally in                      forth in 29 CFR part 2570, subpart B (76
                                                   with its subsidiaries and affiliates, is a                conjunction with the assets of other                 FR 66637, 66644, October 27, 2011).
                                                   diversified global insurer. Liberty                       Liberty Mutual affiliates. Liberty Mutual               5. Liberty Mutual states that PTE 96–
                                                   Mutual Group is based in Boston,                          states further that, at the time the                 23 provides broad exemptive relief for
                                                   Massachusetts and currently operates in                   decision was made to register LMGAMI                 transactions entered into on behalf of a
                                                   30 countries, with approximately 900                      as an RIA, the benefits derived from                 plan at the direction of an ‘‘in-house
                                                   offices worldwide and over 50,000                         being able to internally manage more of              asset manager’’ (i.e., an INHAM), an
                                                   employees.                                                Liberty Mutual’s foreign operations, as              investment manager that manages assets
                                                      2. Liberty Mutual Group established                    well as the fees associated with                     for related employee benefit plans, upon
                                                   the Liberty Mutual Retirement Benefit                     managing institutional third party                   meeting certain requirements. The
                                                   Plan (the Retirement Plan) in 1951 in a                   money, was expected to offset the                    principal part of the exemption is relief
                                                   consolidation of the Employees’                           financial, administrative and regulatory             for transactions between an INHAM and
                                                   Retirement Annuity Plan of Liberty                        burdens associated with LMGAMI being                 persons who are parties in interest to
                                                   Mutual, Liberty Mutual Fire and the                       an RIA.                                              the plan solely by reason of providing
                                                   Liberty Mutual Supplementary Pension                         Furthermore, Liberty Mutual states                services to the plan or by reason of a
                                                   Plan. Liberty Mutual represents that the                  that LMGAMI’s registration as an RIA                 relationship to such a service provider;
                                                   Retirement Plan is a defined benefit                      provided the collateral opportunity to               and certain ‘‘co-joint venturers’’ with
                                                   plan providing benefits based on a cash                   transfer the assets of the Retirement                the plan’s sponsoring employer. Among
                                                   balance formula and a final average pay                   Plan to a trust and to appoint LMGAMI                other things, in order to rely on the
                                                   formula. Liberty Mutual states that, as of                as the Retirement Plan’s discretionary               relief, the INHAM must adopt written
                                                   December 31, 2014, the Retirement Plan                    investment manager, as permitted under               policies and procedures designed to
                                                   had assets valued at $6.24 billion with                   ERISA. Liberty Mutual states that                    ensure compliance with the conditions
                                                   77,244 participants and beneficiaries                     investing the assets of the Retirement               of the exemption, and a qualified,
                                                   covered. Liberty Mutual represents that,                  Plan through an independent trust                    independent auditor must annually
                                                   prior to the enactment of ERISA, the                      could provide the Retirement Plan                    conduct an audit of compliance with the
                                                   Retirement Plan was funded under, and                     access to investments that were                      policies and procedures and certain
                                                   its assets were invested pursuant to, a                   otherwise not permitted or practical                 conditions of the exemption.7 Moreover,
                                                   group annuity contract. Liberty Mutual                    under the terms of a group annuity                   Liberty Mutual states that relief under
                                                   represents that the Retirement Plan                       contract. When LMGAMI became an                      PTE 96–23 is only available to entities
                                                   continued to be funded and managed                        RIA, the assets of the Retirement Plan               that register as RIAs. Specifically, Part
                                                   through the use of a group annuity                        were transferred to the Trust and                    IV(a)(2) of PTE 96–23 defines an
                                                   contract, until 2011, when the assets of                  LMGAMI was appointed as the                          INHAM, in relevant part, as ‘‘an
                                                   the Retirement Plan were transferred to                   investment manager of the Retirement                 investment adviser registered under the
                                                   a trust, the Liberty Mutual Retirement                    Plan and any other employee benefit                  [Advisers Act.]’’ The requirement that
                                                   Plan Master Trust (the Trust).5                           plan maintained for the benefit of the               an INHAM be registered under the
                                                   According to Liberty Mutual, in 2011,                     employees of Liberty Mutual and its                  Advisers Act as an RIA was included, in
                                                   Liberty Mutual established a separate                     affiliated entities that is subject to the           addition to others, to ‘‘help to ensure
                                                   investment management subsidiary,                         fiduciary responsibility provisions of               that the INHAM is an entity that has
                                                   Liberty Mutual Group Asset                                Part IV of Title I of ERISA (collectively            developed an appropriate level of
                                                   Management Inc. (LMGAMI), described                       with the Retirement Plan, the Liberty                expertise in financial and business
                                                   in more detail below, which was                           Mutual Plans).                                       matters.’’ 8 Liberty Mutual’s
                                                   appointed as the Retirement Plan’s                           4. The Department notes that the rules            representations regarding its experience
                                                   investment manager. The Bank of New                       set forth in section 406 of ERISA                    and expertise are described in paragraph
                                                   York Mellon became the Retirement                         proscribe certain ‘‘prohibited                       27 below.
                                                   Plan’s trustee.                                           transactions’’ between plans and related             Decision To Withdraw RIA Status
                                                                                                             parties with respect to those plans,
                                                   LMGAMI                                                    known as ‘‘parties in interest.’’ Under                 6. According to Liberty Mutual,
                                                     3. Liberty Mutual represents that                       section 3(14) of ERISA, parties in                   LMGAMI determined that maintaining
                                                   LMGAMI became a registered                                interest with respect to a plan include,             its RIA status was more burdensome
                                                   investment adviser (an RIA) under the                     among others, service providers with                 than originally anticipated and would
                                                   Investment Advisers Act of 1940, as                       respect to the plan, and certain of their            not further Liberty Mutual’s business
                                                   amended (the Advisers Act) in May                         affiliates. The prohibited transaction               strategy. The Applicant states that, in its
                                                   2011. According to Liberty Mutual,                        provisions under section 406(a) of                   insurance business, Liberty Mutual
                                                   there were several unrelated business                     ERISA prohibit, in relevant part, sales,             invests significant amounts of capital in
                                                   objectives that motivated the decision to                 leases, loans or the provision of services           long-term investment vehicles (such as
                                                   register LMGAMI as an RIA. First,                         between a party in interest and a plan               private capital transactions). The
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                                                   Liberty Mutual owns a number of                           (or an entity whose assets are deemed to             Applicant states that LMGAMI’s
                                                                                                             constitute the assets of a plan), as well
                                                     5 According to the Retirement Plan’s Investment
                                                                                                             as the use of plan assets by or for the              under section 406(b) of ERISA, which do not
                                                   Policy Statement, effective October 24, 2014, a                                                                necessitate a transaction between a plan and a party
                                                                                                             benefit of, or a transfer of plan assets to,         in interest. These include transactions involving
                                                   small portion of the Retirement Plan’s legacy assets
                                                   remain in the group annuity contract issued by            a party in interest.6 Under the authority            fiduciary self-dealing, fiduciary conflicts of interest,
                                                   Liberty Life Assurance Company of Boston. The                                                                  and kickbacks to fiduciaries.
                                                                                                                                                                     7 See 67 FR 18257, 18258 (April 1, 2011).
                                                   Retirement Plan intends to transition all of its assets     6 The prohibited transaction provisions also

                                                   from the group annuity contract to the Trust.             include certain fiduciary prohibited transactions       8 See 60 FR 15600 (March 24, 1995).




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                                                   36216                          Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   registration as an RIA was required to                    officers of Liberty Mutual and its other              effective date of October 27, 2014 (the
                                                   create strategic partnerships with a                      affiliates.10                                         IMA). LMGAMI continues to provide
                                                   small number of large institutional                          10. Liberty Mutual states that the                 investment services to the Retirement
                                                   investors with like objectives. By doing                  Advisers Act imposes the safeguards                   Plan as a sub-adviser to Liberty Mutual,
                                                   so, Liberty Mutual could enhance its                      and limitations contained therein                     at no cost, pursuant to a sub-adviser
                                                   ability to invest in such assets and                      because many of a given RIA’s clients                 agreement between Liberty Mutual and
                                                   provide additional diversification                        are individuals without significant                   LMGAMI, effective October 27, 2014
                                                   through such investments.                                 sophistication and/or bargaining power                (the SAA). Liberty Mutual submitted the
                                                      7. Liberty Mutual represents that:                     and without any other statutory regime                IMA and the SAA to the Massachusetts
                                                   Legislative changes such as those                         to protect them against any potential                 Department of Insurance (Department of
                                                   enacted under the Dodd-Frank Wall                         adviser misconduct. However, the only                 Insurance) on October 10, 2014, and the
                                                   Street Reform and Consumer Protection                     ‘‘client’’ money under Liberty Mutual’s               Department of Insurance approved the
                                                   Act; 9 regulatory changes that                            management is that of its own                         IMA and SAA on October 24, 2014.
                                                   substantially discounted the value of                     Retirement Plan. As such, the Applicant
                                                                                                             states that Liberty Mutual and LMGAMI                 Exemptive Relief Requested
                                                   long-term illiquid investments for
                                                   purposes of satisfying the capital                        are already legally compelled as                         13. Liberty Mutual requests an
                                                   requirements applicable to insurance                      fiduciaries to act in the Retirement                  individual exemption from sections
                                                   companies and other financial services                    Plan’s best interests under provisions of             406(a)(1)(A), 406(a)(1)(B), and
                                                   companies; and adverse changes in the                     section 404 of ERISA. Liberty Mutual                  406(a)(1)(D) of ERISA with regard to the
                                                   capital treatment of such investments by                  and LMGAMI are expressly precluded                    management by Liberty Mutual and its
                                                   credit rating agencies; combined to                       from acting to the detriment of the                   asset manager affiliates (collectively, the
                                                   substantially diminish the appetite for                   Retirement Plan, and any action                       Liberty Mutual Asset Managers) of the
                                                   such investments, among large                             undertaken to benefit itself or any of its            plan assets of the Liberty Mutual Plans.
                                                   institutions, and essentially derailed                    affiliates would be precluded by the                  In this regard, Liberty Mutual requests
                                                   this business objective. As a result, the                 provisions of section 406 of ERISA                    exemptive relief for certain party-in-
                                                   Applicant states, Liberty Mutual had no                   (among others). Moreover, the Applicant               interest transactions with respect to
                                                   unaffiliated third party assets under                     states that Liberty Mutual has an                     which the Liberty Mutual Asset
                                                   management, and had no intention to                       economic interest in the performance of               Managers would engage in on behalf of
                                                   seek to manage any such assets.                           the Retirement Plan’s assets, as ERISA                a Liberty Mutual Plan if PTE 96–23 were
                                                      8. Without any third-party assets                      and the Code make the company                         available. Such transactions include
                                                   under its management, the Applicant                       responsible for any shortfalls in the                 arm’s-length sales or exchanges of
                                                   states that the rules and regulations                     Retirement Plan’s funding. Thus,                      property, the provision of necessary
                                                   pertaining to investments made by RIAs                    Liberty Mutual states that it and the                 services, and various commercially
                                                   are inapplicable to Liberty Mutual’s                      Retirement Plan have a commonality of                 appropriate extensions of credit.
                                                   business model. Liberty Mutual                            interests when it comes to the success                According to Liberty Mutual, the
                                                   represents that a significant part of its                 of the Retirement Plan’s investments                  requested relief includes transactions
                                                   business is the investment of assets that                 that is not typically present between an              for which no other statutory or
                                                   belong to the insurance company. Thus,                    RIA and its client.11                                 administrative exemptions are available,
                                                   the efficient investment of substantial                      11. Thus, Liberty Mutual represents                including, hedges of currency risks
                                                   sums of its assets is critical to its                     that while LMGAMI’s status as an RIA                  associated with investments
                                                   ongoing operations. As a regulated                        afforded the benefits available under                 denominated in foreign currencies, as
                                                   insurance company, it must maintain                       PTE 96–23 and the ability to manage the               well as transactions with regard to
                                                   certain statutory reserves and meet                       Retirement Plan’s assets in a trusteed                assets for which there is not an
                                                   minimum standards of risk-based                           arrangement, the burdens for the                      established market, such as real estate
                                                   capital. Liberty Mutual is subject to                     business and its operations made                      transactions, secondary investments in
                                                   regulation by state authorities that                      continuing such status unacceptable.                  private equity vehicles, and certain
                                                   monitor its ongoing solvency and                          Liberty Mutual represents that LMGAMI                 private debt offerings of reliable
                                                   establish certain rules and procedures                    filed a Form ADV–W with the Securities                borrowers.
                                                   that must be followed with respect to                     and Exchange Commission on October
                                                                                                             27, 2014, to effect the withdrawal of its                14. Liberty Mutual states that sections
                                                   the investments of its assets.                                                                                  3(14)(A) and 3(14)(B) of ERISA define
                                                                                                             RIA status. As such, Liberty Mutual
                                                      9. Similarly, Liberty Mutual states the                                                                      the term ‘‘party in interest’’ to include,
                                                                                                             states, LMGAMI no longer qualifies to
                                                   Advisers Act contains other rules and                                                                           respectively, any fiduciary of a plan and
                                                                                                             serve as an INHAM pursuant to PTE 96–
                                                   prohibitions intended to protect a third                                                                        any person providing services to a plan.
                                                                                                             23.
                                                   party investor from the adviser over-                                                                           Numerous entities currently provide,
                                                                                                                12. Upon LMGAMI discontinuing its
                                                   promoting its recommendations. The                                                                              and will in the future continue to
                                                                                                             RIA registration, Liberty Mutual, as an
                                                   Applicant states that while such                                                                                provide services to the Liberty Mutual
                                                                                                             investment manager under section 3(38)
                                                   restrictions may be appropriate for                                                                             Plans, including as brokers, custodians,
                                                                                                             of ERISA, assumed management
                                                   protecting the interests of third-party                                                                         investment advisers, consultants,
                                                                                                             responsibilities over the assets of the
                                                   investors, these conditions added                                                                               actuaries or trustees, and therefore
                                                                                                             Retirement Plan under an investment
                                                   substantial burdens for an entity                                                                               constitute parties in interest with
                                                                                                             management agreement with an
                                                   managing billions of dollars of assets for
mstockstill on DSK30JT082PROD with NOTICES2




                                                                                                                                                                   respect to the Liberty Mutual Plans.
                                                   an integrated group of affiliated                           10 The Department notes that it is not expressing   Furthermore, section 3(14)(I) of ERISA
                                                   financial services companies and did                      a view whether certain rules under the Advisers Act   defines the term ‘‘party in interest’’ to
                                                   not provide any useful protection when                    may be unduly burdensome or inappropriate in          include certain entities (co-joint
                                                   LMGAMI was communicating with the                         protecting Liberty Mutual’s interests.                venturers) owning at least 10% of a joint
                                                                                                               11 The Department notes that this exemption does
                                                   sophisticated and financially astute                                                                            venture in which an employer of
                                                                                                             not provide relief for LMGAMI or any other Liberty
                                                                                                             Mutual entity to receive a fee in connection with     employees participating in the plan (or
                                                     9 Public   Law 111–203, 124 Stat. 1376 (2010).          any transaction described herein.                     its parent) has at least a 50% interest.


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                          36217

                                                      15. Liberty Mutual represents that                   because of their status as service                       21. Liberty Mutual represents further
                                                   section 406(a)(1)(A) of ERISA prohibits                 providers under section 3(14)(B) of                   that it requires relief for transactions
                                                   the sale or exchange, or leasing, of                    ERISA.                                                between the plan and co-joint venturers,
                                                   property between a plan and a party in                     19. Liberty Mutual represents that,                or entities that own at least 10% of a
                                                   interest. Liberty Mutual states that, to                while section 408(b)(17) of ERISA                     joint venture in which an employer of
                                                   the extent that any service provider,                   generally permits the sale or exchange                employees participating in the plan (or
                                                   such as a broker that provides brokerage                of property or the extension of credit                its parent) has at least a 50% interest
                                                   services to a Liberty Mutual Plan or any                between a plan and a person that is a                 and are described in section 3(14)(I) of
                                                   co-joint venturer, sells any security                   service provider to such plan, there are              ERISA. Liberty Mutual represents that
                                                   (including a debt instrument) or other                  certain transactions beneficial to the                its investment arm invests in assets
                                                   property to, or purchases a security or                 Retirement Plan, such as hedges of                    through comingled investment vehicles
                                                   other property from, a Liberty Mutual                   currency risks associated with                        as a part of its business model. For
                                                   Plan as a principal, a prohibited                       investments denominated in foreign                    instance, the investment arm of Liberty
                                                   transaction would occur under section                   currencies, which cannot be effected in               mutual may invest in real estate with a
                                                   406(a)(1)(A) of ERISA.                                  reliance on the available statutory                   joint venture partner and the joint
                                                      16. Liberty Mutual represents that                   exemptions. Liberty Mutual states that                venturer would own 10% and manage
                                                   section 406(a)(1)(B) of ERISA prohibits                 the Retirement Plan incorporates into its             the real estate and Liberty Mutual
                                                   the lending of money or other extension                 investment strategy investments                       would own the remaining interest in the
                                                   of credit between a plan and a party in                 covering a wide array of investment                   real estate investment through its
                                                   interest. Thus, Liberty Mutual states, to               classes, including alternative                        general account. Liberty Mutual states
                                                   the extent that any service provider to                 investments. Liberty Mutual states that               that it engages in such transactions with
                                                   a Liberty Mutual Plan or a co-joint                     sophisticated counterparties to the                   other investment vehicles also where
                                                   venturer of Liberty Mutual, such as a                   Retirement Plan usually insist on                     they invest with a partnership or joint
                                                   bank, holds a mortgage on real property                 representations and warranties that no                venture and Liberty owns least 50%.
                                                   that a Liberty Mutual Plan owns, or a                   prohibited transaction will occur as a                According to the Applicant, it is
                                                   broker extends credit to a Liberty                      result of a transaction.                              administratively burdensome to monitor
                                                   Mutual Plan to effect a securities                         20. Furthermore, Liberty Mutual                    every joint venture in which an
                                                   transaction, or a Liberty Mutual Plan                   represents that, for common commercial                employer participates in order to ensure
                                                   purchases a debt obligation of any                      transactions involving assets for which               that a plan maintained by such
                                                   person that is also a service provider to               there is not an established market, such              employer does not engage in
                                                   such Liberty Mutual Plan or a co-joint                  as real estate transactions, secondary                commercially common, low-risk
                                                   venture of Liberty Mutual, a prohibited                 investments in private equity vehicles,               transactions with such entities.
                                                   transaction would occur under section                   and certain private debt offerings of
                                                   406(a)(1)(B) of ERISA.                                  reliable borrowers, the requisite data to                Liberty Mutual represents that, given
                                                      17. Liberty Mutual further states that               assure compliance with the statutory                  the magnitude of the assets that it
                                                   section 406(a)(1)(D) of ERISA prohibits                 exemptions, such as demonstrating                     manages in the ordinary course of its
                                                   a fiduciary with respect to a plan from                 ‘‘adequate consideration’’ with regard to             business, Liberty Mutual makes
                                                   causing such plan to engage in a                        transactions relying upon section                     numerous investments, including
                                                   transaction, if such fiduciary knows or                 408(b)(17) of ERISA, may not be                       significant investments in real estate,
                                                   should know that such transaction                       available or timely available. Without                private equity and other types of
                                                   constitutes a transfer to, or use by or for             the availability of such market                       alternative investments. Liberty Mutual
                                                   the benefit of, a party in interest, of any             references, the availability of the                   represents that, in the context of real
                                                   assets of such plan. As such, Liberty                   statutory exemption under section                     estate investments, it is common for the
                                                   Mutual states, to the extent that any                   408(b)(l7) of ERISA is dependent on the               developer of the property to hold a
                                                   Liberty Mutual Asset Manager acting in                  judgment of the fiduciary acting on                   substantial minority interest in the
                                                   a fiduciary capacity on behalf of any                   behalf of the investing plan. The                     investment, while the investor that
                                                   Liberty Mutual Plan were to allow such                  Applicant represents that counterparties              finances the development of the
                                                   Liberty Mutual Plan to engage in a                      are sometimes unwilling to rely on a                  property holds the majority interest.
                                                   transaction with a service provider,                    fiduciary’s subjective determination of               However, the developer, which has the
                                                   such as the manager of an investment                    value, which often leads to additional                expertise to develop the property
                                                   fund that is treated as plan assets under               time and expense (such as may arise                   effectively, would retain operational
                                                   ERISA; or a co-joint venturer of Liberty                from having to obtain additional                      control over the management and
                                                   Mutual; such transaction would involve                  independent appraisals of the value of                development of the property. On the
                                                   the use or transfer to by such entity of                the underlying assets from independent                other hand, Liberty Mutual represents,
                                                   the assets of the Liberty Mutual Plan, in               valuation firms at the expense of the                 in private equity investments, Liberty
                                                   violation of section 406(a)(1)(D) of                    plan) to complete an investment. The                  Mutual will often take a direct
                                                   ERISA.                                                  Applicant represents that counterparties              substantial ownership position or be a
                                                                                                           may not wish to delay the                             significant investor in an investment
                                                   Statutory Findings—In The Interest of                   consummation of the transaction in                    fund established to make investments in
                                                   Liberty Mutual Plans                                    order to assure that such a valuation can             portfolio companies. To this end, it
                                                      18. Liberty Mutual represents that the               be obtained, particularly if other                    would not be uncommon for Liberty
mstockstill on DSK30JT082PROD with NOTICES2




                                                   proposed exemption, if granted, would                   investors are available that can rely on              Mutual to have ownership of more than
                                                   facilitate an efficient execution of the                a statutory exemption such as PTE 96–                 10% and less than 50% in such private
                                                   Liberty Mutual Plans’ investment                        23. Liberty Mutual states that, therefore,            equity investments. Operational control
                                                   strategy, by permitting the Liberty                     the requested exemption would                         over the portfolio companies will
                                                   Mutual Plans to engage in a series of                   facilitate the Retirement Plan’s ability to           usually be vested in the sponsor of the
                                                   commercially common, beneficial                         properly diversify its investments and                fund or the lead investor in a direct
                                                   transactions with counterparties that                   make it more competitive in procuring                 investment. The Applicant represents
                                                   may constitute ‘‘parties in interest’’                  such assets for its own account.                      that other kinds of alternative


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                                                   36218                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   investments are frequently structured in                   23. Liberty Mutual represents that,                to forego the perceived beneficial
                                                   a similar fashion, where Liberty Mutual                 aside from the increased cost in fees,                investment opportunity or make the
                                                   is a significant minority holder, but not               retaining third party managers is not the             investment and assume the exposure to
                                                   a controlling investor and does not have                optimal approach for the investment of                the risk that could otherwise be hedged.
                                                   any operational control over the                        the Retirement Plan’s assets. In this                    Liberty Mutual represents that
                                                   investment or the investment vehicle                    regard, Liberty Mutual states that having             counterparties are reluctant, or may
                                                   managing the assets. As such, in the                    control over the Retirement Plan’s assets             refuse, to engage in transactions with
                                                   ordinary course of business, Liberty                    provides it with the ability to increase              plan investors relying on other
                                                   Mutual owns substantial passive                         investment returns in a manner that                   potentially available exemptions that
                                                   interests in a very large number of                     could not be achieved if multiple                     are dependent on fact specific
                                                   investments where other partners in the                 unaffiliated managers were retained to                considerations that can vary from
                                                   investment, who have unique expertise                   invest the Retirement Plan’s assets.                  transaction to transaction, such as is the
                                                   in the particular investment category,                     Liberty Mutual further represents that             case with regard to the relief provided
                                                   have the control over the management                    having control over the entire portfolio              under the ‘‘service provider’’ exemption
                                                   of the underlying investments.                          allows for efficiencies that can improve              set forth in section 408(b)(17) of ERISA.
                                                      Liberty Mutual represents that,                      the ability to maximize returns and                      25. Liberty Mutual states that, if the
                                                   compared to other employers, which                      control investment risks by affording                 exemption is granted, the continued
                                                   generally engage in joint ventures only                 greater integration in the asset/liability            absence of RIA status will not affect in
                                                   as part of their core business, Liberty                 management process. For example, with                 any way the manner in which Liberty
                                                   Mutual most often engages in such                       respect to managing interest rate risks,              Mutual or LMGAMI manages the assets
                                                   relationships in its capacity as an                     having multiple individual asset                      of Liberty Mutual Plans. Liberty Mutual
                                                                                                           managers hedge their interest rate risk to            represents that the fact that neither
                                                   investor. To this end, the Applicant
                                                                                                           a target (relative to liabilities) can result         Liberty Mutual nor LMGAMI is an RIA
                                                   represents that Liberty Mutual is a
                                                                                                           in inefficient trading. Some managers                 does not preclude the Liberty Mutual
                                                   passive joint venture partner with a
                                                                                                           will be buying, while others will be                  Plans from any services or any
                                                   multitude of entities that ordinarily
                                                                                                           selling. The Applicant represents that                transactions that Liberty Mutual or
                                                   operate the applicable ventures
                                                                                                           the net impact of having separate                     LMGAMI offers.
                                                   independently from Liberty Mutual. If                                                                            26. Liberty Mutual represents that it
                                                   any Liberty Mutual Plan engaged in any                  managers each manage the risk
                                                                                                           associated with the portion of the                    has over 80 years of experience
                                                   transaction with such an entity, the                                                                          managing insurance company assets and
                                                                                                           portfolio under their management can
                                                   counterparty representing the venture                                                                         it conducts extensive compliance
                                                                                                           result in unnecessary transaction costs
                                                   will conduct itself like any other                                                                            training of investment personnel,
                                                                                                           for the Liberty Mutual Plan.
                                                   independent, third party engaging in a                     The Applicant states that having                   including ERISA fiduciary training.
                                                   commercial transaction. The Applicant                   current oversight of the entire asset base            Liberty Mutual and LMGAMI
                                                   represents that, to the extent that Liberty             allows for more efficient risk control.               collectively employ approximately 85
                                                   Mutual directs any investment on behalf                 Setting investment criteria relative to               investment professionals dedicated to
                                                   of any Liberty Mutual Plan, it will be                  benchmark levels is not a static process,             the investment of the assets under
                                                   subject to ERISA’s fiduciary                            as index weights adjust on a daily basis.             Liberty Mutual’s management and
                                                   responsibility provisions, both as a                    The Applicant represents that, if the                 control, with investment teams
                                                   matter of law and as a condition of the                 Liberty Mutual Plan wants to set an                   dedicated to distinct asset classes.
                                                   exemption. Moreover, the Liberty                        absolute aggregate (across stocks and                 Liberty Mutual states that its Chief
                                                   Mutual Plan investors will often be                     bonds) energy exposure to 10% of assets               Investment Officer has over 30 years of
                                                   investing side by side with the general                 under management, the various                         experience in the investment industry.
                                                   account in those investments that are                   investment management agreements or                   Furthermore, Liberty Mutual states an
                                                   appropriate for the Plans. Thus, with                   guidelines with multiple managers                     investment compliance team monitors
                                                   regard to any such investment, the                      would need to be adjusted more                        portfolio compliance in real time
                                                   interests of Liberty Mutual and any                     frequently than is practical.                         employing sophisticated software.
                                                   Liberty Mutual Plan investor would be                      24. The Applicant states that as a
                                                   aligned.                                                matter of policy, certain counterparties              Statutory Findings—Protective of the
                                                      22. Liberty Mutual states that it has                will not engage in hedging transactions               Rights of Participants
                                                   not charged, and will not charge in the                 with plans in reliance on the service                    27. Liberty Mutual represents that
                                                   future, the Retirement Plan fees for the                provider exemption under section                      state insurance laws regulate Liberty
                                                   investment management services that it                  408(b)(l7) of ERISA. Others may do so                 Mutual’s financial condition and
                                                   provides, and does not seek                             only with regard to currencies that are               reporting requirements, the
                                                   reimbursement for the expenses it                       widely traded and do not fluctuate                    diversification of Liberty Mutual’s
                                                   incurs in providing the services of its                 significantly in value. Thus, according               investment portfolio, and types of
                                                   employees to manage the assets of the                   to Liberty Mutual, there have been and                investments that Liberty Mutual can
                                                   Retirement Plan. Liberty Mutual                         may in the future be occasions where it               undertake. Liberty Mutual states that it
                                                   represents that, were the Liberty Mutual                would be advantageous (and a normal                   files audited annual financial statements
                                                   Plans to retain the services of similarly               precaution) for the Retirement Plan to                and unaudited quarterly financial
                                                   qualified third party investment                        put in place a currency hedge, or                     statements with the insurance
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                                                   managers, the operating expenses of the                 perhaps an interest rate hedge, as a                  authorities in all 50 states, and is subject
                                                   Liberty Mutual Plans would increase                     secondary protection for an appropriate               to robust, risk-focused inspections by
                                                   significantly. Liberty Mutual states that,              and attractive primary investment                     state insurance regulators every three to
                                                   absent exemptive relief, even if only                   opportunity that cannot be effected                   five years. Liberty Mutual states that
                                                   alternative assets were turned over to                  without the benefit of the requested                  these inspections include extensive
                                                   third-party managers, the incremental                   exemption. In such circumstances, the                 audits of its control systems and reviews
                                                   annual cost to the Liberty Mutual Plans                 fiduciaries on behalf of the Retirement               of its operating procedures, investments
                                                   would be approximately $15 million.                     Plan would have to determine whether                  and other transactions.


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                           36219

                                                      28. Furthermore, the exemption will                  the auditor during the course of its                  Asset Manager. Also, as part of the
                                                   be subject to a suite of robust, protective             examination, to be completed within six               Compliance Program, each Liberty
                                                   conditions. The terms of transactions                   months following the end of the 12-                   Mutual Asset Manager must adopt and
                                                   entered into in reliance of this                        month period to which the audit relates.              enforce a written code of ethics that,
                                                   exemption will be negotiated on behalf                  The Audit Report must include, among                  among other things, will reflect the
                                                   of the Liberty Mutual Plan by, or under                 other things, the auditor’s specific                  Liberty Mutual Asset Manager’s
                                                   the authority and general direction of,                 determinations regarding the                          fiduciary duties to the Liberty Mutual
                                                   the Liberty Mutual Asset Manager, and                   compliance with the conditions for the                Plans.
                                                   either the Liberty Mutual Asset Manager                 exemption; the adequacy of, and                          35. Finally, the Liberty Mutual Asset
                                                   or, so long as the Liberty Mutual Asset                 compliance with, the Policies; the                    Manager must act in the Best Interest of
                                                   Manager retains full fiduciary                          auditor’s recommendations (if any) with               the Liberty Mutual Plan at the time of
                                                   responsibility with respect to the                      respect to strengthening such Policies;               the transaction. Furthermore, the
                                                   transaction, a sub-adviser acting in                    and any instances of noncompliance                    Liberty Mutual Asset Manager’s
                                                   accordance with written guidelines                      with the conditions for the exemption or              statements about material conflicts of
                                                   established and administered by the                     the Policies.                                         interest and any other matters relevant
                                                   Liberty Mutual Asset Manager, makes                        32. The Liberty Mutual Asset Manager               to the Liberty Mutual Asset Manager’s
                                                   the decision on behalf of the plan to                   will make its Audit Report                            relationship with the Liberty Mutual
                                                   enter into the transaction. Furthermore,                unconditionally available for                         Plan, must not be materially misleading
                                                   the party in interest engaging in the                   examination by any duly authorized                    at the time they are made.
                                                   transaction with the Liberty Mutual                     employee or representative of the
                                                   Plan may not have discretionary                         Department, other relevant regulators,                Statutory Findings—Administratively
                                                   authority or control with respect to the                and any participant in a Liberty Mutual               Feasible
                                                   investment of the Liberty Mutual Plan                   Plan.                                                    36. Liberty Mutual represents that the
                                                   assets involved in the transaction and                     33. The Liberty Mutual Asset                       proposed exemption is administratively
                                                   may not render investment advice                        Managers will prepare and make                        feasible. Liberty Mutual represents that
                                                   (within the meaning of 29 CFR 2510.3–                   available to all participants of, and                 it maintains substantial internal control
                                                   21(c)) with respect to those assets.                    beneficiaries entitled to receive benefits            systems regulating its financial
                                                      29. Liberty Mutual represents that,                  under, the Liberty Mutual Plans (the                  reporting and related functions,
                                                   notwithstanding the withdrawal of its                   Eligible Recipients) a plain English,                 including portfolio management, that
                                                   registration as an RIA under the                        narrative brochure (the Brochure) that                are tested three times per year, with
                                                   Advisers Act, the exemption requires                    contains information comparable to that               regular internal audits. Furthermore, as
                                                   the Liberty Mutual Asset Manager to                     required by Part 2A of Form ADV filed                 described above, the Liberty Mutual
                                                   adopt, maintain, and follow policies and                under the Investment Advisers Act of                  Asset Manager will be subject to robust
                                                   procedures (Policies) designed to ensure                1940,12 modified such that the                        annual audits to be conducted by an
                                                   compliance with the conditions of this                  disclosure is relevant to Eligible                    independent auditor. The Liberty
                                                   exemption, reinforce the Liberty Mutual                 Recipients with respect to the                        Mutual Asset Manager must then make
                                                   Asset Manager’s fiduciary duties,                       management of the applicable Liberty                  its Audit Report unconditionally
                                                   ensuring that the Liberty Mutual Asset                  Mutual Plan. Liberty Mutual must also                 available for examination by any duly
                                                   Manager and its personnel operate                       provide an annual update to the                       authorized employee or representative
                                                   within an impartial conduct standard in                 Brochure (the Updated Brochure),                      of the Department, other relevant
                                                   accordance with a duty of loyalty and                   containing or accompanied by a                        regulators, and any participant in a
                                                   prudence pursuant to section 404 of the                 summary of material changes.                          Liberty Mutual Plan.
                                                   Act with respect to the Liberty Mutual                     34. As an additional condition of the
                                                   Plan when condu0cting business with,                                                                          Summary
                                                                                                           exemption, each Liberty Mutual Asset
                                                   or on behalf of, the applicable Liberty                 Manager must establish an internal                      37. In summary, provided that the
                                                   Mutual Plan, and avoid conflicts of                     compliance program that addresses the                 conditions described above are satisfied,
                                                   interest or risk exposure, including an                 Liberty Mutual Asset Manager’s                        the Department has tentatively
                                                   investment allocation policy and best                   performance of its fiduciary and                      determined that the relief sought by the
                                                   execution policy.                                       substantive obligations under ERISA                   Applicant satisfies the statutory
                                                      30. Liberty Mutual represents that its                                                                     requirements for an exemption under
                                                                                                           (the Compliance Program). Each Liberty
                                                   control systems are tested three times                                                                        section 408(a) of ERISA.
                                                                                                           Mutual Asset Manager must designate a
                                                   per year, with regular internal and
                                                                                                           chief compliance officer (the CCO), who               Proposed Exemption Operative
                                                   external audits. Nevertheless, the
                                                                                                           must be knowledgeable about ERISA                     Language
                                                   Department views a robust independent
                                                                                                           and have the authority to develop and
                                                   audit requirement as an essential
                                                                                                           enforce appropriate compliance policies               Section I. Covered Transactions
                                                   condition for exemptive relief
                                                                                                           and procedures for the Liberty Mutual                   If the proposed exemption is granted,
                                                   hereunder. Therefore, the exemption
                                                   requires that the Liberty Mutual Asset                    12 The Department understands that Form ADV is
                                                                                                                                                                 the restrictions of sections 406(a)(1)(A),
                                                   Manager must submit to an audit                         the uniform form used by investment advisers to
                                                                                                                                                                 406(a)(1)(B), and 406(a)(1)(D) of ERISA
                                                   conducted annually by an independent                    register with both the Securities and Exchange        and the sanctions resulting from the
                                                   auditor. The audit must cover a                         Commission (SEC) and state securities authorities.    application of sections 4975(a) and
                                                                                                           The form consists of two parts. Part 2 requires
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                                                   consecutive twelve-month period                                                                               4975(b) of the Code, by reason of
                                                                                                           investment advisers to prepare narrative brochures
                                                   beginning on the effective date of the                  written in plain English that contain information
                                                                                                                                                                 sections 4975(c)(1)(A), 4975(c)(1)(B),
                                                   exemption.                                              such as the types of advisory services offered, the   and 4975(c)(1)(D) of the Code, shall not
                                                      31. The auditor must issue a written                 adviser’s fee schedule, disciplinary information,     apply to a transaction between a party
                                                   report (the Audit Report) to Liberty                    conflicts of interest, and the educational and        in interest with respect to a Liberty
                                                                                                           business background of management and key
                                                   Mutual and the Liberty Mutual Asset                     advisory personnel of the adviser. The brochure is
                                                                                                                                                                 Mutual Plan (as defined in Section II(h))
                                                   Manager with respect to each audit that                 the primary disclosure document that investment       and such Liberty Mutual Plan, provided
                                                   describes the procedures performed by                   advisers provide to their clients.                    that the Liberty Mutual Asset Manager


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                                                   36220                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   (as defined in Section II(a)) has                       capital or profits), or the parent                    Manager or its personnel from violating
                                                   discretionary authority or control with                 company of such an employer, provided                 ERISA or other federal or state laws or
                                                   respect to the assets of the Liberty                    that such person is not controlled by,                regulations applicable with respect to
                                                   Mutual Plan involved in the transaction                 controlling, or under common control                  the investment of the assets of the
                                                   and the following conditions are                        with such employer; or                                applicable Liberty Mutual Plan
                                                   satisfied:                                                 (C) By reason of both (A) and (B) only;            (Applicable Law);
                                                      (a) The terms of the transaction are                 and                                                      (4) Cover, at a minimum, the
                                                   negotiated on behalf of the Liberty                        (2) Does not have discretionary                    following areas to the extent applicable
                                                   Mutual Plan by, or under the authority                  authority or control with respect to the              to the Liberty Mutual Asset Manager:
                                                   and general direction of, the Liberty                   investment of the Liberty Mutual Plan                    (A) Portfolio management processes,
                                                   Mutual Asset Manager, and either the                    assets involved in the transaction and                including allocation of investment
                                                   Liberty Mutual Asset Manager or, so                     does not render investment advice                     opportunities among any Liberty Mutual
                                                   long as the Liberty Mutual Asset                        (within the meaning of 29 CFR 2510.3–                 Plan and Liberty Mutual’s proprietary
                                                   Manager retains full fiduciary                          21(c)) with respect to those assets;                  investments, taking into account the
                                                   responsibility with respect to the                         (f) The party in interest dealing with             investment objectives of the applicable
                                                   transaction, a sub-adviser acting in                    the Liberty Mutual Plan is neither the                Liberty Mutual Plan and any restrictions
                                                   accordance with written guidelines                      Liberty Mutual Asset Manager nor a                    under Applicable Law;
                                                   established and administered by the                     person related to the Liberty Mutual                     (B) Trading practices, including
                                                   Liberty Mutual Asset Manager, makes                     Asset Manager (within the meaning of                  procedures by which the Liberty Mutual
                                                   the decision on behalf of the Plan to                   Section II(d));                                       Asset Manager satisfies its best
                                                   enter into the transaction;                                (g) The Liberty Mutual Asset Manager               execution obligation, and allocates
                                                      (b) The transaction is not described                 adopts, maintains, and follows written                aggregated trades among all Liberty
                                                   in—                                                     policies and procedures (the Policies)                Mutual Plans and/or Liberty Mutual
                                                      (1) Prohibited Transaction Exemption                 that:                                                 proprietary accounts for which it
                                                   2006–16 (71 FR 63786, October 31,                          (1) Are designed to assure compliance              provides investment management
                                                   2006) (relating to securities lending                   with the conditions of the exemption                  services;
                                                   arrangements) (as amended or                            and its fiduciary responsibilities and                   (C) Personal trading activities of any
                                                   superseded);                                            avoid any conflicts of interest or risk               employee of Liberty Mutual and its
                                                      (2) Prohibited Transaction Exemption                 exposure, including an investment                     subsidiaries who has personal
                                                   83–1 (48 FR 895, January 7, 1983)                       allocation policy and best execution                  involvement and responsibility for
                                                   (relating to acquisitions by plans of                   policy, and ensure that the Liberty                   investment decisions regarding the
                                                   interests in mortgage pools) (as                        Mutual Asset Manager and its personnel                investment of the assets of the
                                                   amended or superseded); or                              operate within an impartial conduct                   applicable Liberty Mutual Plan (an LM
                                                      (3) Prohibited Transaction Exemption                 standard in accordance with a duty of                 Advisory Employee);
                                                   88–59 (53 FR 24811, June 30, 1988)                      loyalty and prudence pursuant to                         (D) The Liberty Mutual Asset
                                                   (relating to certain mortgage financing                 section 404 of the Act with respect to                Manager’s policies regulating conflicts
                                                   arrangements) (as amended or                            the Liberty Mutual Plan when                          of interest;
                                                   superseded);                                            conducting business with, or on behalf                   (E) The accuracy of disclosures,
                                                      (c) The transaction is not part of an                of, the applicable Liberty Mutual Plan;               including account statements, made to
                                                   arrangement, agreement, or                                 (2) Describe the objective                         the trustee(s) or fiduciaries of any
                                                   understanding designed to violate or                    requirements of the exemption, and                    Liberty Mutual Plan or to any regulators;
                                                   evade compliance with ERISA or the                      describe the steps adopted by the                        (F) Safeguarding of Liberty Mutual
                                                   Code;                                                   Liberty Mutual Asset Manager to assure                Plan assets from conversion or
                                                      (d) At the time the transaction is                   compliance with each of these                         inappropriate use by any LM Advisory
                                                   entered into, and at the time of any                    requirements:                                         Employee;
                                                   subsequent renewal or modification                         (A) The requirements of Section I of                  (G) The accurate creation of required
                                                   thereof that requires the consent of the                the exemption, including Section I(a)                 records and their maintenance in a
                                                   Liberty Mutual Asset Manager, the                       regarding the discretionary authority or              manner that secures them from
                                                   terms of the transaction are at least as                control of the Liberty Mutual Asset                   unauthorized alteration or use and
                                                   favorable to the Liberty Mutual Plan as                 Manager with respect to the plan assets               protects them from untimely
                                                   the terms generally available in arm’s                  involved in the transaction, in                       destruction;
                                                   length transactions between unrelated                   negotiating the terms of the transaction,                (H) Processes to value holdings of any
                                                   parties;                                                and with regard to the decision on                    Liberty Mutual Plan, to the extent, if
                                                      (e) The party in interest dealing with               behalf of the Liberty Mutual Plan to                  any, that such valuation is within the
                                                   the Liberty Mutual Plan:                                enter into the transaction;                           control of the Liberty Mutual Asset
                                                      (1) Is a party in interest with respect                 (B) That any procedure for approval                Manager;
                                                   to the Liberty Mutual Plan (including a                 or veto of the transaction meets the                     (I) Safeguards for the privacy
                                                   fiduciary); either                                      requirements of Section I(a);                         protection of records and information
                                                      (A) Solely by reason of providing                       (C) For a transaction described in                 pertaining to each Liberty Mutual Plan;
                                                   services to the Liberty Mutual Plan, or                 Section I:                                            and
                                                   solely by reason of a relationship to a                    (i) That the transaction is not entered               (J) Business continuity plans; and
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                                                   service provider described in section                   into with any person who is excluded                     (5) Any violations of or failure to
                                                   3(14)(F), (G), (H) or (I) of ERISA; or                  from relief under Section I(e)(1), Section            comply with items (1) through (4) above
                                                      (B) Solely by reason of being a 10-                  I(e)(2), or Section I(f); and                         are corrected promptly upon discovery
                                                   percent or more shareholder, partner or                    (ii) That the transaction is not                   and any such violations or compliance
                                                   joint venturer, in a person, which is 50                described in any of the class exemptions              failures not promptly corrected are
                                                   percent or more owned by an employer                    listed in Section I(b);                               reported, upon discovering the failure to
                                                   of employees covered by the Liberty                        (3) Are reasonably designed to                     promptly correct, in writing to
                                                   Mutual Plan (directly or indirectly in                  prevent the Liberty Mutual Asset                      appropriate corporate officers, the Chief


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                          36221

                                                   Compliance Officer (as described below                  reasonable basis to determine the                     signing are adequate to ensure
                                                   in Section I(j)) of the Liberty Mutual                  operational compliance with the                       compliance with the conditions of this
                                                   Asset Manager, and the independent                      Policies;                                             exemption and with the applicable
                                                   auditor described in Section I(h) below,                   (5) For each audit, the auditor shall              provisions of ERISA and the Code;
                                                   and a fiduciary of the relevant Liberty                 issue a written report (the Audit Report)                (8) A senior executive officer with a
                                                   Mutual Plan; the Liberty Mutual Asset                   to Liberty Mutual and the Liberty                     direct reporting line to the highest
                                                   Manager will not be treated as having                   Mutual Asset Manager that describes the               ranking compliance officer of Liberty
                                                   failed to adopt, maintain, or follow the                procedures performed by the auditor                   Mutual reviews the Audit Report and
                                                   Policies, provided that it corrects any                 during the course of its examination, to              certifies in writing, under penalty of
                                                   instances of noncompliance promptly                     be completed within six months                        perjury, that such officer has reviewed
                                                   when discovered or when they                            following the end of the twelve-month                 each Audit Report; and
                                                   reasonably should have known of the                     period to which the audit relates. The                   (9) The Liberty Mutual Asset Manager
                                                   noncompliance (whichever is earlier),                   Audit Report shall include the auditor’s              makes its Audit Report unconditionally
                                                   and provided that it adheres to the                     specific determinations regarding the                 available for examination by any duly
                                                   reporting requirements set forth in this                compliance with the conditions for the                authorized employee or representative
                                                   item (5);                                               exemption; the adequacy of, and                       of the Department, other relevant
                                                      (h)(1) The Liberty Mutual Asset                      compliance with, the Policies; the                    regulators, and any participant in a
                                                   Manager submits to an audit conducted                   auditor’s recommendations (if any) with               Liberty Mutual Plan;
                                                   annually by an independent auditor,                     respect to strengthening such Policies;                  (i) The Liberty Mutual Asset Manager
                                                   who has been prudently selected and                     and any instances of noncompliance                    will prepare and make available to all
                                                   who has the appropriate technical                       with the conditions for the exemption or              participants of, and beneficiaries
                                                   training or experience and proficiency                  the Policies described in paragraph (g)               entitled to receive benefits under, the
                                                   with ERISA’s fiduciary responsibility                   above. Any determinations made by the                 Liberty Mutual Plans (the Eligible
                                                   provisions and applicable securities                    auditor regarding the adequacy of the                 Recipients) a plain English, narrative
                                                   laws to evaluate the adequacy of, and                   Policies and the auditor’s                            brochure (the Brochure) that contains all
                                                   compliance with, the Policies described                 recommendations (if any) with respect                 substantive information, comparable to
                                                   herein, and compliance with the                         to strengthening the Policies shall be                that required by Part 2A of Form ADV
                                                   requirements of the exemption, and so                   promptly addressed by the Liberty                     filed under the Investment Advisers Act
                                                   represents in writing. Upon the                         Mutual Asset Manager, and any actions                 of 1940, but modified such that the
                                                   Department’s request, the auditor must                  taken by the Liberty Mutual Asset                     disclosure is relevant to Eligible
                                                   demonstrate its qualifications as                       Manager to address such                               Recipients with respect to the
                                                   required by this paragraph and its                      recommendations shall be included in                  management of the applicable Liberty
                                                   independence from Liberty Mutual. The                   an addendum to the Audit Report. Any                  Mutual Plan;
                                                   audit must be incorporated into the                     determinations by the auditor that the                   (1) The Brochure shall include, among
                                                   Policies and cover a consecutive twelve-                Liberty Mutual Asset Manager has                      other things:
                                                   month period beginning on the effective                 adopted, maintained, and followed                        (A) The Liberty Mutual Asset
                                                   date of the exemption. Each annual                      sufficient Policies shall not be based                Manager’s investment strategy with
                                                   audit must be completed within six                      solely or in substantial part on an                   respect to the applicable Liberty Mutual
                                                   months following the end of the twelve-                 absence of evidence indicating                        Plan;
                                                   month period to which the audit relates;                noncompliance. In this last regard, any                  (B) The Liberty Mutual Asset
                                                      (2) To the extent necessary for the                  finding that the Liberty Mutual Asset                 Manager’s policies regarding conflicts of
                                                   auditor, in its sole opinion, to complete               Manager has complied with the                         interest;
                                                   its audit and comply with the                           requirements under this subsection                       (C) Any disciplinary information
                                                   conditions for relief described herein,                 must be based on evidence that                        related to employees of the Liberty
                                                   and as permitted by law, the Liberty                    demonstrates the Liberty Mutual Asset                 Mutual Asset Manager; and
                                                   Mutual Asset Manager and, if                            Manager has actually adopted,                            (D) A prominent statement that the
                                                   applicable, Liberty Mutual, will grant                  maintained, and followed the Policies                 Eligible Recipients may request a copy
                                                   the auditor unconditional access to its                 required by this exemption;                           of the Policies, with instructions on how
                                                   business, including, but not limited to:                   (6) The auditor shall notify the Liberty           to make such request and receive such
                                                   its computer systems, business records,                 Mutual Asset Manager and Liberty                      copy;
                                                   transactional data, workplace locations,                Mutual of any instances of                               (2) The Liberty Mutual Asset Manager
                                                   training materials, and personnel;                      noncompliance with the conditions for                 must make the Brochure available to the
                                                      (3) The auditor’s engagement must                    the exemption or the Policies identified              Eligible Recipients: (1) with respect to
                                                   specifically require the auditor to                     by the auditor within five (5) business               any Liberty Mutual Plan for which
                                                   determine whether the Liberty Mutual                    days after such noncompliance is                      Liberty Mutual or its affiliate is then
                                                   Asset Manager has complied with the                     identified by the auditor, regardless of              acting as an investment manager, within
                                                   conditions for the exemption, including                 whether the audit has been completed                  90 days of the effective date of this
                                                   the requirement to adopt, maintain, and                 as of that date;                                      exemption; and (2) with respect to any
                                                   follow Policies in Section I(g);                           (7) With respect to each Audit Report,             other Liberty Mutual Plan for which any
                                                      (4) The auditor’s engagement shall                   the General Counsel or the Chief                      Liberty Mutual Asset Manager thereafter
                                                   specifically require the auditor to test                Compliance Officer (described in                      becomes an investment manager, within
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                                                   the Liberty Mutual Asset Manager’s                      Section I(j)) of the Liberty Mutual Asset             ten (10) business days of the date that
                                                   operational compliance with the                         Manager certifies in writing, under                   the applicable Investment Management
                                                   exemption, including the Policies in                    penalty of perjury, that the officer has              Agreement or Sub-Adviser Agreement
                                                   Section I(g). In this regard, the auditor               reviewed the Audit Report and this                    with a Liberty Mutual Plan becomes
                                                   must test a sample of the Liberty Mutual                exemption; addressed, corrected, or                   effective;
                                                   Asset Manager’s transactions involving                  remedied any inadequacies identified in                  (3) Liberty Mutual annually updates
                                                   the Liberty Mutual Plan sufficient in                   the Audit Report; and determined that                 such brochure (the Updated Brochure),
                                                   size and nature to afford the auditor a                 the Policies in effect at the time of                 containing or accompanied by a


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                                                   36222                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   summary of material changes. Each                          (8) With respect to any individuals                   (A) Set forth a minimum standard of
                                                   Updated Brochure that is made                           who become Eligible Recipients with                   conduct for all LM Advisory Employees
                                                   available following the completion of                   respect to any Liberty Mutual Plan for                and any other employees of the Liberty
                                                   the first audit required with respect to                which Liberty Mutual or its affiliate is              Mutual Asset Manager whose
                                                   any Liberty Mutual Asset Manager in                     then acting as an investment manager                  responsibilities include assisting the LM
                                                   accordance with this exemption must                     (the New Eligible Recipients) after the               Advisory Employees in managing the
                                                   include a prominently displayed                         delivery of the Brochure to the Eligible              investments of any Liberty Mutual Plan
                                                   statement indicating that the Liberty                   Recipients with respect to the Liberty                (the LM Facilitating Employees);
                                                   Mutual Asset Manager has completed                      Mutual Plan, the Liberty Mutual Asset                    (B) Require LM Advisory Employees
                                                   the required audit, and must also                       Manager will provide a copy of the                    and LM Facilitating Employees to
                                                   provide clear instructions for obtaining                Brochure as well as the most recent                   comply with Applicable Law in
                                                   a copy of the audit;                                    Updated Brochure, if applicable, and                  fulfilling their investment management
                                                      (4) The Liberty Mutual Asset Manager                 any Brochure Supplements related to                   duties to the Liberty Mutual Plans;
                                                   will be deemed to have met the                          LM Advisory Employees employed by                        (C) Require each LM Advisory
                                                   requirements pertaining to the provision                the Liberty Mutual Asset Manager at the               Employee to report his or her securities
                                                   of the Brochure and the Updated                         time the New Eligible Recipients                      holdings at the later of the time that the
                                                   Brochure if it makes such documents                     became Eligible Recipients, within 90                 person becomes an LM Advisory
                                                   available to the Eligible Recipients                    days of the New Eligible Recipients                   Employee or within 90 days after this
                                                   through a prominently displayed link                    becoming Eligible Recipients with                     exemption becomes effective and at
                                                   on a Web site (the Plan Benefits Web                    respect to the Liberty Mutual Plan. The               least once annually thereafter and to
                                                   site) where it makes available                          Liberty Mutual Asset Manager will be                  make a report at least once quarterly of
                                                   information to the Eligible Recipients                  deemed to have met the disclosure                     all personal securities transactions in
                                                   about their benefits and rights under the               requirements pertaining to the New                    reportable securities to the Liberty
                                                   applicable Liberty Mutual Plan (Plan                    Eligible Recipients if it makes the                   Mutual Asset Manager’s CCO or other
                                                   Information), and contact information                   applicable documents available to the                 designated person;
                                                   for an appropriate representative of                    New Eligible Recipients through a                        (D) Require the CCO or other
                                                   Liberty Mutual to direct inquiries from                 prominently displayed link on the Plan                designated persons to pre-approve
                                                   the Eligible Recipients, which is readily               Benefits Web site described in section                investments by any LM Advisory
                                                   available to such Eligible Recipients.                  I(i)(4) of this exemption.                            Employee in IPOs or limited offerings;
                                                   Notwithstanding the above, the Liberty                  Notwithstanding the above, the Liberty                   (E) Require each LM Advisory
                                                   Mutual Asset Manager will not be                        Mutual Asset Manager will not be                      Employee or LM Facilitating Employees
                                                   deemed to have met the requirements of                  deemed to have met the requirements of                to promptly report any violation of
                                                   this subparagraph unless it provides                    this subparagraph unless it provides                  Applicable Law to the Liberty Mutual
                                                   notice of the Plan Benefits Web site, and               notice of the Plan Benefits Web site, and             Asset Manager’s CCO or other
                                                   the link to the Brochure and Updated                    the link to the Brochure, Updated                     designated person;
                                                   Brochure at least once annually, to all                 Brochure, and Brochure Supplements to                    (F) Require the Liberty Mutual Asset
                                                   Eligible Recipients;                                    all New Eligible Recipients. For any                  Manager to provide training on
                                                      (5) For any such Eligible Recipient to               such New Eligible Recipient to whom                   applicable law and to obtain a written
                                                   whom Liberty Mutual makes Plan                          Liberty Mutual makes Plan Information                 acknowledgment from each LM
                                                   Information available by hard copy or                   available by Supplemental Delivery, the               Advisory Employee documenting his/
                                                   other means (Supplemental Delivery),                    Brochure and the Updated Brochure                     her agreement to abide by the code of
                                                   the Brochure and the Updated Brochure                   must be provided to such New Eligible                 ethics, the Policies, and applicable law;
                                                   must be provided to such Eligible                       Recipient at the same time and by the                 and
                                                   Recipient at the same time and by the                   same means that Plan Information is                      (G) Require the Liberty Mutual Asset
                                                   same means that Plan Information is                     provided;                                             Manager to keep records of any
                                                   provided;                                                  (j) Each Liberty Mutual Asset Manager              violations of applicable law and of any
                                                      (6) The Liberty Mutual Asset Manager                 must establish an internal compliance                 actions taken against the violators;
                                                   will also provide supplements to the                    program that addresses the Liberty                       (k) The Liberty Mutual Asset Manager
                                                   Brochure (each, a Brochure                              Mutual Asset Manager’s performance of                 must act in the Best Interest of the
                                                   Supplement) that contain information                    its fiduciary and substantive obligations             Liberty Mutual Plan at the time of the
                                                   about any LM Advisory Employee,                         under ERISA (the Compliance Program);                 transaction. For purposes of this
                                                   including the LM Advisory Employee’s                       (1) Each Liberty Mutual Asset                      paragraph, a Liberty Mutual Asset
                                                   educational background, business                        Manager must designate a Chief                        Manager acts in the ‘‘Best Interest’’ of
                                                   experience, other business activities,                  Compliance Officer (the CCO), who                     the Liberty Mutual Plan when the
                                                   and disciplinary history;                               must be knowledgeable about ERISA                     Liberty Mutual Asset Manager acts with
                                                      (7) Each Brochure Supplement must                    and have the authority to develop and                 the care, skill, prudence, and diligence
                                                   be made available in the same manner                    enforce appropriate compliance policies               under the circumstances then prevailing
                                                   as the Brochure, and must be posted to                  and procedures for the Liberty Mutual                 that a prudent person acting in a like
                                                   the Plan Benefits Web site, not later                   Asset Manager;                                        capacity and familiar with such matters
                                                   than 90 days following the date that any                   (2) As part of the Compliance                      would use in the conduct of an
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                                                   such LM Advisory Employee begins to                     Program, each Liberty Mutual Asset                    enterprise of a like character and with
                                                   provide advisory services to that Liberty               Manager must adopt and enforce a                      like aims, based on the investment
                                                   Mutual Plan. Such Brochure                              written code of ethics that, among other              objectives, risk tolerance, financial
                                                   Supplement must be included with the                    things, will reflect the Liberty Mutual               circumstances, and needs of the Liberty
                                                   next Updated Brochure included in the                   Asset Manager’s fiduciary duties to the               Mutual Plan, without regard to the
                                                   material provided to any Eligible                       Liberty Mutual Plans. At a minimum,                   financial or other interests of the Liberty
                                                   Recipient receiving such Updated                        the Liberty Mutual Asset Manager’s                    Mutual Asset Manager, any affiliate or
                                                   Brochure by Supplemental Delivery;                      code of ethics must:                                  other party;


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                           36223

                                                     (l) The Liberty Mutual Asset                          as of the last day of each Liberty Mutual             in the case of a transaction that is
                                                   Manager’s statements about material                     Plan’s reporting year;                                continuing, the transaction shall be
                                                   conflicts of interest and any other                        (b) For purposes of Sections II(a) and             deemed to occur until it is terminated.
                                                   matters relevant to the Liberty Mutual                  II(h), an ‘‘affiliate’’ of a Liberty Mutual           Nothing in this paragraph shall be
                                                   Asset Manager’s relationship with the                   Asset Manager means a member of                       construed as exempting a transaction
                                                   Liberty Mutual Plan, are not materially                 either (1) a controlled group of                      entered into by a plan which becomes
                                                   misleading at the time they are made.                   corporations (as defined in section                   a transaction described in section 406 of
                                                   For purposes of this paragraph, a                       414(b) of the Code) of which the Liberty              ERISA or section 4975 of the Code while
                                                   ‘‘material conflict of interest’’ exists                Mutual Asset Manager is a member, or                  the transaction is continuing, unless the
                                                   when a Liberty Mutual Asset Manager                     (2) a group of trades or businesses under             conditions of the exemption were met
                                                   has a financial interest that a reasonable              common control (as defined in section                 either at the time the transaction was
                                                   person would conclude could affect the                  414(c) of the Code) of which the Liberty              entered into or at the time the
                                                   exercise of its best judgment as a Liberty              Mutual Asset Manager is a member;                     transaction would have become
                                                   Mutual Asset Manager; and                               provided that ‘‘50 percent’’ shall be                 prohibited but for this exemption. In
                                                     (m) The Liberty Mutual Asset                          substituted for ‘‘80 percent’’ wherever               determining compliance with the
                                                   Manager will not charge any asset                       ‘‘80 percent’’ appears in section 414(b)              conditions of the exemption at the time
                                                   management fees or receive any fee in                   or 414(c) of the Code or the rules                    that the transaction was entered into for
                                                   connection with transactions covered by                 thereunder;                                           purposes of the preceding sentence,
                                                   this exemption.                                            (c) The term ‘‘party in interest’’ means           Section I(e) will be deemed satisfied if
                                                                                                           a person described in section 3(14) of                the transaction was entered into
                                                   Section II. Definitions                                 ERISA and includes a ‘‘disqualified                   between a Liberty Mutual Plan and a
                                                      (a) The term ‘‘Liberty Mutual Asset                  person’’ as defined in section 4975(e)(2)             person who was not then a party in
                                                   Manager’’ means Liberty Mutual or any                   of the Code;                                          interest;
                                                   organization that is either a direct or                    (d) A Liberty Mutual Asset Manager is                 (f) The term ‘‘LMGAMI’’ means
                                                   indirect 80 percent or more owned                       ‘‘related’’ to a party in interest for                Liberty Mutual Group Asset
                                                   subsidiary of Liberty Mutual, or a direct               purposes of Section I(f) of this                      Management Inc., a separate investment
                                                   or indirect 80 percent more owned                       exemption, if, as of the last day of its              management subsidiary of Liberty
                                                   subsidiary of a parent organization of                  most recent calendar quarter: (i) The                 Mutual;
                                                   Liberty Mutual, provided that such                      Liberty Mutual Asset Manager (or a                       (g) The term ‘‘Liberty Mutual’’ means
                                                   Liberty Mutual Asset Manager:                           person controlling, or controlled by, the             Liberty Mutual Insurance Company; and
                                                      (1) Is an insurance company which is                 Liberty Mutual Asset Manager) owns a                     (h) The term ‘‘Liberty Mutual Plan’’
                                                   qualified under the laws of more than                   ten percent or more interest in the party             means the Liberty Mutual Retirement
                                                   one State to manage, acquire, or dispose                in interest; or (ii) the party in interest (or        Benefit Plan and any other employee
                                                   of any assets of a plan, which company                  a person controlling, or controlled by,               benefit plan subject to the fiduciary
                                                   has, as of the last day of its most recent              the party in interest) owns a 10 percent              responsibility provisions of Part IV of
                                                   fiscal year, net worth (capital, paid-in                or more interest in the Liberty Mutual                Title I of ERISA maintained by Liberty
                                                   and contributed surplus, unassigned                     Asset Manager.                                        Mutual or an affiliate of Liberty Mutual,
                                                   surplus, contingency reserves, group                       For purposes of this definition:                   and covering the employees of such
                                                   contingency reserves, and special                          (1) The term ‘‘interest’’ means with               entities.
                                                                                                           respect to ownership of an entity—                       Effective Date: The proposed
                                                   reserves) in excess of $1,000,000;
                                                                                                              (A) The combined voting power of all               exemption, if granted, will be effective
                                                      (2) Is subject to supervision and
                                                                                                           classes of stock entitled to vote or the              as of the date that a final notice of
                                                   examination by a State authority having
                                                                                                           total value of the shares of all classes of           granted exemption is published in the
                                                   supervision over insurance companies
                                                                                                           stock of the entity if the entity is a                Federal Register.
                                                   and is subject to periodic audits by
                                                                                                           corporation,                                          Notice to Interested Persons
                                                   applicable State insurance regulators in
                                                                                                              (B) The capital interest or the profits
                                                   accordance with the requirements of                                                                             Notice of the proposed exemption
                                                                                                           interest of the entity if the entity is a
                                                   applicable state law, which, under                                                                            will be given to all Interested Persons
                                                                                                           partnership, or
                                                   current law, would be no less than once                    (C) The beneficial interest of the                 within 15 days of the publication of the
                                                   every five years;                                       entity if the entity is a trust or                    notice of proposed exemption in the
                                                      (3) Has any arrangements between it                  unincorporated enterprise; and                        Federal Register, by first class U.S. mail
                                                   and any Liberty Mutual Plan reviewed                       (2) A person is considered to own an               to the last known address of all such
                                                   by the applicable State insurance                       interest if, other than in a fiduciary                individuals. Such notice will contain a
                                                   regulators, including any investment                    capacity, the person has or shares the                copy of the notice of proposed
                                                   management agreements (or revisions                     authority—                                            exemption, as published in the Federal
                                                   thereto) with the Liberty Mutual Plan                      (A) To exercise any voting rights or to            Register, and a supplemental statement,
                                                   and sub-advisor agreements with any                     direct some other person to exercise the              as required pursuant to 29 CFR
                                                   other Liberty Mutual Asset Managers,                    voting rights relating to such interest, or           2570.43(a)(2). The supplemental
                                                   the results of which will be made                          (B) To dispose or to direct the                    statement will inform interested persons
                                                   available without limitation to the                     disposition of such interest; and                     of their right to comment on the
                                                   independent auditor conducting the                         (3) The term ‘‘control’’ means the                 pending exemption. Written comments
                                                   audit required under Section I(i);
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                                                                                                           power to exercise a controlling                       are due within 45 days of the
                                                      (4) As of the last day of its most recent            influence over the management or                      publication of the notice of proposed
                                                   fiscal year, has under its management                   policies of a person other than an                    exemption in the Federal Register.
                                                   and control total assets in excess of $1                individual;                                             All comments will be made available
                                                   billion; and                                               (e) For purposes of this exemption,                to the public.
                                                      (5) Together with its affiliates,                    the time as of which any transaction                    Warning: If you submit a comment,
                                                   maintains Liberty Mutual Plans holding                  occurs is the date upon which the                     EBSA recommends that you include
                                                   aggregate assets of at least $500 million               transaction is entered into. In addition,             your name and other contact


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                                                   36224                          Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   information in the body of your                           Fund other services (Secondary                          On June 1, 2016, London Stock
                                                   comment, but DO NOT submit                                Service(s)); and                                     Exchange Group PLC (LSEG), FRC’s
                                                   information that you consider to be                         (b) In connection with the indirect                ultimate parent company, sold Russell
                                                   confidential, or otherwise protected                      investment by a Client Plan in shares of             Investments for $1.15 billion to certain
                                                   (such as Social Security number or an                     an Affiliated Fund through investment                holding companies ultimately owned by
                                                   unlisted phone number) or confidential                    in a pooled investment vehicle or                    certain private equity funds sponsored
                                                   business information that you do not                      pooled investment vehicles (Collective               by TA Associates Management, LP and
                                                   want publicly disclosed. All comments                     Fund(s)), where Russell Investments                  Reverence Capital Partners LP (the
                                                   may be posted on the Internet and can                     serves as a fiduciary with respect to                Sale). Following the Sale, FRC
                                                   be retrieved by most Internet search                      such Client Plan, the receipt of fees by             continues to operate as a wholly-owned
                                                   engines.                                                  Russell Investments from: (1) An                     subsidiary of LSEG, whereas RIM and
                                                                                                             Affiliated Fund for the provision of                 RICap continue to operate as ‘‘Russell
                                                   FOR FURTHER INFORMATION CONTACT:                          investment advisory services, or similar             Investments.’’ Because FRC is no longer
                                                   Scott Ness of the Department, telephone                   services by Russell Investments to any               affiliated with Russell Investments by
                                                   (202) 693–8561. (This is not a toll-free                  such Affiliated Fund; and (2) an                     reason of the Sale, the Applicants have
                                                   number.)                                                  Affiliated Fund for the provision of                 requested a new exemption that would
                                                   Russell Investment Management, LLC                        Secondary Services by Russell                        apply the relief provided under PTE
                                                   (RIM), Russell Investments Capital, LLC                   Investments to any such Affiliated                   2015–17 to the recently sold entities
                                                   (RICap), and Their Affiliates                             Fund.                                                comprising Russell Investments.
                                                   (Collectively, Russell Investments or the                 Summary of Facts and                                 Russell Investments
                                                   Applicants) Located in Seattle, WA                        Representations 14                                      2. Russell Investments is a global asset
                                                   [Application No. D–11916]                                 Background                                           management firm providing investment
                                                   Proposed Exemption                                           1. On October 6, 2015, the Department             management products and services to
                                                                                                             granted Prohibited Transaction                       individuals and institutions in 47
                                                     The Department is considering                                                                                different countries. As of June 30, 2016,
                                                                                                             Exemption 2015–17 (PTE 2015–17) to
                                                   granting an exemption under the                                                                                Russell Investments had approximately
                                                                                                             Frank Russell Company and Affiliates
                                                   authority of 29 U.S.C. 1108 (section                      (collectively, FRC). PTE 2015–17                     $244 billion in assets under
                                                   408(a) of the Act) and 26 U.S.C. (section                 provides conditional relief to FRC for               management. Among the companies
                                                   4975(c)(2) of the Code), in accordance                    the receipt of a fee from an Affiliated              currently comprising Russell
                                                   with the procedures set forth in 29 CFR                   Fund, in connection with a Client Plan’s             Investments are RIM and RICap.
                                                   part 2570, subpart B (76 FR 46637,                                                                                RIM is an investment adviser
                                                                                                             direct investment in shares of an
                                                   66644, October 27, 2011). Effective                                                                            registered with the U.S. Securities and
                                                                                                             Affiliated Fund, or a Client Plan’s
                                                   December 31, 1978, section 102 of                         indirect investment in shares of an                  Exchange Commission. RIM provides
                                                   Reorganization Plan No. 4 of 1978, 5                      Affiliated Fund, through investment in               investment advisers and broker/dealers
                                                   U.S.C. App. 1 (1996), transferred the                     a pooled investment vehicle (the                     with model strategies designed to
                                                   authority of the Secretary of the                         Collective Fund), where FRC: (a) Serves              optimize asset allocation strategies
                                                   Treasury to issue exemptions of the type                  as a fiduciary with respect to such                  based on various investment principles,
                                                   requested to the Secretary of Labor.                      Client Plan, and (b) provides to such                and may also provide marketing
                                                   Therefore, this notice of proposed                        Affiliated Fund, investment advisory                 assistance and subject matter expertise
                                                   exemption is issued solely by the                         services or similar services, and                    to these investment advisers. RIM may
                                                   Department. If the exemption is granted,                  Secondary Services, if certain                       also provide objective setting, asset
                                                   the restrictions of sections 406(a)(1)(D)                 conditions are met.                                  allocation, fund and manager selection
                                                   and 406(b) of the Act and the sanctions                      PTE 2015–17 defines FRC as ‘‘Frank                services directly to pension plans or
                                                   resulting from the application of section                 Russell Company and any affiliate                    other institutional clients. As of
                                                   4975 of the Code, by reason of sections                   thereof,’’ and ‘‘affiliate’’ as ‘‘[a]ny              December 31, 2016, RIM had total assets
                                                   4975(c)(1)(D) through (F) of the Code,13                  person directly or indirectly, through               under management of over $40.4 billion,
                                                   shall not apply, effective June 1, 2016,                  one or more intermediaries, controlling,             all of which was discretionary.
                                                   to:                                                       controlled by, or under common control                  RICap is also an investment adviser
                                                     (a) The receipt of a fee by Russell                     with the person.’’ While PTE 2015–17                 registered with the U.S. Securities and
                                                   Investments, from an open-end                             was nominally granted to ‘‘Frank                     Exchange Commission. RICap provides
                                                   investment company or open-end                            Russell Company and Affiliates,’’ the                general investment advisory services
                                                   investment companies (Affiliated                          primary intended beneficiaries of the                and acts as an adviser to separate
                                                   Fund(s)), in connection with the direct                   relief provided were two entities                    account clients as well as several
                                                   investment in shares of any such                          operating as ‘‘Russell Investments’’—                private, private equity and hedge funds
                                                   Affiliated Fund, by an employee benefit                   Russell Investment Management, LLC                   offered to select institutional investors.
                                                   plan or by employee benefit plans                         (RIM) and Russell Investments Capital,               RICap advises private investment funds
                                                   (Client Plan(s)), where Russell                           LLC (RICap), each of which qualified as              which involve privately negotiated
                                                   Investments serves as a fiduciary with                    an ‘‘affiliate’’ of FRC within the meaning           equity and equity-related investments.
                                                   respect to such Client Plan, and where                    of PTE 2015–17. However, as of June 1,               As of December 31, 2016, RICap had
                                                   Russell Investments: (1) Provides                         2016, RIM and RICap no longer were                   approximately $8.3 billion in assets
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                                                   investment advisory services, or similar                  under the control of, or common control              under management, all of which was
                                                   services to any such Affiliated Fund;                     with, FRC and, thus, no longer are                   discretionary.
                                                   and (2) provides to any such Affiliated                   ‘‘affiliates’’ of FRC within the meaning             Investment Products and Services
                                                                                                             of PTE 2015–17.
                                                     13 For purposes of this proposed exemption
                                                                                                                                                                    3. The Applicants represent that, in
                                                   reference to specific provisions of Title I of the Act,     14 The Summary of Facts and Representations is     the United States, certain affiliates of
                                                   unless otherwise specified, should be read to refer       based on the Applicants’ representations, unless     Russell Investments make investments
                                                   as well to the corresponding provisions of the Code.      indicated otherwise.                                 in mutual funds and collective


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                           36225

                                                   investment funds available to Client                    is a fiduciary with respect to a plan to                 With respect to section 406(b)(3) of
                                                   Plans, and develop investment products                  the extent that the person: (i) Exercises             the Act, Russell Investments, as
                                                   and services for such Client Plans. The                 any discretionary authority or control                investment manager or investment
                                                   investment products include open-end                    respecting management of the Plan or                  adviser to a Client Plan, may receive
                                                   investment companies registered under                   any authority or control respecting                   investment advisory fees and
                                                   the Investment Company Act of 1940, as                  management or disposition of its assets,              ‘‘secondary services’’ fees from one or
                                                   amended, for which RIM serves as an                     or (ii) renders investment advice for a               more collective funds or mutual funds
                                                   investment adviser or sub-adviser (i.e.,                fee or other compensation, direct or                  in connection with a Client Plan’s
                                                   the Affiliated Funds). Russell                          indirect, with respect to any moneys or               investment in such funds, subject to the
                                                   Investments may also serve as dividend                  other property of a plan or has any                   terms and conditions of this proposed
                                                   disbursing agent, shareholder servicing                 authority or responsibility to do so.                 exemption, if granted. Such payments
                                                   agent, transfer agent, fund accountant,                    Russell Investments may currently                  would implicate section 406(b)(3) of
                                                   or provider of some other Secondary                     serve, and may in the future serve, as                ERISA.
                                                   Services, including brokerage services,                 investment adviser, investment
                                                   to an Affiliated Fund.                                                                                        Prohibited Transaction Exemption 77–4
                                                                                                           manager, trustee, or other fiduciary with             (PTE 77–4)
                                                      The Applicants state that other                      respect to Client Plans. Accordingly,
                                                   investment products provided by                         pursuant to section 3(21)(A)(i) and (ii) of              7. The Applicants represent that all of
                                                   Russell Investments include bank-                       the Act, Russell Investments may                      the Russell Investments entities to
                                                   maintained common or collective trust                   currently be, or may in the future be, a              which the exemption would apply are
                                                   funds and other similar pooled funds                    fiduciary with respect to Client Plans                currently part of the same controlled
                                                   including, potentially, insurance                       which engage in the proposed                          group. In this regard, Russell
                                                   company pooled separate accounts                        transactions. As a fiduciary, Russell                 Investments maintains that—if and to
                                                   (Collective Funds) managed by Russell                   Investments may currently be, or may in               the extent that Russell Investments
                                                   Investments Trust Company, a RIM                        the future be a party in interest with                invests Client Plan assets (directly or
                                                   affiliate.                                              respect to Client Plans which engage in               indirectly via Collective Funds) in
                                                      4. The Applicants represent that the                 the transactions described in Section I               Affiliated Funds, such Russell
                                                   services provided by Russell                            of this proposed exemption.                           Investments entities can rely on the
                                                   Investments may include various types                                                                         relief provided pursuant to PTE 77–4
                                                                                                              Section 406(a)(l)(D) of the Act
                                                   of investment advisory and/or                                                                                 (42 FR 18732 (April 8, 1977)), except as
                                                                                                           prohibits a fiduciary with respect to a
                                                   investment management services which                                                                          described below. PTE 77–4 exempts
                                                                                                           plan from causing such plan to engage
                                                   may be rendered at the individual Plan                                                                        certain purchases and sales by a plan of
                                                                                                           in a transaction, if such fiduciary knows
                                                   level, the Collective Fund level, or the                                                                      shares of a registered, open-ended
                                                   Affiliated Fund level. According to the                 or should know, that such transaction
                                                                                                           constitutes a transfer to, or use by or for           investment company, where the
                                                   Applicants, Plan investment advisory,
                                                                                                           the benefit of, a party in interest, of any           investment adviser of such fund: (a) Is
                                                   investment management and similar
                                                                                                           assets of such plan. Where Russell                    a plan fiduciary or affiliated with a plan
                                                   services include money manager
                                                                                                           Investments, as investment adviser or                 fiduciary; and (b) is not an employer of
                                                   selection, cash management, individual
                                                                                                           manager to a Client Plan, invests plan                employees covered by the plan.
                                                   security selection and trading strategies,
                                                   as well as various asset allocation                     assets, directly or indirectly, in shares of             8. Russell Investments represents that
                                                   strategies involving asset class selection              a collective fund or a mutual fund that               the requested relief is essentially the
                                                   and rebalancing, including target date                  is managed or advised by Russell                      same as that afforded by PTE 77–4, with
                                                   fund ‘‘glidepath’’ strategies. Such                     Investments, the investment purchase                  the exception of the use of a ‘‘negative
                                                   services include Russell Investments’                   transaction violates section 406(a)(1)(D)             consent’’ procedure, as discussed below
                                                   Adaptive Retirement Accounts asset                      of the Act.                                           for: (a) Approving Fee Increases with
                                                   allocation service, under which RIM                        Under section 406(b) of the Act, a                 respect to Affiliated Funds, and (b)
                                                   provides individualized asset allocation                fiduciary with respect to a plan may not:             approving in advance the addition of
                                                   advice to defined contribution plan                     (a) Deal with the assets of a plan in his             Affiliated Funds (not previously
                                                   participants.                                           own interest or for his own account, (b)              authorized) as investments ‘‘inside’’ a
                                                      5. The Applicants also represent that                act, in his individual or in any other                Russell Investments Collective Fund,
                                                   a Russell Investments entity acting as a                capacity in any transaction involving a               subject to notice and a right to terminate
                                                   fiduciary may cause a Client Plan to                    plan on behalf of a party (or represent               the original approval at the time a new
                                                   invest directly in one or more Affiliated               a party) whose interests are adverse to               Affiliated Fund is proposed to be added.
                                                   Funds. It is also possible, the Applicants              the interests of such plan or the interests              Russell Investments maintains that
                                                   state, that a Russell Investments entity                of its participants or beneficiaries, or (c)          obtaining advance written approval
                                                   acting as a fiduciary to plans                          receive any consideration for his own                 from a Second Fiduciary can be
                                                   participating in a Collective Fund may                  personal account from any party dealing               difficult, particularly in the case of a
                                                   cause a Client Plan to invest indirectly                with a plan in connection with a                      Collective Fund, where a Second
                                                   in Affiliated Funds by directing the                    transaction involving the assets of such              Fiduciary from every investing Client
                                                   investment of a Collective Fund in                      plan.                                                 Plan must provide written approval
                                                   which a Client Plan participates into                      Russell Investments, as investment                 before fees payable to Russell
                                                   one or more Affiliated Funds.                           manager or investment adviser to a                    Investments by an Affiliated Fund in
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                                                                                                           Client Plan, may invest plan assets, or               which such Client Plans invest
                                                   Prohibited Transactions                                 cause the investment of plan assets,                  indirectly via a Collective Fund can be
                                                     6. Section 3(14)(A) and (B) of the Act                directly or indirectly, in shares of a                increased, or before a new investment in
                                                   defines the term ‘‘party in interest’’ to               collective fund or mutual fund, from                  an Affiliated Fund that was not
                                                   include, respectively, any fiduciary of a               which Russell Investments receives                    previously authorized can be made.
                                                   plan and any person providing services                  compensation. Such added                              Affirmative consent may also be
                                                   to a plan. Section 3(21)(A) of the Act                  compensation would violate section                    difficult to obtain in a timely fashion in
                                                   provides, in relevant part, that a person               406(b)(1) and (b)(2) of the Act.                      the context of smaller Client Plans.


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                                                   36226                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   Negative Consent for Fee Increases                      Increase, including but not limited to an             addition of an Affiliated Fund into the
                                                      9. Russell Investments requests a                    increase in the fee for Secondary                     portfolios of Russell Investments’
                                                   negative consent procedure for: (a) Any                 Services.                                             Collective Funds.
                                                   increase in the rate of a fee previously                Negative Consent for New Affiliated                   Electronic Disclosures
                                                   authorized in writing by the Second                     Funds                                                   12. Russell Investments may utilize
                                                   Fiduciary of an affected Client Plan; (b)                  10. The exemption would further                    electronic mail with hyperlinks to
                                                   any increase in any fee that results from               permit a Russell Investments Collective               documents required to be disclosed by
                                                   an addition of services for which a fee                 Fund holding the assets of a Client Plan,             this proposed exemption. Russell
                                                   is charged; (c) any increase in any fee                 such as a Target Date Fund, to purchase               Investments will ‘‘actively’’ satisfy the
                                                   that results from a decrease in the                     shares of an Affiliated Fund not                      various disclosure requirements of this
                                                   number or kind of services performed                    previously affirmatively authorized by                proposed exemption by transmitting
                                                   for such fee over an existing rate for                  the Second Fiduciary of such Client                   emails, rather than relying on ‘‘passive’’
                                                   such service previously authorized by                   Plan, provided: (a) The organizational                postings on a Web site. Russell
                                                   the Second Fiduciary; and (d) any                       document of such Collective Fund                      Investments represents that this method
                                                   increase in a fee that results from                     expressly provides for the addition of                of disclosure will be consistent with the
                                                   Russell Investments changing from one                   one or more Affiliated Funds to the                   Department’s regulations at 29 CFR
                                                   of the fee methods to another of the fee                portfolio of such Collective Fund and                 2520.104b–l. Russell Investments
                                                   methods.                                                such organizational document is                       represents that Client Plans which do
                                                      To obtain negative consent                           disclosed initially to such Client Plan;              not authorize electronic delivery will
                                                   authorization with regard to a Fee                      and (b) Russell Investments satisfies the             receive in advance hard copies of the
                                                   Increase, Russell Investments must                      requirements of the negative consent                  documents required to be disclosed, and
                                                   provide certain disclosures, in writing,                procedure for obtaining the approval of               hard copies of documents will also be
                                                   thirty (30) days in advance of any                      the Second Fiduciary for each Client                  available on request.
                                                   proposed Fee Increase, including but                    Plan invested in such Collective Fund at
                                                   not limited to any Fee Increase for                                                                           Termination
                                                                                                           the time Russell Investments proposes
                                                   Secondary Services, as such services are                to add an Affiliated Fund to such                        13. A Client Plan invested directly in
                                                   described below. Such disclosures                       Collective Fund’s portfolio.                          shares of an Affiliated Fund or invested
                                                   would be delivered by regular mail or                      Specifically, the Second Fiduciary of              indirectly through a Collective Fund
                                                   personal delivery (or if the Second                     each Client Plan invested in such                     will have an opportunity to terminate
                                                   Fiduciary consents by electronic                        Collective Fund would receive in                      and withdraw from investment in such
                                                   means), and are to be accompanied by                    advance: (a) A notice of Russell                      Affiliated Fund, and, as applicable, to
                                                   a Termination Form and instructions on                  Investments’ intent to add an Affiliated              terminate and withdraw from
                                                   the use of such form.                                   Fund to the portfolio of such Collective              investment in such Collective Fund in
                                                      The exemption would permit Russell                   Fund; and (b) certain disclosures in                  the event of a Fee Increase and in the
                                                   Investments to implement a Fee                          writing, including a summary                          event of the addition of an Affiliated
                                                   Increase, without waiting until the                     prospectus of such Affiliated Fund.                   Fund to the portfolio of a Collective
                                                   expiration of the thirty (30) day period,                  The disclosures are delivered by                   Fund. In this regard, a Second Fiduciary
                                                   provided that implementation of such                    regular mail or personal delivery (or if              will be provided with a Termination
                                                   Fee Increase does not start before                      the Second Fiduciary consents, by                     Form at least annually and may
                                                   Russell Investments delivers to each                    electronic means), and are accompanied                terminate the authorization to invest
                                                   affected Client Plan the Notice of Intent               by a Termination Form and instructions                directly in shares of an Affiliated Fund
                                                   of Change of Fees, as described in                      on the use of such form.                              or indirectly through a Collective Fund,
                                                   Section II(k), and provided further that                   Failure of the Second Fiduciary to                 at will, without penalty to a Client Plan.
                                                   any affected Client Plan receives a cash                return the Termination Form or to                     Termination of the authorization by the
                                                   credit equal to its pro rata share of such              provide some other written notification               Second Fiduciary of a Client Plan
                                                   Fee Increase, for the period from the                   of the intent to terminate within a                   investing directly in shares of an
                                                   date of the implementation of such Fee                  certain period of time will be deemed to              Affiliated Fund will result in such
                                                   Increase to the earlier of the date of the              be approval of the investment by such                 Client Plan withdrawing from such
                                                   termination of the investment or the                    Collective Fund in such Affiliated Fund.              Affiliated Fund. Termination of the
                                                   thirtieth (30th) day after the date Russell                Authorizations for fee increases and               authorization by the Second Fiduciary
                                                   Investments delivers the Notice of                      new affiliated funds may also be made                 of a Client Plan investing indirectly in
                                                   Change of Fee to the Second Fiduciary                   affirmatively, in writing, by a Second                shares of an Affiliated Fund through a
                                                   of each affected Client Plan. In addition,              Fiduciary, in a manner that is otherwise              Collective Fund will result in such
                                                   Russell Investments must pay to each                    consistent with the requirements of the               Client Plan withdrawing from such
                                                   affected Client Plan interest on such                   exemption.                                            Collective Fund.
                                                   cash credit. An independent auditor, on                    11. Russell Investments represents                    Generally, Russell Investments will
                                                   at least an annual basis, will verify the               that because the Second Fiduciary of                  process timely requests for withdrawal
                                                   proper crediting of the pro rata share of               each Client Plan will receive all of the              from an Affiliated Fund within one (1)
                                                   each such Fee Increase and interest. An                 necessary disclosures and will have an                business day. Withdrawal from a
                                                   audit report shall be completed by such                 opportunity to terminate the investment               Collective Fund will generally be
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                                                   auditor no later than six (6) months after              in any Affiliated Fund without penalty,               processed within the same time frame,
                                                   the period to which it relates.                         such Client Plan and its participants                 subject to rules designed to ensure
                                                      Failure of the Second Fiduciary to                   and beneficiaries are adequately                      orderly withdrawals and fairness for the
                                                   return the Termination Form or to                       protected. Further, Russell Investments               withdrawing Client Plans and non-
                                                   provide some other written notification                 states that to the extent it finds it                 withdrawing Client Plans, but in no
                                                   of the intent to terminate within a                     desirable to create an Affiliated Fund                event shall such withdrawal be
                                                   certain period of time will be deemed to                with new investment goals, the negative               implemented by Russell Investments
                                                   be approval of the proposed Fee                         consent procedure will facilitate the                 more than five (5) business days after


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                           36227

                                                   receipt by Russell Investments of a                     for Secondary Services is discussed                   Client Plans; (ii) charge fees which are
                                                   Termination Form or other written                       above.                                                reasonable in relation to the total
                                                   notification of intent to terminate                        Russell Investments affiliates may                 services it provides to Client Plans; and
                                                   investment in such Collective Fund                      receive commissions for the                           (iii) not make misleading statements to
                                                   from the Second Fiduciary acting on                     performance of brokerage services for                 Client Plans regarding recommended
                                                   behalf of the withdrawing Client Plan.                  the mutual funds. Under the conditions                investments, fees, material conflicts of
                                                   Russell Investments will pay interest on                of this proposed exemption, if an                     interest, and any other matters relevant
                                                   the settlement amount for the period                    Affiliated Fund places brokerage                      to a Client Plan’s investment decisions.
                                                   from receipt by Russell Investments of                  transactions with Russell Investments,
                                                                                                           Russell Investments will provide the                  Summary
                                                   a Termination Form or other written
                                                   notification of intent to terminate from                Second Fiduciary of each such Client                    19. Given the conditions described
                                                   the Second Fiduciary, acting on behalf                  Plan, at least annually, the disclosure               below, the Department has tentatively
                                                   of the withdrawing Client Plan, to the                  described in Section II(o) of this                    determined that the relief sought by the
                                                   date Russell Investments pays the                       proposed exemption.                                   Applicants satisfies the statutory
                                                   settlement amount, plus interest                        Statutory Findings                                    requirements for an exemption under
                                                   thereon.                                                                                                      section 408(a) of the Act.
                                                                                                              16. According to the Applicants, the
                                                      From the date a Client Plan terminates               use of a Termination Form will provide                Proposed Exemption Operative
                                                   its investment in an Affiliated Fund,                   both a record and a regular reminder to               Language
                                                   such Client Plan will not be subject to                 the Second Fiduciary of a Client Plan of                The Department is considering
                                                   pay a pro rata share of the fees received               such plan’s rights vis-à-vis investing in            granting an exemption under the
                                                   by Russell Investments from such                        Affiliated Funds, either directly or                  authority of section 408(a) of the Act (or
                                                   Affiliated Fund. Likewise, from the date                indirectly through a Collective Fund.                 ERISA) and in accordance with the
                                                   a Client Plan terminates its investment                 Further the Applicants state that with                procedures set forth in 29 CFR part
                                                   in a Collective Fund, such Client Plan                  very narrow exceptions relating to the                2570, subpart B (76 FR 46637, 66644,
                                                   will not be subject to pay a pro rata                   negative consent authorizations                       October 27, 2011).
                                                   share of the fees received by Russell                   described above, all of the conditions of
                                                   Investments from such Collective Fund,                  PTE 77–4, as amended and/or restated,                 Section I. Transactions
                                                   nor will such Client Plan be subject to                 must be met.                                            If the proposed exemption is granted,
                                                   changes in the portfolio of such                           17. The Applicants represent that the              the restrictions of sections 406(a)(1)(D)
                                                   Collective Fund, including a pro rata                   proposed exemption is in the interest of              and 406(b) of the Act, and the sanctions
                                                   share of any Affiliated Fund-Level                      Client Plans, because it will allow                   resulting from the application of section
                                                   Advisory Fee arising from the                           Russell Investments to manage or advise               4975 of the Code, by reason of sections
                                                   investment by such Collective Fund in                   with respect to the assets of such Client             4975(c)(1)(D) through (F) of the Code,
                                                   an Affiliated Fund.                                     Plans invested in shares of an Affiliated             shall not apply, effective June 1, 2016,
                                                   Receipt of Fees Pursuant to the Fee                     Fund, either directly or indirectly                   to:
                                                   Methods                                                 through a Collective Fund, in an                        (a) The receipt of a fee by Russell
                                                                                                           efficient or timely manner and on terms               Investments, from an Affiliated Fund, in
                                                     14. The exemption, if granted,                        that might not otherwise be available                 connection with the direct investment
                                                   includes conditions which detail                        without exemptive relief.                             in shares of any such Affiliated Fund,
                                                   various methods which ensure that                          18. The Applicants represent that the              by a Client Plan, where Russell
                                                   Russell Investments complies with the                   proposed exemption is protective of                   Investments serves as a fiduciary with
                                                   prohibition against a Client Plan paying                Client Plans because: (a) Prior to any                respect to such Client Plan, and where
                                                   double investment management fees,                      investment by a Client Plan directly or               Russell Investments:
                                                   investment advisory, and similar fees                   indirectly in shares of an Affiliated                   (1) Provides investment advisory
                                                   for the assets of Client Plans invested                 Fund, such investment must be                         services, or similar services to any such
                                                   directly in shares of an Affiliated Fund                authorized by the Second Fiduciary of                 Affiliated Fund; and
                                                   or invested indirectly in shares of an                  such Client Plan, based on full and                     (2) Provides to any such Affiliated
                                                   Affiliated Fund though a Collective                     detailed written disclosure concerning                Fund other services (Secondary
                                                   Fund. These methods are described                       such Affiliated Fund; (b) Fee Increases               Service(s)), as defined below in Section
                                                   below in Section II(a)(l)–(3).                          and Affiliated Fund additions to the                  IV(i); and
                                                                                                           portfolios of Collective Funds will be                  (b) In connection with the indirect
                                                   Receipt of Fees for Secondary Services
                                                                                                           monitored and approved by the Second                  investment by a Client Plan in shares of
                                                      15. Russell Investments may also                     Fiduciary, who will have the ability to               an Affiliated Fund through investment
                                                   receive various fees and expenses for                   avoid the effect of such Fee Increases of             in a pooled investment vehicle or
                                                   ‘‘Secondary Services,’’ which are                       Affiliated Fund additions; (c) Client                 pooled investment vehicles (Collective
                                                   services other than investment                          Plan investments in shares of an                      Fund(s)), where Russell Investments
                                                   management services, investment                         Affiliated Fund, either directly or                   serves as a fiduciary with respect to
                                                   advisory services, and any similar                      indirectly, will be subject to the ongoing            such Client Plan, the receipt of fees by
                                                   service, which are provided by Russell                  ability of the Second Fiduciary of such               Russell Investments from:
                                                   Investments to an Affiliated Fund.                      Client Plan to terminate such                           (1) An Affiliated Fund for the
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                                                   These services include accounting,                      investment, without penalty to such                   provision of investment advisory
                                                   administrative and brokerage services. It               Client Plan; (d) Russell Investments will             services, or similar services by Russell
                                                   is represented that all fees for Secondary              provide to such Second Fiduciary, in                  Investments to any such Affiliated
                                                   Services received by Russell                            addition to certain initial disclosures,              Fund; and
                                                   Investments at this time are paid to                    ongoing disclosures regarding such                      (2) An Affiliated Fund for the
                                                   Russell Investments directly by the                     Affiliated Funds; and (e) Russell                     provision of Secondary Services by
                                                   Affiliated Funds. The negative consent                  Investments, in its fiduciary capacity,               Russell Investments to any such
                                                   procedure applicable for a Fee Increase                 will: (i) Act in the Best Interest of the             Affiliated Fund; provided that the


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                                                   36228                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   conditions, as set forth below, were                    not invested in shares of an Affiliated               total assets of such Client Plan invested
                                                   satisfied, as of June 1, 2016, the effective            Fund:                                                 in such Collective Fund, from which a
                                                   date of this exemption, and continue to                    (i) Does not pay to Russell                        credit has been subtracted from such
                                                   be satisfied thereafter.                                Investments for the entire period of such             Collective Fund-Level Management Fee,
                                                                                                           investment any Plan-Level Management                  where the amount subtracted represents
                                                   Section II. Specific Conditions                         Fee with respect to any assets of such                such Client Plan’s pro rata share of any
                                                      (a)(1) Each Client Plan which is                     Client Plan invested in such Collective               Affiliated Fund-Level Advisory Fee paid
                                                   invested directly in shares of an                       Fund.                                                 to Russell Investments by such
                                                   Affiliated Fund either:                                    The requirements of this Section                   Affiliated Fund; and does not pay to
                                                      (i) Does not pay to Russell                          II(a)(2)(i) do not preclude the payment               Russell Investments for the entire period
                                                   Investments, for the entire period of                   of a Collective Fund-Level Management                 of such investment any Plan-Level
                                                   such investment, any investment                         Fee by such Collective Fund to Russell                Management Fee with respect to any
                                                   management fee, any investment                          Investments, based on the assets of such              assets of such Client Plan invested in
                                                   advisory fee, or any similar fee at the                 Client Plan invested in such Collective               such Collective Fund; or
                                                   plan-level (the Plan-Level Management                   Fund; or                                                 (iii) Pays to Russell Investments a
                                                   Fee), as defined below in Section IV(m),                   (ii) Does not pay to Russell                       Plan-Level Management Fee, in
                                                   with respect to any of the assets of such               Investments for the entire period of such             accordance with Section II(a)(2)(ii)
                                                   Client Plan which are invested directly                 investment any Collective Fund-Level                  above, based on the total assets of such
                                                   in shares of such Affiliated Fund; or                   Management Fee with respect to any                    Client Plan under management by
                                                      (ii) Pays to Russell Investments a                   assets of such Client Plan invested in                Russell Investments at the plan-level,
                                                   Plan-Level Management Fee, based on                     such Collective Fund.                                 from which a credit has been subtracted
                                                   total assets of such Client Plan under                     The requirements of this Section                   from such Plan-Level Management Fee,
                                                   management by Russell Investments at                    II(a)(2)(ii) do not preclude the payment              where the amount subtracted represents
                                                   the plan-level, from which a credit has                 of a Plan-Level Management Fee by                     such Client Plan’s pro rata share of any
                                                   been subtracted from such Plan-Level                    such Client Plan to Russell Investments,              Affiliated Fund-Level Advisory Fee paid
                                                   Management Fee, where the amount                        based on total assets of such Client Plan             to Russell Investments by such
                                                   subtracted represents such Client Plan’s                under management by Russell                           Affiliated Fund; and does not pay
                                                   pro rata share of any investment                        Investments at the plan-level; or                     directly to Russell Investments or
                                                   advisory fee and any similar fee (the                      (iii) Such Client Plan pays to Russell             indirectly to Russell Investments
                                                   Affiliated Fund Level Advisory Fee), as                 Investments a Plan-Level Management                   through the Collective Fund for the
                                                   defined below in Section IV(o), paid by                 Fee, based on total assets of such Client             entire period of such investment any
                                                   such Affiliated Fund to Russell                         Plan under management by Russell                      Collective Fund-Level Management Fee
                                                   Investments.                                            Investments at the plan-level, from                   with respect to any assets of such Client
                                                      If, during any fee period, in the case               which a credit has been subtracted from               Plan invested in such Collective Fund;
                                                   of a Client Plan invested directly in                   such Plan-Level Management Fee (the                   or
                                                   shares of an Affiliated Fund, such Client               ‘‘Net’’ Plan-Level Management Fee),                      (iv) Pays to Russell Investments a
                                                   Plan has prepaid its Plan Level                         where the amount subtracted represents                ‘‘Net’’ Plan-Level Management Fee, in
                                                   Management Fee, and such Client Plan                    such Client Plan’s pro rata share of any              accordance with Section II(a)(2)(iii)
                                                   purchases shares of an Affiliated Fund                  Collective Fund-Level Management Fee                  above, from which a further credit has
                                                   directly, the requirement of this Section               paid by such Collective Fund to Russell               been subtracted from such ‘‘Net’’ Plan-
                                                   II(a)(1)(ii) shall be deemed met with                   Investments.                                          Level Management Fee, where the
                                                   respect to such prepaid Plan-Level                         The requirements of this Section                   amount of such further credit which is
                                                   Management Fee, if, by a method                         II(a)(2)(iii) do not preclude the payment             subtracted represents such Client Plan’s
                                                   reasonably designed to accomplish the                   of a Collective Fund-Level Management                 pro rata share of any Affiliated Fund-
                                                   same, the amount of the prepaid Plan-                   Fee by such Collective Fund to Russell                Level Advisory Fee paid to Russell
                                                   Level Management Fee that constitutes                   Investments, based on the assets of such              Investments by such Affiliated Fund.
                                                   the fee with respect to the assets of such              Client Plan invested in such Collective                  Provided that the conditions of this
                                                   Client Plan invested directly in shares of              Fund.                                                 proposed exemption are satisfied, the
                                                   an Affiliated Fund:                                        (3) Each Client Plan invested in a                 requirements of Section II(a)(1)(i)–(ii)
                                                      (A) Is anticipated and subtracted from               Collective Fund, the assets of which are              and Section II(a)(3)(i)–(iv) do not
                                                   the prepaid Plan-Level Management Fee                   invested in shares of an Affiliated Fund:             preclude the payment of an Affiliated
                                                   at the time of the payment of such fee;                    (i) Does not pay to Russell                        Fund-Level Advisory Fee by an
                                                   or                                                      Investments for the entire period of such             Affiliated Fund to Russell Investments
                                                      (B) Is returned to such Client Plan, no              investment any Plan-Level Management                  under the terms of an investment
                                                   later than during the immediately                       Fee (including any ‘‘Net’’ Plan-Level                 advisory agreement adopted in
                                                   following fee period; or                                Management Fee, as described, above,                  accordance with section 15 of the
                                                      (C) Is offset against the Plan-Level                 in Section II(a)(2)(ii)), and does not pay            Investment Company Act of 1940 (the
                                                   Management Fee for the immediately                      directly to Russell Investments or                    Investment Company Act). Further, the
                                                   following fee period or for the fee period              indirectly to Russell Investments                     requirements of Section II(a)(1)(i)–(ii)
                                                   immediately following thereafter.                       through the Collective Fund for the                   and Section II(a)(3)(i)–(iv) do not
                                                      For purposes of Section II(a)(1)(ii), a              entire period of such investment any                  preclude the payment of a fee by an
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                                                   Plan-Level Management Fee shall be                      Collective Fund-Level Management Fee                  Affiliated Fund to Russell Investments
                                                   deemed to be prepaid for any fee period,                with respect to the assets of such Client             for the provision by Russell Investments
                                                   if the amount of such Plan-Level                        Plan which are invested in such                       of Secondary Services to such Affiliated
                                                   Management Fee is calculated as of a                    Affiliated Fund; or                                   Fund under the terms of a duly adopted
                                                   date not later than the first day of such                  (ii) Pays indirectly to Russell                    agreement between Russell Investments
                                                   period.                                                 Investments a Collective Fund-Level                   and such Affiliated Fund.
                                                      (2) Each Client Plan invested in a                   Management Fee, in accordance with                       For the purpose of Section II(a)(1)(ii)
                                                   Collective Fund the assets of which are                 Section II(a)(2)(i) above, based on the               and Section II(a)(3)(ii)–(iv), in


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                                                                                 Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                         36229

                                                   calculating a Client Plan’s pro rata share               of shares in such Affiliated Fund and at             Fund by such Client Plan to be
                                                   of an Affiliated Fund-Level Advisory                     the time of any sale of such shares.                 appropriate for such Client Plan;
                                                   Fee, Russell Investments must use an                        (e) The combined total of all fees                   (iv) A statement describing whether
                                                   amount representing the ‘‘gross’’                        received by Russell Investments is not               there are any limitations applicable to
                                                   advisory fee paid to Russell Investments                 in excess of reasonable compensation                 Russell Investments with respect to
                                                   by such Affiliated Fund. For purposes of                 within the meaning of section 408(b)(2)              which assets of such Client Plan may be
                                                   this paragraph, the ‘‘gross’’ advisory fee               of the Act, for services provided:                   invested directly in shares of such
                                                   is the amount paid to Russell                               (1) By Russell Investments to each                Affiliated Fund, and if so, the nature of
                                                   Investments by such Affiliated Fund,                     Client Plan;                                         such limitations; and
                                                   including the amount paid by such                           (2) By Russell Investments to each                   (v) Upon the request of the Second
                                                   Affiliated Fund to sub-advisers.                         Collective Fund in which a Client Plan               Fiduciary acting on behalf of such
                                                      (b) The purchase price paid and the                   invests;                                             Client Plan, a copy of the Notice of
                                                   sales price received by a Client Plan for                   (3) By Russell Investments to each                Proposed Exemption (the Notice), a
                                                   shares in an Affiliated Fund purchased                   Affiliated Fund in which a Client Plan               copy of the final exemption, if granted,
                                                   or sold directly, and the purchase price                 invests directly in shares of such                   and any other reasonably available
                                                   paid and the sales price received by a                   Affiliated Fund; and                                 information regarding the transactions
                                                   Client Plan for shares in an Affiliated                     (4) By Russell Investments to each                which are the subject of this proposed
                                                   Fund purchased or sold indirectly                        Affiliated Fund in which a Client Plan               exemption.
                                                   through a Collective Fund, is the net                    invests indirectly in shares of such                    (2) In the case of a Client Plan whose
                                                   asset value per share (NAV), as defined                  Affiliated Fund through a Collective                 assets are proposed to be invested in a
                                                   below in Section IV(f), at the time of the               Fund.                                                Collective Fund after such Collective
                                                   transaction, and is the same purchase                       (f) Russell Investments does not                  Fund has begun investing in shares of
                                                   price that would have been paid and the                  receive any fees payable pursuant to                 an Affiliated Fund, a Second Fiduciary,
                                                   same sales price that would have been                    Rule 12b–1 under the Investment                      acting on behalf of such Client Plan,
                                                   received for such shares by any other                    Company Act in connection with the                   receives, in writing, in advance of any
                                                   shareholder of the same class of shares                  transactions covered by this proposed                investment by such Client Plan in such
                                                   in such Affiliated Fund at that time.15                  exemption;                                           Collective Fund, a full and detailed
                                                      (c) Russell Investments, including any                   (g) No Client Plan is an employee                 disclosure via first class mail or via
                                                   officer and any director of Russell                      benefit plan sponsored or maintained by              personal delivery (or, if the Second
                                                   Investments, does not purchase any                       Russell Investments.                                 Fiduciary consents to such means of
                                                   shares of an Affiliated Fund from, and                      (h)(1) In the case of a Client Plan               delivery, through electronic email, in
                                                   does not sell any shares of an Affiliated                investing directly in shares of an                   accordance with Section II(q), as set
                                                   Fund to, any Client Plan which invests                   Affiliated Fund, a second fiduciary (the             forth below) of information concerning
                                                   directly in such Affiliated Fund, and                    Second Fiduciary), as defined below in               such Collective Fund and information
                                                   Russell Investments, including any                       Section IV(h), acting on behalf of such              concerning each such Affiliated Fund in
                                                   officer and director of Russell                          Client Plan, receives, in writing, in                which such Collective Fund is invested,
                                                   Investments, does not purchase any                       advance of any investment by such                    including but not limited to the items
                                                   shares of any Affiliated Fund from, and                  Client Plan directly in shares of such               listed, below:
                                                   does not sell any shares of an Affiliated                                                                        (i) A current summary prospectus
                                                                                                            Affiliated Fund, a full and detailed
                                                   Fund to, any Collective Fund in which                                                                         issued by each such Affiliated Fund;
                                                                                                            disclosure via first class mail or via
                                                   a Client Plan invests indirectly in shares                                                                       (ii) A statement describing the fees,
                                                                                                            personal delivery of (or, if the Second
                                                   of such Affiliated Fund.                                                                                      including the nature and extent of any
                                                                                                            Fiduciary consents to such means of
                                                      (d) No sales commissions, no                                                                               differential between the rates of such
                                                                                                            delivery, through electronic email, in
                                                   redemption fees, and no other similar                                                                         fees for:
                                                                                                            accordance with Section II(q), as set                   (A) Investment advisory and similar
                                                   fees are paid in connection with any                     forth below) information concerning                  services to be paid to Russell
                                                   purchase and in connection with any                      such Affiliated Fund, including but not              Investments by each Affiliated Fund;
                                                   sale by a Client Plan directly in shares                 limited to the items listed below:                      (B) Secondary Services to be paid to
                                                   of an Affiliated Fund, and no sales                         (i) A current summary prospectus                  Russell Investments by each such
                                                   commissions, no redemption fees, and                     issued by each such Affiliated Fund;                 Affiliated Fund; and
                                                   no other similar fees are paid by a                         (ii) A statement describing the fees,                (C) All other fees to be charged by
                                                   Collective Fund in connection with any                   including the nature and extent of any               Russell Investments to such Client Plan,
                                                   purchase, and in connection with any                     differential between the rates of such               to such Collective Fund, and to each
                                                   sale, of shares in an Affiliated Fund by                 fees for:                                            such Affiliated Fund and all other fees
                                                   a Client Plan indirectly through such                       (A) Investment advisory and similar               to be paid to Russell Investments by
                                                   Collective Fund. However, this Section                   services to be paid to Russell                       such Client Plan, by such Collective
                                                   II(d) does not prohibit the payment of a                 Investments by each Affiliated Fund;                 Fund, and by each such Affiliated Fund;
                                                   redemption fee, if:                                         (B) Secondary Services to be paid to                 (iii) The reasons why Russell
                                                      (1) Such redemption fee is paid only                  Russell Investments by each such                     Investments may consider investment
                                                   to an Affiliated Fund; and                               Affiliated Fund; and                                 by such Client Plan in shares of each
                                                      (2) The existence of such redemption                     (C) All other fees to be charged by               such Affiliated Fund indirectly through
                                                   fee is disclosed in the summary
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                                                                                                            Russell Investments to such Client Plan              such Collective Fund to be appropriate
                                                   prospectus for such Affiliated Fund in                   and to each such Affiliated Fund and all             for such Client Plan;
                                                   effect both at the time of any purchase                  other fees to be paid to Russell                        (iv) A statement describing whether
                                                                                                            Investments by each such Client Plan                 there are any limitations applicable to
                                                      15 The selection of a particular class of shares of
                                                                                                            and by each such Affiliated Fund;                    Russell Investments with respect to
                                                   an Affiliated Fund as an investment for a Client
                                                   Plan indirectly through a Collective Fund is a
                                                                                                               (iii) The reasons why Russell                     which assets of such Client Plan may be
                                                   fiduciary decision that must be made in accordance       Investments may consider investment                  invested indirectly in shares of each
                                                   with the provisions of section 404(a) of the Act.        directly in shares of such Affiliated                such Affiliated Fund through such


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                                                   36230                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   Collective Fund, and if so, the nature of                  (iii) In a Collective Fund which is not            via personal delivery (or if such Second
                                                   such limitations;                                       yet invested in shares of an Affiliated               Fiduciary consents to such means of
                                                      (v) Upon the request of the Second                   Fund but whose organizational                         delivery through electronic email, in
                                                   Fiduciary, acting on behalf of such                     document expressly provides for the                   accordance with Section II(q), as set
                                                   Client Plan, a copy of the Notice, a copy               addition of one or more Affiliated Funds              forth below). However, if a Termination
                                                   of the final exemption, if granted, and                 to the portfolio of such Collective Fund;             Form has been provided to such Second
                                                   any other reasonably available                          and                                                   Fiduciary pursuant to Section II(k) or
                                                   information regarding the transactions                     (2) Authorizes in writing, as                      pursuant to Section II(l) below, then a
                                                   which are the subject of this proposed                  applicable:                                           Termination Form need not be provided
                                                   exemption; and                                             (i) The Affiliated Fund-Level                      pursuant to this Section II(j), until at
                                                      (vi) A copy of the organizational                    Advisory Fee received by Russell                      least six (6) months, but no more than
                                                   documents of such Collective Fund                       Investments for investment advisory                   twelve (12) months, have elapsed, since
                                                   which expressly provide for the                         services and similar services provided                the prior Termination Form was
                                                   addition of one or more Affiliated Funds                by Russell Investments to such                        provided;
                                                   to the portfolio of such Collective Fund.               Affiliated Fund;                                         (3) The instructions for the
                                                      (3) In the case of a Client Plan whose                  (ii) The fee received by Russell                   Termination Form must include the
                                                   assets are proposed to be invested in a                 Investments for Secondary Services                    following statements:
                                                   Collective Fund before such Collective                  provided by Russell Investments to such                  (i) Any authorization, described above
                                                   Fund has begun investing in shares of                   Affiliated Fund;                                      in Section II(i), and any authorization
                                                   any Affiliated Fund, a Second                              (iii) The Collective Fund-Level
                                                                                                                                                                 made pursuant to negative consent, as
                                                   Fiduciary, acting on behalf of such                     Management Fee received by Russell
                                                                                                                                                                 described below in Section II(k) or in
                                                   Client Plan, receives, in writing, in                   Investments for investment
                                                                                                                                                                 Section II(l), is terminable at will by a
                                                   advance of any investment by such                       management, investment advisory, and
                                                                                                                                                                 Second Fiduciary, acting on behalf of a
                                                   Client Plan in such Collective Fund, a                  similar services provided by Russell
                                                                                                                                                                 Client Plan, without penalty to such
                                                   full and detailed disclosure via first                  Investments to such Collective Fund in
                                                                                                                                                                 Client Plan, upon receipt by Russell
                                                   class mail or via personal delivery (or,                which such Client Plan invests;
                                                                                                              (iv) The Plan-Level Management Fee                 Investments via first class mail or via
                                                   if the Second Fiduciary consents to such                                                                      personal delivery or via electronic email
                                                   means of delivery through electronic                    received by Russell Investments for
                                                                                                           investment management and similar                     of the Termination Form, or some other
                                                   email, in accordance with Section II(q),                                                                      written notification of the intent of such
                                                   as set forth below) of information,                     services provided by Russell
                                                                                                           Investments to such Client Plan at the                Second Fiduciary to terminate such
                                                   concerning such Collective Fund,                                                                              authorization;
                                                   including but not limited to, the items                 plan-level; and
                                                                                                              (v) The selection by Russell                          (ii) Within thirty (30) days from the
                                                   listed below:                                                                                                 date the Termination Form is sent to
                                                      (i) A statement describing the fees,                 Investments of the applicable fee
                                                                                                           method, as described above in Section                 such Second Fiduciary by Russell
                                                   including the nature and extent of any                                                                        Investments, the failure by such Second
                                                   differential between the rates of such                  II(a)(1)–(3).
                                                                                                              All authorizations made by a Second                Fiduciary to return such Termination
                                                   fees for all fees to be charged by Russell                                                                    Form or the failure by such Second
                                                   Investments to such Client Plan and to                  Fiduciary pursuant to this Section II(i)
                                                                                                           must be consistent with the                           Fiduciary to provide some other written
                                                   such Collective Fund and all other fees                                                                       notification of the Client Plan’s intent to
                                                   to be paid to Russell Investments by                    responsibilities, obligations, and duties
                                                                                                           imposed on fiduciaries by Part 4 of Title             terminate any authorization, described
                                                   such Client Plan, and by such Collective                                                                      in Section II(i), or intent to terminate
                                                   Fund;                                                   I of the Act;
                                                                                                              (j)(1) Any authorization, described                any authorization made pursuant to
                                                      (ii) Upon the request of the Second
                                                                                                           above in Section II(i), and any                       negative consent, as described below in
                                                   Fiduciary, acting on behalf of such
                                                                                                           authorization made pursuant to negative               Section II(k) or in Section II(l), will be
                                                   Client Plan, a copy of the Notice, a copy
                                                                                                           consent, as described below in Section                deemed to be an approval by such
                                                   of the final exemption, if granted, and
                                                                                                           II(k) and in Section II(l), made by a                 Second Fiduciary;
                                                   any other reasonably available
                                                                                                           Second Fiduciary, acting on behalf of a                  (4) In the event that a Second
                                                   information regarding the transactions
                                                                                                           Client Plan, shall be terminable at will              Fiduciary, acting on behalf of a Client
                                                   which are the subject of this proposed
                                                                                                           by such Second Fiduciary, without                     Plan, at any time returns a Termination
                                                   exemption; and
                                                      (iii) A copy of the organizational                   penalty to such Client Plan (including                Form or returns some other written
                                                   documents of such Collective Fund                       any fee or charge related to such                     notification of intent to terminate any
                                                   which expressly provide for the                         penalty), upon receipt by Russell                     authorization, as described above in
                                                   addition of one or more Affiliated Funds                Investments via first class mail, via                 Section II(i), or intent to terminate any
                                                   to the portfolio of such Collective Fund.               personal delivery, or via electronic                  authorization made pursuant to negative
                                                      (i) On the basis of the information,                 email of a written notification of the                consent, as described below in Section
                                                   described above in Section II(h), a                     intent of such Second Fiduciary to                    II(k) or in Section II(l);
                                                   Second Fiduciary, acting on behalf of a                 terminate any such authorization;                        (i)(A) In the case of a Client Plan
                                                   Client Plan:                                               (2) A form (the Termination Form),                 which invests directly in shares of an
                                                      (1) Authorizes in writing the                        expressly providing an election to                    Affiliated Fund, the termination will be
                                                   investment of the assets of such Client                 terminate any authorization, described                implemented by the withdrawal of all
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                                                   Plan, as applicable:                                    above in Section II(i), or to terminate               investments made by such Client Plan
                                                      (i) Directly in shares of an Affiliated              any authorization made pursuant to                    in the affected Affiliated Fund, and such
                                                   Fund;                                                   negative consent, as described below in               withdrawal will be effected by Russell
                                                      (ii) Indirectly in shares of an                      Section II(k) and in Section II(l), with              Investments within one (1) business day
                                                   Affiliated Fund through a Collective                    instructions on the use of such                       of the date that Russell Investments
                                                   Fund where such Collective Fund has                     Termination Form, must be provided to                 receives such Termination Form or
                                                   already invested in shares of an                        such Second Fiduciary at least annually,              receives from the Second Fiduciary,
                                                   Affiliated Fund; and                                    either in writing via first class mail or             acting on behalf of such Client Plan,


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                              36231

                                                   some other written notification of intent               (Fee Increase(s)), as defined below in                   (iii) Russell Investments pays to each
                                                   to terminate any such authorization;                    Section IV(l), must provide in writing                affected Client Plan the cash credit, as
                                                      (B) From the date a Second Fiduciary,                via first class mail or via personal                  described above in Section II(k)(2)(ii),
                                                   acting on behalf of a Client Plan that                  delivery (or if the Second Fiduciary                  with interest thereon, no later than five
                                                   invests directly in shares of an Affiliated             consents to such means of delivery                    (5) business days following the earlier
                                                   Fund, returns a Termination Form or                     through electronic email, in accordance               of:
                                                   returns some other written notification                 with Section II(q), as set forth below), a               (A) The date such affected Client
                                                   of intent to terminate such Client Plan’s               notice of change in fees (the Notice of               Plan, pursuant to Section II(j),
                                                   investment in such Affiliated Fund,                     Change in Fees) (which may take the                   terminates any authorization, as
                                                   such Client Plan will not be subject to                 form of a proxy statement, letter, or                 described above in Section II(i), or
                                                   pay a pro rata share of any Affiliated                  similar communication which is                        terminates, any negative consent
                                                   Fund-Level Advisory Fee and will not                    separate from the summary prospectus                  authorization, as described in Section
                                                   be subject to pay any fees for Secondary                of such Affiliated Fund) and which                    II(k) or in Section II(l); or
                                                   Services paid to Russell Investments by                 explains the nature and the amount of                    (B) The 30th day after the day that
                                                   such Affiliated Fund, or any other fees                 such Fee Increase to the Second                       Russell Investments delivers to the
                                                   or charges;                                             Fiduciary of each affected Client Plan.               Second Fiduciary of each affected Client
                                                      (ii)(A) In the case of a Client Plan                 Such Notice of Change in Fees shall be                Plan, the Notice of Change of Fees,
                                                   which invests in a Collective Fund, the                 accompanied by a Termination Form                     described in Section II(k)(1),
                                                   termination will be implemented by the                  and by instructions on the use of such                accompanied by the Termination Form
                                                   withdrawal of such Client Plan from all                 Termination Form, as described above                  and instructions on the use of such
                                                   investments in such affected Collective,                in Section II(j)(3);                                  Termination Form, as described above
                                                   and such withdrawal will be                                (2) Subject to the crediting, interest-            in Section II(j)(3);
                                                   implemented by Russell Investments                                                                               (iv) Interest on the credit in cash is
                                                                                                           payback, and other requirements below,
                                                   within such time as may be necessary                                                                          calculated at the prevailing Federal
                                                                                                           for each Client Plan affected by a Fee
                                                   for withdrawal in an orderly manner                                                                           funds rate plus two percent (2%) for the
                                                                                                           Increase, Russell Investments may
                                                   that is equitable to the affected                                                                             period from the day Russell Investments
                                                                                                           implement such Fee Increase without
                                                   withdrawing Client Plan and to all non-                                                                       first implements the Fee Increase to the
                                                                                                           waiting for the expiration of the 30-day
                                                   withdrawing Client Plans, but in no                                                                           date Russell Investments pays such
                                                                                                           period, described above in Section
                                                   event shall such withdrawal be                                                                                credit in cash, with interest thereon, to
                                                                                                           II(k)(1), provided Russell Investments
                                                   implemented by Russell Investments                                                                            each affected Client Plan;
                                                                                                           does not begin implementation of such                    (v) An independent accounting firm
                                                   more than five business (5) days after
                                                                                                           Fee Increase before the first day of the              (the Auditor) at least annually audits the
                                                   the day Russell Investments receives
                                                                                                           30-day period, described above in                     payments made by Russell Investments
                                                   from the Second Fiduciary, acting on
                                                                                                           Section II(k)(1), and provided further                to each affected Client Plan, audits the
                                                   behalf of such withdrawing Client Plan,
                                                                                                           that the following conditions are                     amount of each cash credit, plus the
                                                   a Termination Form or receives some
                                                                                                           satisfied:                                            interest thereon, paid to each affected
                                                   other written notification of intent to
                                                   terminate the investment of such Client                    (i) Russell Investments delivers, in the           Client Plan, and verifies that each
                                                   Plan in such Collective Fund, unless                    manner described in Section II(k)(1), to              affected Client Plan received the correct
                                                   such withdrawal is otherwise prohibited                 the Second Fiduciary for each affected                amount of cash credit and the correct
                                                   by a governmental entity with                           Client Plan, the Notice of Change of                  amount of interest thereon;
                                                   jurisdiction over the Collective Fund, or               Fees, as described in Section II(k)(1),                  (vi) Such Auditor issues an audit
                                                   the Second Fiduciary fails to instruct                  accompanied by the Termination Form                   report of its findings no later than six (6)
                                                   Russell Investments as to where to                      and by instructions on the use of such                months after the period to which such
                                                   reinvest or send the withdrawal                         Termination Form, as described above                  audit report relates, and provides a copy
                                                   proceeds; and                                           in Section II(j)(3);                                  of such audit report to the Second
                                                      (B) From the date Russell Investments                   (ii) Each affected Client Plan receives            Fiduciary of each affected Client Plan;
                                                   receives from a Second Fiduciary, acting                from Russell Investments a credit in                  and
                                                   on behalf of a Client Plan, that invests                cash equal to each such Client Plan’s                    (3) Within thirty (30) days from the
                                                   in a Collective Fund, a Termination                     pro rata share of such Fee Increase to be             date Russell Investments sends to the
                                                   Form or receives some other written                     received by Russell Investments for the               Second Fiduciary of each affected Client
                                                   notification of intent to terminate such                period from the date of the                           Plan, the Notice of Change of Fees and
                                                   Client Plan’s investment in such                        implementation of such Fee Increase to                the Termination Form, the failure by
                                                   Collective Fund, such Client Plan will                  the earlier of:                                       such Second Fiduciary to return such
                                                   not be subject to pay a pro rata share of                  (A) The date when an affected Client               Termination Form and the failure by
                                                   any fees arising from the investment by                 Plan, pursuant to Section II(j),                      such Second Fiduciary to provide some
                                                   such Client Plan in such Collective                     terminates any authorization, as                      other written notification of the Client
                                                   Fund, including any Collective Fund-                    described above in Section II(i), or                  Plan’s intent to terminate the
                                                   Level Management Fee, nor will such                     terminates any negative consent                       authorization, described in Section II(i),
                                                   Client Plan be subject to any other                     authorization, as described in Section                or to terminate the negative consent
                                                   charges to the portfolio of such                        II(k) or in Section II(l); or                         authorization, as described in Section
                                                   Collective Fund, including a pro rata                      (B) The 30th day after the day that                II(k) or in Section II(l), will be deemed
mstockstill on DSK30JT082PROD with NOTICES2




                                                   share of any Affiliated Fund-Level                      Russell Investments delivers to the                   to be an approval by such Second
                                                   Advisory Fee and any fee for Secondary                  Second Fiduciary of each affected Client              Fiduciary of such Fee Increase.
                                                   Services arising from the investment by                 Plan the Notice of Change of Fees,                       (l) Effective upon the date that the
                                                   such Collective Fund in an Affiliated                   described in Section II(k)(1),                        final exemption is granted, in the case
                                                   Fund.                                                   accompanied by the Termination Form                   of (a) a Client Plan which has received
                                                      (k)(1) Russell Investments, at least                 and by the instructions on the use of                 the disclosures detailed in Section
                                                   thirty (30) days in advance of the                      such Termination Form, as described                   II(h)(2)(i), II(h)(2)(ii)(A), II(h)(2)(ii)(B),
                                                   implementation of each fee increase                     above in Section II(j)(3).                            II(h)(2)(ii)(C), II(h)(2)(iii), II(h)(2)(iv),


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                                                   36232                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   II(h)(2)(v), and II(h)(2)(vi), and which                Collective Fund shall be accompanied                     (1) The total, expressed in dollars, of
                                                   has authorized the investment by such                   by the information described in Section               brokerage commissions that are paid to
                                                   Client Plan in a Collective Fund in                     II(h)(2)(i), II(h)(2)(ii)(A), II(h)(2)(ii)(B),        Russell Investments by each such
                                                   accordance with Section II(i)(1)(ii)                    II(h)(2)(ii)(C), II(h)(2)(iii), II(h)(2)(iv),         Affiliated Fund;
                                                   above, and (b) a Client Plan which has                  and II(2)(v) with respect to each such                   (2) The total, expressed in dollars, of
                                                   received the disclosures detailed in                    New Affiliated Fund proposed to be                    brokerage commissions that are paid by
                                                   Section II(h)(3)(i), II(h)(3)(ii), and                  added to the portfolio of such Collective             each such Affiliated Fund to brokerage
                                                   II(h)(3)(iii), and which has authorized                 Fund; and                                             firms unrelated to Russell Investments;
                                                   investment by such Client Plan in a                        (C) A Termination Form and                            (3) The average brokerage
                                                   Collective Fund, in accordance with                     instructions on the use of such                       commissions per share, expressed as
                                                   Section II(i)(1)(iii) above, the                        Termination Form, as described in                     cents per share, paid to Russell
                                                   authorization pursuant to negative                      Section II(j)(3); and                                 Investments I by each such Affiliated
                                                   consent in accordance with this Section                    (2) Within thirty (30) days from the               Fund; and
                                                   II(l), applies to:                                      date Russell Investments sends to the                    (4) The average brokerage
                                                      (1) The purchase, as an addition to the              Second Fiduciary of each affected Client              commissions per share, expressed as
                                                   portfolio of such Collective Fund, of                   Plan, the information described above in              cents per share, paid by each such
                                                   shares of an Affiliated Fund (a New                     Section II(l)(1)(ii), the failure by such             Affiliated Fund to brokerage firms
                                                   Affiliated Fund) where such New                         Second Fiduciary to return the                        unrelated to Russell Investments;
                                                   Affiliated Fund has not been previously                 Termination Form or to provide some                      (p)(1) Russell Investments provides to
                                                   authorized pursuant to Section                          other written notification of the Client              the Second Fiduciary of each Client
                                                   II(i)(1)(ii), or, as applicable, Section                Plan’s intent to terminate the                        Plan invested directly in shares of an
                                                   II(i)(1)(iii), and such Collective Fund                 authorization described in Section                    Affiliated Fund with the disclosures, as
                                                   may commence investing in such New                      II(i)(1)(ii), or, as appropriate, to                  set forth below, and at the times set
                                                   Affiliated Fund without further written                 terminate the authorization, described                forth below in Section II(p)(1)(i),
                                                   authorization from the Second                           in Section II(i)(1)(iii), or to terminate             II(p)(1)(ii), II(p)(1)(iii), II(p)(1)(iv), and
                                                   Fiduciary of each Client Plan invested                  any authorization, pursuant to negative               II(p)(1)(v), either in writing via first
                                                   in such Collective Fund, provided that:                 consent, as described in this Section                 class mail or via personal delivery (or if
                                                      (i) The organizational documents of                                                                        the Second Fiduciary consents to such
                                                                                                           II(l), will be deemed to be an approval
                                                   such Collective Fund expressly provide                                                                        means of delivery, through electronic
                                                                                                           by such Second Fiduciary of the
                                                   for the addition of one or more                                                                               email, in accordance with Section II(q)
                                                                                                           addition of a New Affiliated Fund to the
                                                   Affiliated Funds to the portfolio of such                                                                     as set forth below):
                                                                                                           portfolio of such Collective Fund in
                                                   Collective Fund, and such documents                                                                              (i) Annually, with a copy of the
                                                                                                           which such Client Plan invests, and will
                                                   were disclosed in writing via first class                                                                     current summary prospectus for each
                                                                                                           result in the continuation of the
                                                   mail or via personal delivery (or, if the                                                                     Affiliated Fund in which such Client
                                                   Second Fiduciary consents to such                       authorization of Russell Investments to
                                                                                                                                                                 Plan invests directly in shares of such
                                                   means of delivery, through electronic                   engage in the transactions which are the
                                                                                                                                                                 Affiliated Fund;
                                                   email, in accordance with Section II(q))                subject of this proposed exemption with                  (ii) Upon the request of such Second
                                                   to the Second Fiduciary of each such                    respect to such New Affiliated Fund.                  Fiduciary, a copy of the statement of
                                                   Client Plan invested in such Collective                    (m) Russell Investments is subject to              additional information for each
                                                   Fund, in advance of any investment by                   the requirement to provide within a                   Affiliated Fund in which such Client
                                                   such Client Plan in such Collective                     reasonable period of time any                         Plan invests directly in shares of such
                                                   Fund;                                                   reasonably available information                      Affiliated Fund which contains a
                                                      (ii) At least thirty (30) days in advance            regarding the covered transactions that               description of all fees paid by such
                                                   of the purchase by a Client Plan of                     the Second Fiduciary of such Client                   Affiliated Fund to Russell Investments;
                                                   shares of such New Affiliated Fund                      Plan requests Russell Investments to                     (iii) With regard to any Fee Increase
                                                   indirectly through a Collective Fund,                   provide.                                              received by Russell Investments
                                                   Russell Investments provides, either in                    (n) All dealings between a Client Plan             pursuant to Section II(k)(2), a copy of
                                                   writing via first class or via personal                 and an Affiliated Fund, including all                 the audit report referred to in Section
                                                   delivery (or if the Second Fiduciary                    such dealings when such Client Plan is                II(k)(2)(v) within sixty (60) days of the
                                                   consents to such means of delivery                      invested directly in shares of such                   completion of such audit report;
                                                   through electronic email, in accordance                 Affiliated Fund and when such Client                     (iv) Oral or written responses to the
                                                   with Section II(q)) to the Second                       Plan is invested indirectly in such                   inquiries posed by the Second Fiduciary
                                                   Fiduciary of each Client Plan having an                 shares of such Affiliated Fund through                of such Client Plan, as such inquiries
                                                   interest in such Collective Fund, full                  a Collective Fund, are on a basis no less             arise; and
                                                   and detailed disclosures about such                     favorable to such Client Plan, than                      (v) Annually, with a Termination
                                                   New Affiliated Fund, including but not                  dealings between such Affiliated Fund                 form, as described in Section II(j)(1),
                                                   limited to:                                             and other shareholders of the same class              and instructions on the use of such
                                                      (A) A notice of Russell Investments’                 of shares in such Affiliated Fund.                    form, as described in Section II(j)(3),
                                                   intent to add a New Affiliated Fund to                     (o) In the event a Client Plan invests             except that if a Termination Form has
                                                   the portfolio of such Collective Fund,                  directly in shares of an Affiliated Fund,             been provided to such Second
                                                   where such notice may take the form of                  and, as applicable, in the event a Client             Fiduciary, pursuant to Section II(k) or
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                                                   a proxy statement, letter, or similar                   Plan invests indirectly in shares of an               pursuant to Section II(l), then a
                                                   communication that is separate from the                 Affiliated Fund through a Collective                  Termination Form need not be provided
                                                   summary prospectus of such New                          Fund, if such Affiliated Fund places                  again pursuant to this Section II(p)(1)(v)
                                                   Affiliated Fund to the Second Fiduciary                 brokerage transactions with Russell                   until at least six (6) months but no more
                                                   of each affected Client Plan;                           Investments, Russell Investments will                 than twelve (12) months have elapsed
                                                      (B) Such notice of Russell                           provide to the Second Fiduciary of each               since a Termination Form was provided.
                                                   Investments’ intent to add a New                        such Client Plan, so invested, at least                  (2) Russell Investments provides to
                                                   Affiliated Fund to the portfolio of such                annually a statement specifying:                      the Second Fiduciary of each Client


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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                                       36233

                                                   Plan invested in a Collective Fund, with                Fiduciary, pursuant to Section II(k) or               Section IV(q)) of the Client Plan, at the
                                                   the disclosures, as set forth below, and                pursuant to Section II(l), then a                     time of the Transaction; (2) all
                                                   at the times set forth below in Section                 Termination Form need not be provided                 compensation received by Russell
                                                   II(p)(2)(i), II(p)(2)(ii), II(p)(2)(iii),               again pursuant to this Section                        Investments in connection with the
                                                   II(p)(2)(iv), II(p)(2)(v), II(p)(2)(vi),                II(p)(2)(viii) until at least six (6) months          transaction in relation to the total
                                                   II(p)(2)(vii), and II(p)(2)(viii), either in            but no more than twelve (12) months                   services the fiduciary provides to the
                                                   writing via first class mail or via                     have elapsed since a Termination Form                 Client Plan does not exceed reasonable
                                                   personal delivery (or if the Second                     was provided.                                         compensation within the meaning of
                                                   Fiduciary consents to such means of                        (q) Any disclosure required herein to              section 408(b)(2) of the Act; and (3)
                                                   delivery, through electronic email, in                  be made by Russell Investments to a                   Russell Investments’ statements about
                                                   accordance with Section II(q), as set                   Second Fiduciary may be delivered by                  recommended investments, fees,
                                                   forth below:                                            electronic email containing direct                    material conflicts of interest,16 and any
                                                      (i) Annually, with a copy of the                     hyperlinks to the location of each such               other matters relevant to a Client Plan’s
                                                   current summary prospectus for each                     document required to be disclosed,                    investment decisions are not materially
                                                   Affiliated Fund in which such Client                    which are maintained on a Web site by                 misleading at the time they are made.
                                                   Plan invests indirectly in shares of such               Russell Investments, provided:                           For purposes of this section, Russell
                                                   Affiliated Fund through each such                          (1) Russell Investments obtains from               Investments acts in the ‘‘Best Interest’’
                                                   Collective Fund;                                        such Second Fiduciary prior consent in                of the Client Plan when Russell
                                                      (ii) Upon the request of such Second                 writing to the receipt by such Second                 Investments acts with the care, skill,
                                                   Fiduciary, a copy of the statement of                   Fiduciary of such disclosure via                      prudence, and diligence under the
                                                   additional information for each                         electronic email;                                     circumstances then prevailing that a
                                                   Affiliated Fund in which such Client                       (2) Such Second Fiduciary has                      prudent person would exercise based on
                                                   Plan invests indirectly in shares of such               provided to Russell Investments a valid               the investment objectives, risk
                                                   Affiliated Fund through each such                       email address; and                                    tolerance, financial circumstances, and
                                                   Collective Fund which contains a                           (3) The delivery of such electronic                needs of the plan or IRA, without regard
                                                   description of all fees paid by such                    email to such Second Fiduciary is                     to the financial or other interests of the
                                                   Affiliated Fund to Russell Investments;                 provided by Russell Investments in a                  fiduciary, any affiliate or other party.
                                                      (iii) Annually, with a statement of the              manner consistent with the relevant
                                                   Collective Fund-Level Management Fee                    provisions of the Department’s                        Section III. General Conditions
                                                   for investment management, investment                   regulations at 29 CFR 2520.104b–1(c)                     (a) Russell Investments maintains for
                                                   advisory or similar services paid to                    (substituting the word ‘‘Russell                      a period of six (6) years the records
                                                   Russell Investments by each such                        Investments’’ for the word                            necessary to enable the persons,
                                                   Collective Fund, regardless of whether                  ‘‘administrator’’ as set forth therein, and           described below in Section III(b), to
                                                   such Client Plan invests in shares of an                substituting the phrase ‘‘Second                      determine whether the conditions of
                                                   Affiliated Fund through such Collective                 Fiduciary’’ for the phrase ‘‘the                      this proposed exemption have been met,
                                                   Fund;                                                   participant, beneficiary or other                     except that:
                                                      (iv) A copy of the annual financial                  individual’’ as set forth therein).                      (1) A prohibited transaction will not
                                                   statement of each such Collective Fund                     (r) The authorizations described in                be considered to have occurred, if solely
                                                   in which such Client Plan invests,                      Sections II(k) or II(l) may be made                   because of circumstances beyond the
                                                   regardless of whether such Client Plan                  affirmatively, in writing, by a Second                control of Russell Investments, the
                                                   invests in shares of an Affiliated Fund                 Fiduciary, in a manner that is otherwise              records are lost or destroyed prior to the
                                                   through such Collective Fund, within                    consistent with the requirements of                   end of the six-year period; and
                                                   sixty (60) days of the completion of such               those sections.                                          (2) No party in interest other than
                                                   financial statement;                                       (s) All of the conditions of PTE 77–               Russell Investments shall be subject to
                                                      (v) With regard to any Fee Increase                  4, as amended and/or restated, are met.               the civil penalty that may be assessed
                                                   received by Russell Investments                         Notwithstanding this, if PTE 77–4 is                  under section 502(i) of the Act or to the
                                                   pursuant to Section II(k)(2), a copy of                 amended and/or restated, the                          taxes imposed by section 4975(a) and (b)
                                                   the audit report referred to in Section                 requirements of paragraph (e) therein                 of the Code, if the records are not
                                                   II(k)(2)(v) within sixty (60) days of the               will be deemed to be met with respect                 maintained or are not available for
                                                   completion of such audit report;                        to authorizations described in Section                examination, as required below by
                                                      (vi) Oral or written responses to the                II(l) above, but only to the extent the               Section III(b).
                                                   inquiries posed by the Second Fiduciary                 requirements of Section II(l) are met.                   (b)(1) Except as provided in Section
                                                   of such Client Plan as such inquiries                   Similarly, if PTE 77–4 is amended and/                III(b)(2) and notwithstanding any
                                                   arise;                                                  or restated, the requirements of                      provisions of section 504(a)(2) of the
                                                      (vii) For each Client Plan invested                  paragraph (f) therein will be deemed to               Act, the records referred to in Section
                                                   indirectly in shares of an Affiliated                   be met with respect to authorizations                 III(a) are unconditionally available at
                                                   Fund through a Collective Fund, a                       described in Section II(k) above, if the              their customary location for
                                                   statement of the approximate percentage                 requirements of Section II(k) are met.                examination during normal business
                                                   (which may be in the form of a range)                      (t) Standards of Impartial Conduct. If             hours by:
                                                   on an annual basis of the assets of such                Russell Investments is a fiduciary                       (i) Any duly authorized employee or
                                                   Collective Fund that was invested in                    within the meaning of section                         representative of the Department or the
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                                                   Affiliated Funds during the applicable                  3(21)(A)(i) or (ii) of the Act, or section               16 A ‘‘material conflict of interest’’ exists when a
                                                   year; and                                               4975(e)(3)(A) or (B) of the Code, with                fiduciary has a financial interest that could affect
                                                      (viii) Annually, with a Termination                  respect to the assets of a Client Plan                the exercise of its best judgment as a fiduciary in
                                                   Form, as described in Section II(j)(1),                 involved in the transaction, Russell                  rendering advice to a Client Plan. For this purpose,
                                                   and instructions on the use of such                     Investments must comply with the                      the failure of Russell Investments to disclose a
                                                                                                                                                                 material conflict of interest relevant to the services
                                                   form, as described in Section II(j)(3),                 following conditions with respect to the              it is providing to a Client Plan, or other actions it
                                                   except that if a Termination Form has                   transaction: (1) Russell Investments acts             is taking in relation to a Client Plan’s investment
                                                   been provided to such Second                            in the Best Interest (as defined below, in            decisions, is deemed to be a misleading statement.



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                                                   36234                        Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices

                                                   Internal Revenue Service, or the                        registered with the Securities and                       (ii) Any authorization in accordance
                                                   Securities & Exchange Commission;                       Exchange Commission under the                         with Section II(i), and any
                                                      (ii) Any fiduciary of a Client Plan                  Investment Company Act, as amended,                   authorization, pursuant to negative
                                                   invested directly in shares of an                       established and maintained by Russell                 consent, as described in Section II(k) or
                                                   Affiliated Fund, any fiduciary of a                     Investments now or in the future for                  in Section II(l); and
                                                   Client Plan who has the authority to                    which Russell Investments serves as an                   (iii) The choice of such Client Plan’s
                                                   acquire or to dispose of the interest in                investment adviser.                                   investment adviser, then Section
                                                   a Collective Fund in which a Client Plan                   (f) The term ‘‘net asset value per                 IV(h)(2) above shall not apply.
                                                   invests, any fiduciary of a Client Plan                 share’’ and the term ‘‘NAV’’ mean the                    (i) The term ‘‘Secondary Service(s)’’
                                                   invested indirectly in an Affiliated Fund               amount for purposes of pricing all                    means a service or services other than
                                                   through a Collective Fund where such                    purchases and sales of shares of an                   an investment management service,
                                                   fiduciary has the authority to acquire or               Affiliated Fund, calculated by dividing               investment advisory service, and any
                                                   to dispose of the interest in such                      the value of all securities, determined               similar service which is provided by
                                                   Collective Fund, and any duly                           by a method as set forth in the summary               Russell Investments to an Affiliated
                                                   authorized employee or representative                   prospectus for such Affiliated Fund and               Fund, including, but not limited to,
                                                   of such fiduciary; and                                  in the statement of additional                        custodial, accounting, administrative
                                                      (iii) Any participant or beneficiary of              information, and other assets belonging               services, and brokerage services. Russell
                                                   a Client Plan invested directly in shares               to such Affiliated Fund or portfolio of               Investments may also serve as a
                                                   of an Affiliated Fund or invested in a                  such Affiliated Fund, less the liabilities            dividend disbursing agent, shareholder
                                                   Collective Fund, and any participant or                 charged to each such portfolio or each                servicing agent, transfer agent, fund
                                                   beneficiary of a Client Plan invested                   such Affiliated Fund, by the number of                accountant, or provider of some other
                                                   indirectly in shares of an Affiliated                   outstanding shares.                                   Secondary Service, as defined in this
                                                   Fund through a Collective Fund, and                        (g) The term ‘‘relative’’ means a                  Section IV(i).
                                                   any representative of such participant or               relative as that term is defined in                      (j) The term ‘‘Collective Fund(s)’’
                                                   beneficiary; and                                        section 3(15) of the Act (or a member of              means a separate account of an
                                                      (2) None of the persons described in                 the family as that term is defined in                 insurance company, as defined in
                                                   Section III(b)(1)(ii) and (iii) shall be                section 4975(e)(6) of the Code), or a                 section 2510.3–101(h)(1)(iii) of the
                                                   authorized to examine trade secrets of                  brother, a sister, or a spouse of a brother           Department’s plan assets regulations,17
                                                   Russell Investments, or commercial or                   or a sister.                                          maintained by Russell Investments, and
                                                   financial information which is                             (h) The term ‘‘Second Fiduciary’’                  a bank-maintained common or
                                                   privileged or confidential.                             means the fiduciary of a Client Plan                  collective investment trust maintained
                                                                                                           who is independent of and unrelated to                by Russell Investments.
                                                   Section IV. Definitions                                                                                          (k) The term ‘‘business day’’ means
                                                                                                           Russell Investments. For purposes of
                                                      For purposes of this proposed                        this proposed exemption, the Second                   any day that:
                                                   exemption:                                                                                                       (1) Russell Investments is open for
                                                                                                           Fiduciary will not be deemed to be
                                                      (a) The term ‘‘Russell Investments’’                                                                       conducting all or substantially all of its
                                                                                                           independent of and unrelated to Russell
                                                   means RIM (f/k/a Russell Investment                                                                           business; and
                                                                                                           Investments if:
                                                   Management Company), RICap, and any                                                                              (2) The New York Stock Exchange (or
                                                                                                              (1) Such Second Fiduciary, directly or             any successor exchange) is open for
                                                   affiliate thereof, as defined below, in
                                                                                                           indirectly, through one or more                       trading.
                                                   Section IV(c).
                                                      (b) The term ‘‘Client Plan(s)’’ means a              intermediaries, controls, is controlled                  (l) The term ‘‘Fee Increase(s)’’
                                                   401(k) plan(s), an individual retirement                by, or is under common control with                   includes any increase by Russell
                                                   account(s), other tax-qualified plan(s),                Russell Investments;                                  Investments in a rate of a fee previously
                                                   and other plan(s) as defined in the Act                    (2) Such Second Fiduciary, or any                  authorized in writing by the Second
                                                   and Code, but does not include any                      officer, director, partner, employee, or              Fiduciary of each affected Client Plan
                                                   employee benefit plan sponsored or                      relative of such Second Fiduciary, is an              pursuant to Section II(i)(2)(i)–(iv) above,
                                                   maintained by Russell Investments, as                   officer, director, partner, or employee of            and in addition includes, but is not
                                                   defined above in Section IV(a).                         Russell Investments (or is a relative of              limited to:
                                                      (c) An ‘‘affiliate’’ of a person includes:           such person); or                                         (1) Any increase in any fee that results
                                                      (1) Any person directly or indirectly,                  (3) Such Second Fiduciary, directly or             from the addition of a service for which
                                                   through one or more intermediaries,                     indirectly, receives any compensation or              a fee is charged;
                                                   controlling, controlled by, or under                    other consideration for his or her                       (2) Any increase in any fee that results
                                                   common control with the person;                         personal account in connection with                   from a decrease in the number of
                                                      (2) Any officer, director, employee,                 any transaction described in this                     services and any increase in any fee that
                                                   relative, or partner in any such person;                proposed exemption. If an officer,                    results from a decrease in the kind of
                                                   and                                                     director, partner, or employee of Russell             service(s) performed by Russell
                                                      (3) Any corporation or partnership of                Investments (or relative of such person)              Investments for such fee over an
                                                   which such person is an officer,                        is a director of such Second Fiduciary,               existing rate of fee for each such service
                                                   director, partner, or employee.                         and if he or she abstains from                        previously authorized by the Second
                                                      (d) The term ‘‘control’’ means the                   participation in:                                     Fiduciary, in accordance with Section
                                                   power to exercise a controlling                            (i) The decision of a Client Plan to               II(i)(2)(i)–(iv) above; and
mstockstill on DSK30JT082PROD with NOTICES2




                                                   influence over the management or                        invest in and to remain invested in                      (3) Any increase in any fee that results
                                                   policies of a person other than an                      shares of an Affiliated Fund directly, the            from Russell Investments changing from
                                                   individual.                                             decision of a Client Plan to invest in                one of the fee methods, as described
                                                      (e) The term ‘‘Affiliated Fund(s)’’                  shares of an Affiliated Fund indirectly               above in Section II(a)(1)–(3), to using
                                                   means Russell Investment Company, a                     through a Collective Fund, and the                    another of the fee methods, as described
                                                   series of mutual funds managed by RIM,                  decision of a Client Plan to invest in a              above in Section II(a)(1)–(3).
                                                   and any other diversified open-end                      Collective Fund that may in the future
                                                   investment company or companies                         invest in shares of an Affiliated Fund;                 17 51   FR 41262 (November 13, 1986).



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                                                                                Federal Register / Vol. 82, No. 148 / Thursday, August 3, 2017 / Notices                                                 36235

                                                     (m) The term ‘‘Plan-Level                             to the financial or other interests of                408(a) of the Act and/or section
                                                   Management Fee’’ includes any                           Russell Investments, any affiliate or                 4975(c)(2) of the Code does not relieve
                                                   investment management fee, investment                   other party.                                          a fiduciary or other party in interest or
                                                   advisory fee, and any similar fee paid by                 Effective Date: If granted, this                    disqualified person from certain other
                                                   a Client Plan to Russell Investments for                proposed exemption will be effective as               provisions of the Act and/or the Code,
                                                   any investment management services,                     of June 1, 2016.                                      including any prohibited transaction
                                                   investment advisory services, and                                                                             provisions to which the exemption does
                                                   similar services provided by Russell                    Notice to Interested Persons
                                                                                                                                                                 not apply and the general fiduciary
                                                   Investments to such Client Plan at the                     Those persons who may be interested                responsibility provisions of section 404
                                                   plan-level. The term ‘‘Plan-Level                       in the publication in the Federal                     of the Act, which, among other things,
                                                   Management Fee’’ does not include a                     Register of the Notice include each                   require a fiduciary to discharge his
                                                   separate fee paid by a Client Plan to                   Client Plan invested directly in shares of            duties respecting the plan solely in the
                                                   Russell Investments for asset allocation                an Affiliated Fund, each Client Plan                  interest of the participants and
                                                   service(s) (Asset Allocation Service(s)),               invested indirectly in shares of an                   beneficiaries of the plan and in a
                                                   as defined below in Section IV(p),                      Affiliated Fund through a Collective                  prudent fashion in accordance with
                                                   provided by Russell Investments to such                 Fund, and each plan for which Russell                 section 404(a)(1)(b) of the Act; nor does
                                                   Client Plan at the plan-level.                          Investments provides discretionary                    it affect the requirement of section
                                                     (n) The term ‘‘Collective Fund-Level                  management services at the time the                   401(a) of the Code that the plan must
                                                   Management Fee’’ includes any                           proposed exemption is published in the                operate for the exclusive benefit of the
                                                   investment management fee, investment                   Federal Register.                                     employees of the employer maintaining
                                                   advisory fee, and any similar fee paid by                  It is represented that notification will           the plan and their beneficiaries;
                                                   a Collective Fund to Russell                            be provided to each of these interested                  (2) Before an exemption may be
                                                   Investments for any investment                          persons by first class mail, within                   granted under section 408(a) of the Act
                                                   management services, investment                         fifteen (15) calendar days of the date of
                                                   advisory services, and any similar                                                                            and/or section 4975(c)(2) of the Code,
                                                                                                           the publication of the Notice in the                  the Department must find that the
                                                   services provided by Russell                            Federal Register. Such mailing will
                                                   Investments to such Collective Fund at                                                                        exemption is administratively feasible,
                                                                                                           contain a copy of the Notice, as it                   in the interests of the plan and of its
                                                   the collective fund level.                              appears in the Federal Register on the
                                                     (o) The term ‘‘Affiliated Fund-Level                                                                        participants and beneficiaries, and
                                                                                                           date of publication, plus a copy of the               protective of the rights of participants
                                                   Advisory Fee’’ includes any investment                  Supplemental Statement, as required,
                                                   advisory fee and any similar fee paid by                                                                      and beneficiaries of the plan;
                                                                                                           pursuant to 29 CFR 2570.43(b)(2), which
                                                   an Affiliated Fund to Russell                           will advise such interested persons of                   (3) The proposed exemptions, if
                                                   Investments under the terms of an                       their right to comment and to request a               granted, will be supplemental to, and
                                                   investment advisory agreement adopted                   hearing. The Department must receive                  not in derogation of, any other
                                                   in accordance with section 15 of the                    all written comments and requests for a               provisions of the Act and/or the Code,
                                                   Investment Company Act.                                 hearing no later than forty-five (45) days            including statutory or administrative
                                                     (p) The term ‘‘Asset Allocation                       from the date of the publication of the               exemptions and transitional rules.
                                                   Service(s)’’ means a service or services                Notice in the Federal Register.                       Furthermore, the fact that a transaction
                                                   to a Client Plan relating to the selection                 All comments will be made available                is subject to an administrative or
                                                   of appropriate asset classes or target-                                                                       statutory exemption is not dispositive of
                                                                                                           to the public.
                                                   date ‘‘glidepath’’ and the allocation or                                                                      whether the transaction is in fact a
                                                                                                              Warning: Do not include any
                                                   reallocation (including rebalancing) of                                                                       prohibited transaction; and
                                                                                                           personally identifiable information
                                                   the assets of a Client Plan among the                                                                            (4) The proposed exemptions, if
                                                                                                           (such as name, address, or other contact
                                                   selected asset classes. Such services do                                                                      granted, will be subject to the express
                                                                                                           information) or confidential business
                                                   not include the management of the                                                                             condition that the material facts and
                                                                                                           information that you do not want
                                                   underlying assets of a Client Plan, the                                                                       representations contained in each
                                                                                                           publicly disclosed. All comments may
                                                   selection of specific funds or manager,                                                                       application are true and complete, and
                                                                                                           be posted on the Internet and can be
                                                   and the management of the selected                                                                            that each application accurately
                                                                                                           retrieved by most Internet search
                                                   Affiliated Funds or Collective Funds.                                                                         describes all material terms of the
                                                     (q) The term ‘‘Best Interest’’ means                  engines.
                                                                                                                                                                 transaction which is the subject of the
                                                   acting with the care, skill, prudence,                  FOR FURTHER INFORMATION CONTACT:    Mr.
                                                                                                                                                                 exemption.
                                                   and diligence under the circumstances                   Joseph Brennan of the Department,
                                                   then prevailing that a prudent person                   telephone (202) 693–8456. (This is not                  Signed at Washington, DC, this 28th day of
                                                   acting in a like capacity and familiar                  a toll-free number.)                                  July, 2017.
                                                   with such matters would use in the                                                                            Lyssa E. Hall,
                                                   conduct of an enterprise of a like                      General Information                                   Director, Office of Exemption Determinations,
                                                   character and with like aims, based on                    The attention of interested persons is              Employee Benefits Security Administration,
                                                   the investment objectives, risk                         directed to the following:                            U.S. Department of Labor.
                                                   tolerance, financial circumstances, and                   (1) The fact that a transaction is the              [FR Doc. 2017–16295 Filed 8–2–17; 8:45 am]
                                                   needs of the plan or IRA, without regard                subject of an exemption under section                 BILLING CODE 4510–29–P
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Document Created: 2017-08-03 07:24:33
Document Modified: 2017-08-03 07:24:33
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionNotice of Proposed Exemptions.
DatesAll interested persons are invited to submit written comments or requests for a hearing on the pending exemptions, unless otherwise stated in the Notice of Proposed Exemption, within 45 days from the date of publication of this Federal Register Notice.
ContactScott Ness of the Department, telephone (202) 693-8561. (This is not a toll-free number.)
FR Citation82 FR 36214 

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