83 FR 7226 - Technical Corrections to Exemptions From Certain Prohibited Transaction Restrictions
DEPARTMENT OF LABOR
Employee Benefits Security Administration Federal Register Volume 83, Issue 34 (February 20, 2018)
Employee Benefits Security Administration
Federal Register Volume 83, Issue 34 (February 20, 2018)
| Page Range | 7226-7235 | |
| FR Document | 2018-03396 |
[Federal Register Volume 83, Number 34 (Tuesday, February 20, 2018)] [Notices] [Pages 7226-7235] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-03396] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF LABOR Employee Benefits Security Administration Technical Corrections to Exemptions From Certain Prohibited Transaction Restrictions AGENCY: Employee Benefits Security Administration, Labor. ACTION: Notice of technical corrections. ----------------------------------------------------------------------- SUMMARY: On December 29, 2017 the Department of Labor (the Department) published notices of exemptions in the Federal Register granting relief from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). This notice includes technical corrections to those published prohibited transaction exemptions (PTEs): PTE 2017-03, JPMorgan Chase & Co., D-11906; PTE 2017-04, Deutsche Investment Management Americas Inc. (DIMA) and Certain Current and Future Asset Management Affiliates of Deutsche Bank AG, D-11908; PTE 2017-05, Citigroup Inc., D-11909; PTE 2017-06, Barclays Capital Inc., D-11910; PTE 2017-07, UBS Assets Management (Americas) Inc.; UBS Realty Investors LLC; UBS Hedge Fund Solutions LLC; UBS O'Connor LLC; and Certain Future Affiliates in UBS's Asset Management and Wealth Management Americas Divisions, D-11907. JPMorgan Chase Co. (JPMC or the Applicant) Located in New York, New York [Prohibited Transaction Exemption (PTE) 2017-03; Exemption Application No. D-11906]. Discussion On December 29, 2017, the Department published PTE 2017-03 in the Federal Register at 82 FR 61816. PTE 2017-03 is an administrative exemption from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (the Act), and the Internal Revenue Code of 1986, that permits certain entities with specified relationships to JPMC to continue to rely upon the relief provided by PTE 84-14 \1\ for a period of five years, notwithstanding JPMC's criminal conviction (the Conviction). The Department granted PTE 2017- 03 to ensure that Covered Plans \2\ whose assets are managed by a JPMC Affiliated QPAM or a JPMC Related QPAM may continue to benefit from the relief provided by PTE 84-14. The exemption is effective from January 10, 2018 through January 9, 2023. --------------------------------------------------------------------------- \1\ 49 FR 9494, March 13, 1984, as corrected at 50 FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23, 2005) and as amended at 75 FR 38837 (July 6, 2010), hereinafter referred to as PTE 84-14 or the QPAM Exemption. \2\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of ERISA (``ERISA-covered plan'') or a plan subject to Section 4975 of the Code (``IRA''), with respect to which a JPMC Affiliated QPAM relies on PTE 84-14, or with respect to which a JPMC Affiliated QPAM (or any JPMC affiliate) has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption (PTE 84- 14). A Covered Plan does not include an ERISA-covered Plan or IRA to the extent the JPMC Affiliated QPAM has expressly disclaimed reliance on QPAM status or PTE 84-14 in entering into its contract, arrangement, or agreement with the ERISA covered plan or IRA. --------------------------------------------------------------------------- The Department has decided to make certain technical and clarifying corrections to the exemption, as described below. Technical Corrections Sections I(g) and I(m) The Department's response to Comment 36 on page 61833 of the exemption states: ``Section I(g) requires two specific entities, JPMC and the Investment Bank of JPMorgan Chase Bank, to refrain from providing investment management services to plans. . . . Thus, with respect to Sections I(g) and (m), the obligations imposed extend exclusively to JPMC and the Investment Bank of JPMorgan Chase Bank. . . . The Department also believes that the potential for disqualification of all JPMC Affiliated QPAMs under this agreement will serve as additional incentive for JPMC and JPMorgan Chase Bank to comply in good-faith with the provisions of Sections I(g) and (m).'' The Department is revising its response to Comment 36 by removing references to ``the Investment Bank of JPMorgan Chase Bank'' because Section I(g) and I(m) do not apply to such entity. Similarly, the Department is also removing the phrase ``JPMorgan Chase Bank'' from the sentence that reads, ``[t]he Department also believes that the potential for disqualification of all JPMC Affiliated QPAMs under this agreement will serve as additional incentive for JPMC and JPMorgan Chase Bank to comply in good-faith with the provisions of Sections I(g) and (m).'' Section I(h)(1)(vii) The Department is adding the term ``as reasonably possible'' to the first sentence of the first full paragraph on page 61821 of the preamble to the exemption. As revised, the first sentence of the first full paragraph on page 61821 now reads: ``The Department has revised the term `corrected promptly' to be consistent with the Department's intent that violations or compliance failures be corrected `as soon as reasonably possible upon discovery or as soon as reasonably possible after the QPAM reasonably should have known of the noncompliance (whichever is earlier).' '' Section I(i)(10) Section I(i)(10) of the exemption states: ``(10) Each JPMC Affiliated QPAM and the auditor must submit to [the Office of Exemption Determinations] OED: Any engagement agreement(s) entered into pursuant to the engagement of the auditor under this exemption, no later than two (2) months after the execution of any such engagement agreement.'' The Department is revising Section I(i)(10) of the exemption to clarify the timing requirements for submission of the auditor agreements. As revised, Section I(i)(10) of the exemption now states: ``(10) Any engagement agreement with an auditor to perform the audits required under the terms of this exemption must be submitted to OED by March 9, 2018 if the agreement was executed on or prior to January 10, 2018. Any engagement agreement(s) entered into subsequent to January 10, 2018 must be submitted to OED no later than two (2) months after the execution of such engagement agreement.'' Section I(j)(7) Section I(j)(7) of the exemption states: ``(7) By July 9, 2018, each JPMC [[Page 7227]] Affiliated QPAM must provide a notice of its obligations under this Section I(j) to each Covered Plan. For all other prospective Covered Plans, the JPMC Affiliated QPAM will agree to its obligations under this Section I(j) in an updated investment management agreement between the JPMC Affiliated QPAM and such clients or other written contractual agreement.'' The Department notes that the term ``prospective Covered Plan,'' as used in Section I(j)(7), means a Covered Plan that enters into a written asset or investment management agreement with a JPMC Affiliated QPAM on or after July 10, 2018. Section I(k) Section I(k) of the exemption states: ``(k) By March 10, 2018, each JPMC Affiliated QPAM will provide a notice of the exemption, along with a separate summary describing the facts that led to the Conviction (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that the Conviction results in a failure to meet a condition in PTE 84-14, to each sponsor and beneficial owner of a Covered Plan, or the sponsor of an investment fund in any case where a JPMC Affiliated QPAM acts as a sub-advisor to the investment fund in which such ERISA-covered plan and IRA invests. Any prospective client for which a JPMC Affiliated QPAM relies on PTE 84-14 or has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption must receive the proposed and final exemptions with the Summary and the Statement prior to, or contemporaneously with, the client's receipt of a written asset management agreement from the JPMC Affiliated QPAM. Disclosures may be delivered electronically.'' The Department is replacing the term ``prospective client'' with ``prospective Covered Plan.'' As revised, ``prospective Covered Plan,'' as used in Section I(k), means a Covered Plan that enters into a written asset or investment management agreement with a JPMC Affiliated QPAM on or after March 10, 2018. The Department is clarifying that the requirements of Section I(k) will be met with respect to all current and prospective Covered Plans if, by March 10, 2018, the Applicant posts the required Section I(k) disclosure documents on a website whose link/address is referenced in: (a) The notice sent by the Applicant following the grant of the temporary exemption; or (b) the relevant investment management agreement received by the client (including instances where such reference describes the site as containing the required obligations under the temporary exemption), and the Applicant informs clients who are Covered Plan clients as of the effective date of this exemption, in writing, by March 10, that they can go back to the website to find the additional documents, which are identified. The Department is also clarifying that, for Covered Plans that enter into a written asset or investment management agreement with the Applicant between January 11, 2018, and March 9, 2018, the written notice that the website has been updated must be provided to such Covered Plans by March 31, 2018. FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department, telephone (202) 693-8456. (This is not a toll-free number). Deutsche Investment Management Americas Inc. (DIMA) and Certain Current and Future Asset Management Affiliates of Deutsche Bank AG (Collectively, the Applicant or the DB QPAMs), Located in New York, New York [Prohibited Transaction Exemption (PTE) 2017-04; Exemption Application No. D-11908] Discussion On December 29, 2017, the Department published PTE 2017-04 in the Federal Register at 82 FR 61840. PTE 2017-04 is an administrative exemption from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (the Act), and the Internal Revenue Code of 1986, that permits certain entities with specified relationships to Deutsche Securities Korea, Co. (DSK) \3\ or DB Group Services (UK) Limited (DB Group Services) \4\ to continue to rely upon the relief provided by PTE 84-14 for a period of three years,\5\ notwithstanding certain criminal convictions (the Convictions). The Department granted PTE 2017-04 to ensure that Covered Plans \6\ with assets managed by an asset manager within the corporate family of Deutsche Bank AG (together with its current and future affiliates, Deutsche Bank) may continue to benefit from the relief provided by PTE 84-14. The exemption is effective from April 18, 2018 through April 17, 2021 (the Exemption Period). The Department has decided to make certain technical and clarifying corrections to the exemption, as described below. --------------------------------------------------------------------------- \3\ Deutsche Securities Korea, Co. is a South Korean ``affiliate'' (as defined in Section VI(d) of PTE 84-14) of Deutsche Bank AG. \4\ DB Group Services (UK) Limited is United Kingdom-based ``affiliate'' (as defined in Section VI(d) of PTE 84-14) of Deutsche Bank AG. \5\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23, 2005) and as amended at 75 FR 38837 (July 6, 2010), hereinafter referred to as PTE 84-14 or the QPAM exemption. \6\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of ERISA (``ERISA-covered plan'') or a plan subject to section 4975 of the Code (``IRA'') with respect to which a DB QPAM relies on PTE 84- 14, or with respect to which a DB QPAM (or any Deutsche Bank affiliate) has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption (PTE 84-14). A Covered Plan does not include an ERISA-covered plan or IRA to the extent the DB QPAM has expressly disclaimed reliance on QPAM status or PTE 84- 14 in entering into its contract, arrangement, or agreement with the ERISA-covered plan or IRA. --------------------------------------------------------------------------- Technical Corrections Section I Prefatory Language The prefatory language of Section I of the exemption states, in relevant part: ``Certain entities with specified relationships to Deutsche Bank AG . . . will not be precluded from relying on the exemptive relief provided by Prohibited Transaction Class Exemption 84- 14 . . . notwithstanding: . . . . (2) the `US Conviction' against DB Group Services (UK) Limited, an affiliate of Deutsche Bank based in the United Kingdom (hereinafter, DB Group Services, as further defined in Section II(e)) . . . .'' For consistency with the re-ordered Definitions in Section II of the exemption, the relevant prefatory language of Section I now reads, ``DB Group Services (UK) Limited, an affiliate of Deutsche Bank based in the United Kingdom (hereinafter, DB Group Services, as further defined in Section II(c)).'' Section I(h)(1)(v) Section I(h)(1)(v) in the exemption states, in relevant part: ``The Policies must require, and must be reasonably designed to ensure that: . . . . (v) To the best of the DB QPAM's knowledge at the time, the DB QPAM does not make material misrepresentations or omit material information in its communications with such regulators with respect to ERISA-covered plans or IRAs with respect to Covered Plans.'' For clarity, the Department has deleted the phrase ``with respect to ERISA-covered plans or IRAs.'' As revised, Section I(h)(1)(v) now reads, in relevant part: ``The Policies must require, and must be reasonably designed to ensure that: . . . . (v) To the best of the DB QPAM's knowledge at the time, the DB QPAM does not make material misrepresentations or omit material information in its communications with such regulators with respect to Covered Plans.'' [[Page 7228]] Section I(h)(2) Section I(h)(2) of the exemption states: ``Each DB QPAM must develop and implement a program of training (the Training), to be conducted at least annually . . . The first Training under this Final Exemption must be completed by all relevant DB QPAM personnel by April 18, 2019 (by the end of this 30-month period, asset/portfolio management, trading, legal, compliance, and internal audit personnel who were employed from the start to the end of the period must have been trained twice: The first time under PTE 2016-13; and the second time under this exemption).'' The Department is revising this condition to reflect the Department's intended timeline for completing the first Training under this exemption. To this end, the Department is replacing ``April 18, 2019'' with ``April 17, 2019.'' Furthermore, the Department is replacing the phrase ``by the end of this 30-month period'' with ``by the end of the 24-month period commencing on the effective date of PTE 2016-13 and ending on April 17, 2019.'' As revised, Section I(h)(2) in relevant part now reads: ``The first Training under this Final Exemption must be completed by all relevant DB QPAM personnel by April 17, 2019 (by the end of the 24-month period commencing on the effective date of PTE 2016-13 and ending on April 17, 2019, asset/portfolio management, trading, legal, compliance, and internal audit personnel who were employed from the start to the end of the period must have been trained twice: The first time under PTE 2016-13; and the second time under this exemption).'' Section I(h)(2)(i) Section I(h)(2)(i) of the exemption states: ``The Training must: (i) At a minimum, cover the Policies, ERISA and Code compliance (including applicable fiduciary duties and the prohibited transaction provisions), ethical conduct, the consequences for not complying with the conditions of this exemption (including any loss of exemptive relief provided herein), and prompt reporting of wrongdoing.'' The Department is revising Section I(h)(2)(i) to clarify that this exemption's Training requirement must be included in the Policies. As revised, Section I(h)(2)(i) reads, in relevant part: ``The Training must: (i) Be required by the Policies and, at a minimum. . . .'' Section I(i)(5)(i) Section I(i)(5)(i) of the exemption states: ``For each audit, on or before the end of the relevant period described in Section I(i)(1) for completing the audit, the auditor must issue a written report (the Audit Report) . . . The Audit Report must include the auditor's specific determinations regarding: (i) The adequacy of each DB QPAM's Policies and Training . . . The DB QPAM must promptly address or prepare a written plan of action to address any determination of inadequacy by the auditor regarding the adequacy of the Policies and Training. . . .'' For clarity, the Department is replacing the phrase ``any determination of inadequacy by the auditor regarding the adequacy of the Policies and Training'' with ``any determination by the auditor regarding the adequacy of the Policies and Training.'' As revised, Section I(i)(5)(i) in relevant part now states: ``The DB QPAM must promptly address or prepare a written plan of action to address any determination by the auditor regarding the adequacy of the Policies and Training. . . .'' Section I(i)(7) Section I(i)(7) of the exemption states: ``(7) With respect to each Audit Report, the General Counsel, or one of the three most senior executive officers of the line of business engaged in discretionary asset management services through the DB QPAM with respect to which the Audit Report applies, must certify in writing, under penalty of perjury, that the officer has reviewed the Audit Report and this exemption; that such DB QPAM has addressed, corrected, or remedied any noncompliance and inadequacy or has an appropriate written plan to address any inadequacy regarding the Policies and Training identified in the Audit Report. . . .'' The Department is replacing the term ``General Counsel'' with ``general counsel'' and making clear that the certification of the Audit Report can come from the respective line of business's general counsel or one of its three most senior officers. As revised, Section I(i)(7) in relevant part now reads: ``With respect to each Audit Report, the general counsel, or one of the three most senior executive officers of the line of business engaged in discretionary asset management services through the DB QPAM with respect to which the Audit Report applies, must certify in writing, under penalty of perjury, that the officer has reviewed the Audit Report and this exemption.'' Section I(i)(8) Section I(i)(8) of the exemption states: ``(8) The Audit Committee of Deutsche Bank's Supervisory Board is provided a copy of each Audit Report; and a senior executive officer with a direct reporting line to the highest ranking legal compliance officer of Deutsche Bank must review the Audit Report for each DB QPAM and must certify in writing, under penalty of perjury, that such officer has reviewed each Audit Report. Deutsche Bank must provide notice to the Department in the event of a switch in the committee to which the Audit Report will be provided.'' The Department is revising the first sentence of Section I(i)(8) by removing the term ``legal.'' The condition now reads: ``(8) The Audit Committee of Deutsche Bank's Supervisory Board is provided a copy of each Audit Report; and a senior executive officer with a direct reporting line to the highest ranking compliance officer of Deutsche Bank must review the Audit Report for each DB QPAM and must certify in writing, under penalty of perjury, that such officer has reviewed each Audit Report.'' Section I(i)(9) Section I(i)(9) of the proposed exemption states: ``(9) Each DB QPAM provides its certified Audit Report, by regular mail to: The Department's Office of Exemption Determinations (OED), 200 Constitution Avenue NW, Suite 400, Washington, DC 20210, or by private carrier to: 122 C Street NW, Suite 400, Washington, DC 20001-2109, no later than 45 days following its completion.'' Section I(i)(9) of the final exemption states: ``(9) Each DB QPAM provides its certified Audit Report, by regular mail. . . . This delivery must take place no later than thirty (30) days following completion of the Audit Report. . . .'' The Department is revising Section I(i)(9) for consistency with the proposed exemption by replacing ``thirty (30) days'' with ``forty-five (45) days.'' Section I(i)(9) in relevant part now states: ``This delivery must take place no later than forty-five (45) days following completion of the Audit Report.'' Section I(i)(10) Section I(i)(10) of the exemption states: ``(10) Each DB QPAM and the auditor must submit to OED any engagement agreement(s) entered into pursuant to the engagement of the auditor under this exemption, no later than two (2) months after the execution of any such engagement agreement.'' The Department is revising Section I(i)(10) to reflect that any engagement agreement entered into with the auditor prior to or on April 18, 2018 in order to comply with this exemption must be submitted by June 17, 2018. Section [[Page 7229]] I(i)(10), as revised, now reads: ``(10) Any engagement agreement to perform the audits required under the terms of this exemption must be submitted to OED by June 17, 2018 if the agreement was executed on or prior to April 18, 2018. Any engagement agreement(s) entered into subsequent to April 18, 2018 must be submitted to OED no later than two (2) months after the execution of such engagement agreement.'' Section I(j)(7) Section I(j)(7) of the exemption in relevant part states: ``(7) By October 17, 2018, each DB QPAM must provide a notice of its obligations under this Section I(j) to each Covered Plan. For all other prospective Covered Plans, the DB QPAM will agree to its obligations under this Section I(j) in an updated investment management agreement between the DB QPAM and such clients or other written contractual agreement. This condition will be deemed met for each Covered Plan that received a notice pursuant to PTE 2016-13 that meets the terms of this condition.'' The Department notes that the term ``prospective Covered Plan,'' as used in Section I(j)(7), means a Covered Plan that enters into a written asset or investment management agreement with a DB QPAM on or after October 17, 2018. The Department also notes that the phrase, ``This condition will be deemed met for each Covered Plan that received a notice pursuant to PTE 2016-13 that meets the terms of this condition,'' means that a notice that satisfies Section I(j) of PTE 2016-13 will satisfy Section I(j)(7) of this exemption, unless such notice contains any language that limits, or is inconsistent with, the scope of this exemption. Section I(k) Section I(k) of the exemption states: ``(k) By June 17, 2018, each DB QPAM will provide a notice of the exemption, along with a separate summary describing the facts that led to the Convictions (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that the Convictions result in a failure to meet a condition in PTE 84-14, to each sponsor and beneficial owner of a Covered Plan, or the sponsor of an investment fund in any case where a DB QPAM acts as a sub-advisor to the investment fund in which such ERISA-covered plan and IRA invests. Any prospective client for which a DB QPAM relies on PTE 84-14 or has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption must receive the proposed and final exemptions with the Summary and the Statement prior to, or contemporaneously with, the client's receipt of a written asset management agreement from the DB QPAM. Disclosures may be delivered electronically.'' The Department is revising Section I(k) by adding the phrase ``that entered into a written asset or investment management agreement with a DB QPAM on or before June 16, 2018'' following the phrase ``to each sponsor and beneficial owner of a Covered Plan.'' As revised, Section I(k) now states, in relevant part: ``By June 17, 2018, each DB QPAM will provide a notice of the exemption, along with a separate summary describing the facts that led to the Convictions (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that each Conviction separately results in a failure to meet a condition in PTE 84-14, to each sponsor and beneficial owner of a Covered Plan that entered into a written asset or investment management agreement with a DB QPAM on or before June 16, 2018, or the sponsor of an investment fund in any case where a DB QPAM acts as a sub-advisor to the investment fund in which such ERISA- covered plan and IRA invests.'' The Department notes that the phrase, ``Any prospective client for which a DB QPAM relies on PTE 84-14 or has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption . . .'' means any Covered Plan that enters into a written asset or investment management agreement with a DB QPAM on or after June 17, 2018. Section I(m)(1) Section I(m)(1) of the exemption states: ``(1) By October 17, 2018, Deutsche Bank designates a senior compliance officer (the Compliance Officer) who will be responsible for compliance with the Policies and Training requirements described herein.'' The Department notes that each relevant line of business may designate its own Compliance Officer in order to comply with this condition. Section I(m)(1)(i) Section I(m)(1)(i) of the exemption states: ``(i) The Compliance Officer must be a legal professional who has extensive experience with, and knowledge of, the regulation of financial services and products, including under ERISA and the Code.'' The Department is removing the word ``legal'' from Section I(m)(1)(i). As revised, Section I(m)(1)(i) now reads: ``(i) The Compliance Officer must be a professional who has extensive experience with, and knowledge of, the regulation of financial services and products, including under ERISA and the Code.'' Section I(m)(1)(ii) Section I(m)(1)(ii) of the exemption states: ``(ii) The Compliance Officer must have a direct reporting line to the highest-ranking corporate officer in charge of legal compliance for asset management.'' The Department is removing the word ``legal'' from Section I(m)(1)(ii). As revised, Section I(m)(1)(ii) now reads: ``(ii) The Compliance Officer must have a direct reporting line to the highest- ranking corporate officer in charge of compliance for asset management.'' Section II(a) Section II(a) of the exemption states: ``The term `Convictions' means (1) the judgment of conviction against DB Group Services, in case number 3:15-cr-00062-RNC to be entered in the United States District Court for the District of Connecticut to a single count of wire fraud, in violation of 18 Sec. U.S.C. 1343 . . .'' This Section is revised to read,: ``The term `Convictions' means (1) the judgment of conviction against DB Group Services that was entered on April 18, 2017, in case number 3:15-cr-00062-RNC in the United States District Court for the District of Connecticut to a single count of wire fraud, in violation of 18 U.S.C.[thinsp]1343 . . .'' Discussion of Written Comments The prefatory section to the discussion of written comments on page 61840 of the Federal Register states: ``[t]he Department received written comments from the Applicant, members of the U.S. Congress, and a number of plan and IRA clients of Deutsche Bank.'' This section is revised to read, in relevant part, ``[t]he Department received written comments from the Applicant, members of the U.S. Congress, and several other commenters.'' FOR FURTHER INFORMATION CONTACT: Mr. Scott Ness of the Department, telephone (202) 693-8561. (This is not a toll-free number). [[Page 7230]] Citigroup Inc. (Citigroup or the Applicant) Located in New York, New York [Prohibited Transaction Exemption (PTE) 2017-05; Exemption Application No. D-11909] Discussion On December 29, 2017, the Department published PTE 2017-05 in the Federal Register at 82 FR 61864. PTE 2017-05 is an administrative exemption from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (the Act), and the Internal Revenue Code of 1986, that permits certain entities with specified relationships to Citigroup to continue to rely upon the relief provided by PTE 84-14 \7\ for a period of five years,\8\ notwithstanding Citicorp's criminal conviction (the Conviction). The Department granted PTE 2017-05 to ensure that Covered Plans \9\ whose assets are managed by a Citigroup Affiliated QPAM or Citigroup Related QPAM may continue to benefit from the relief provided by PTE 84-14. --------------------------------------------------------------------------- \7\ 49 FR 9494, March 13, 1984, as corrected at 50 FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23, 2005) and as amended at 75 FR 38837 (July 6, 2010), hereinafter referred to as PTE 84-14 or the QPAM Exemption. \8\ PTE 2017-05 is effective from January 10, 2018 through January 9, 2023. \9\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of ERISA (``ERISA-covered plan'') or a plan subject to Section 4975 of the Code (``IRA''), with respect to which a Citigroup Affiliated QPAM relies on PTE 84-14, or with respect to which a Citigroup Affiliated QPAM (or any Citigroup affiliate) has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption (PTE 84-14). A Covered Plan does not include an ERISA-covered Plan or IRA to the extent the Citigroup Affiliated QPAM has expressly disclaimed reliance on QPAM status or PTE 84-14 in entering into its contract, arrangement, or agreement with the ERISA covered plan or IRA. --------------------------------------------------------------------------- The Department has decided to make certain technical and clarifying corrections to the exemption, as described below. Technical Corrections Preamble The Department is replacing the term ``Citcorp'' with ``Citicorp'' on page 61876 of the preamble to the exemption. Section I(i)(1) The Department is revising its discussion of the entities subject to the Section I(i) Audit requirement. On page 61869 of the exemption, the Department is replacing the sentence that reads: ``The Department notes that Section I(i) requires the audit of each Citigroup entity that relies upon QPAM status, or expressly represents to ERISA-covered plan or IRA clients that it qualifies as a QPAM,'' with the following: ``The Department notes that Section I(i) requires the audit of each Citigroup Affiliated QPAM.'' Section I(i)(10) Section I(i)(10) of the exemption states: ``(10) Each Citigroup Affiliated QPAM and the auditor must submit to [the Office of Exemption Determinations] OED: Any engagement agreement(s) entered into pursuant to the engagement of the auditor under this exemption, no later than two (2) months after the execution of any such engagement agreement.'' The Department is revising Section I(i)(10) of the exemption to clarify the timing requirements for submission of the auditor agreements. As revised, Section I(i)(10) of the exemption now states: ``(10) Any engagement agreement with an auditor to perform the audits required under the terms of this exemption must be submitted to OED by March 9, 2018 if the agreement was executed on or prior to January 10, 2018. Any engagement agreement(s) entered into subsequent to January 10, 2018 must be submitted to OED no later than two (2) months after the execution of such engagement agreement.'' Section I(j)(7) Section I(j)(7) of the exemption states: ``(7) By July 9, 2018, each Citigroup Affiliated QPAM must provide a notice of its obligations under this Section I(j) to each Covered Plan. For all other prospective Covered Plans, the Citigroup Affiliated QPAM will agree to its obligations under this Section I(j) in an updated investment management agreement between the Citigroup Affiliated QPAM and such clients or other written contractual agreement.'' The Department notes that the term ``prospective Covered Plan,'' as used in Section I(j)(7), means a Covered Plan that enters into a written asset or investment management agreement with a Citigroup Affiliated QPAM on or after July 10, 2018. Section I(k) Section I(k) of the exemption states: ``(k) By March 10, 2018, each Citigroup Affiliated QPAM will provide a notice of the exemption, along with a separate summary describing the facts that led to the Conviction (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that the Conviction results in a failure to meet a condition in PTE 84-14, to each sponsor and beneficial owner of a Covered Plan, or the sponsor of an investment fund in any case where a Citigroup Affiliated QPAM acts as a sub- advisor to the investment fund in which such ERISA-covered plan and IRA invests. Any prospective clients for which a Citigroup Affiliated QPAM relies on PTE 84-14 or has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption must receive the proposed and final exemptions with the Summary and the Statement prior to, or contemporaneously with, the client's receipt of a written asset or investment management agreement from the Citigroup Affiliated QPAM. Disclosures may be delivered electronically.'' The Department notes that ``prospective clients,'' as referred to in Section I(k), means Covered Plans that enter into a written asset or investment management agreement with a Citigroup Affiliated QPAM on or after March 10, 2018. The Department also notes that the disclosure materials required to be provided to prospective clients under Section I(k) do not need to be provided to such clients prior to March 10, 2018. Such disclosures, rather, must be made, ``prior to, or contemporaneously with, the client's receipt of a written asset or investment management agreement from the Citigroup Affiliated QPAM.'' Finally, the Department notes that the disclosure materials required to be provided to prospective clients under the second sentence of Section I(k) are the same materials referenced in the first sentence of Section I(k). Section I(p) The discussion of the Right to Copies of Policies and Procedures on page 61876 of the exemption states: ``The Department has also modified Section I(p) to require that the Citigroup Affiliated QPAMs provide notice regarding the information on the website within 60 days of the effective date of this exemption, and thereafter to the extent certain material changes are made to the Policies.'' The Department is revising the discussion of the Right to Copies of Policies and Procedures to conform with the language of Section I(p). As revised, the discussion on page 61876 now states: ``The Department has also modified Section I(p) to require that the Citigroup Affiliated QPAMs provide notice regarding the information on the website by July 9, 2018. If the Policies are thereafter changed, each Covered Plan client must receive a new disclosure within six (6) months following the end of the calendar year during which the Policies were changed.'' [[Page 7231]] FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department, telephone (202) 693-8456. (This is not a toll-free number). Barclays Capital Inc. (BCI or the Applicant), Located in New York, New York [Prohibited Transaction Exemption (PTE) 2017-06; Exemption Application No. D-11910] Discussion On December 29, 2017, the Department published PTE 2017-06 in the Federal Register at 82 FR 61881. PTE 2017-06 is an administrative exemption from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (the Act), and the Internal Revenue Code of 1986, that permits certain entities with specified relationships to Barclays PLC (BPLC) to continue to rely upon the relief provided by PTE 84-14 for a period of five years,\10\ notwithstanding certain criminal convictions (the Convictions). The Department granted PTE 2017-06 to ensure that Covered Plans \11\ with assets managed by an asset manager within the corporate family of BPLC may continue to benefit from the relief provided by PTE 84-14. The effective date of PTE 2017-06 is January 10, 2018, and the exemption is effective from January 10, 2018, through January 9, 2023 (the Exemption Period). --------------------------------------------------------------------------- \10\ 49 FR 9494, March 13, 1984, as corrected at 50 FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23, 2005) and as amended at 75 FR 38837 (July 6, 2010), hereinafter referred to as PTE 84-14. \11\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of ERISA (``ERISA-covered plan'') or a plan subject to section 4975 of the Code (``IRA'') with respect to which a Barclays Affiliated QPAM relies on PTE 84-14, or with respect to which a Barclays Affiliated QPAM (or any BPLC affiliate) has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption (PTE 84-14). A Covered Plan does not include an ERISA- covered plan or IRA to the extent the Barclays Affiliated QPAM has expressly disclaimed reliance on QPAM status or PTE 84-14 in entering into its contract, arrangement, or agreement with the ERISA-covered plan or IRA. --------------------------------------------------------------------------- The Department has decided to make certain technical and clarifying corrections to the exemption, as described below. Technical Corrections Section I(b) Section I(b) of the exemption states: ``Apart from a non-fiduciary line of business within BCI, the Barclays Affiliated QPAMs and the Barclays Related QPAMs (including their officers, directors, and agents other than BPLC, and employees of such Barclays Affiliated QPAMs) did not receive direct compensation, or knowingly receive indirect compensation, in connection with the criminal conduct that is the subject of the Conviction.'' This Section is revised by replacing ``within BCI'' with ``of a BPLC subsidiary.'' In addition, the phrase, ``who had responsibility for or exercised authority in connection with the management of plan assets'' now appears after ``Barclays Affiliated QPAMs'' in the parenthetical. As revised, Section I(b) reads, in pertinent part, ``Apart from a non-fiduciary line of business of a BPLC subsidiary, the Barclays Affiliated QPAMs and the Barclays Related QPAMs (including their officers, directors, and agents other than BPLC, and employees of such Barclays Affiliated QPAMs who had responsibility for or exercised authority in connection with the management of plan assets) did not receive direct compensation . . . .'' Section I(j) Section I(j) of the exemption states, in relevant part: ``As of January 10, 2018 and throughout the Exemption Period, with respect to any arrangement, agreement, or contract between a Barclays Affiliated QPAM and a Covered Plan, the Barclays Affiliated QPAM agrees and warrants . . . .'' For clarity, the phrase, ``As of January 10, 2018 and throughout the Exemption Period,'' is revised to read, ``Effective on the date that a Barclays Affiliated QPAM enters into any arrangement, agreement, or contract, after January 10, 2018, with any Covered Plan, and throughout the Exemption Period, . . . .'' Section I(j)(7) Section I(j)(7) states: ``Prior to a Barclays Affiliated QPAM's engagement with an ERISA-covered plan or IRA for the provision of asset management or other discretionary fiduciary services . . . .'' The Department is replacing the phrase, ``an ERISA-covered plan or IRA'' with ``a Covered Plan.'' Section I(k) Section I(k) states: ``Any client for which a Barclays Affiliated QPAM relies on PTE 84-14 or has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption must receive the proposed and final exemptions, along with a separate summary describing the facts that led to the Conviction (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that the Conviction results in a failure to meet a condition in PTE 84-14, prior to, or contemporaneously with, the client's receipt of a written asset management agreement from the Barclays Affiliated QPAM. Disclosures may be delivered electronically.'' The Department is replacing the term ``client'' with ``Covered Plan.'' As revised, ``Covered Plan,'' as used in Section I(k), means a Covered Plan that enters into a written asset or investment management agreement with a Barclays Affiliated QPAM. Section I(m)(1)(iv) Section I(m)(1)(iv) states: ``(iv) Each Annual Report must be provided to the appropriate corporate officers of BPLC and each Barclays Affiliated QPAM to which such report relates; the head of compliance and the General Counsel (or their functional equivalent) of the relevant Barclays Affiliated QPAM and the General Counsel (or their functional equivalent) of BPLC; and must be made unconditionally available to the independent auditor described in Section I(i) above.'' Comment Section 37 of the exemption at 82 FR 61896 states that the Department intended to revise Section I(m)(1)(iv) by deleting the phrase, ``the appropriate corporate officers of BPLC and each Barclays Affiliated QPAM to which such report relates'' from the condition. Such revision did not appear in the text. Therefore, the Department is now revising Section I(m)(1)(iv) to read, ``(iv) Each Annual Report must be provided to the head of compliance and the General Counsel (or their functional equivalent) of the relevant Barclays Affiliated QPAM and the General Counsel (or their functional equivalent) of BPLC; and must be made unconditionally available to the independent auditor described in Section I(i) above.'' Section II(d) \12\ Section II(d) states, ``The term ``Conviction'' means the judgment of conviction against BPLC for violation of the Sherman Antitrust Act, 15 U.S.C. 1, which is scheduled to be entered in the District Court for the District of Connecticut (the District Court), Case Number 3:15-cr- 00077-SRU-1.'' --------------------------------------------------------------------------- \12\ In the final grant notice, the Department renumbered Section II(d), which was previously Section II(e) in the proposed exemption. --------------------------------------------------------------------------- Section II(d) is revised to reflect that the Conviction occurred prior to the effective date of the exemption. Section II(d) now reads, in pertinent part, [[Page 7232]] ``. . . . 15 U.S.C. 1, which was entered in the District Court. . . .'' Section II(e) \13\ Section II(e) states, ``The term ``Conviction Date'' means the date of the judgment of the trial court. For avoidance of confusion, the Conviction Date is January 10, 2017, as set forth in Case Number 3:15- cr-00077-SRU.'' Section II(e) is revised to add a ``-1'' after the letters ``SRU'' in the case number. As revised, Section II(e) now reads, in pertinent part, ``. . . . as set forth in Case Number 3:15- cr-00077-SRU-1.'' --------------------------------------------------------------------------- \13\ In the final grant notice, the Department renumbered Section II(e), which was previously Section II(f) in the proposed exemption. FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the Department, telephone (202) 693-8565. (This is not a toll-free number). UBS Assets Management (Americas) Inc.; UBS Realty Investors LLC; UBS Hedge Fund Solutions LLC; UBS O'Connor LLC; and Certain Future Affiliates in UBS's Asset Management and Wealth Management Americas Divisions (collectively, the Applicants or the UBS QPAMs) Located in Chicago, Illinois; Hartford, Connecticut; New York, New York; and Chicago, Illinois, Respectively [Prohibited Transaction Exemption (PTE) 2017-07; Exemption Application No. D-11907] Discussion On December 29, 2017, the Department published PTE 2017-07 in the Federal Register at 82 FR 61903. PTE 2017-07 is an administrative exemption from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (the Act), and the Internal Revenue Code of 1986, that permits certain entities with specified relationships to UBS (as defined in Section II(g)) (hereinafter, the UBS QPAMs) to continue to rely upon the relief provided by PTE 84-14 for a period of three years,\14\ notwithstanding the ``2013 Conviction'' of UBS Securities Japan Co. Ltd \15\ and the ``2017 Conviction'' of UBS (collectively, the Convictions as defined in Section II(a)). The Department granted PTE 2017-07 to ensure that Covered Plans \16\ with assets managed by UBS QPAMs may continue to benefit from the relief provided by PTE 84-14. The exemption is effective from January 10, 2018 through January 9, 2021 (the Exemption Period). The Department has decided to make certain technical and clarifying corrections to the exemption, as described below. --------------------------------------------------------------------------- \14\ 49 FR 9494, March 13, 1984, as corrected at 50 FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23, 2005) and as amended at 75 FR 38837 (July 6, 2010), hereinafter referred to as PTE 84-14 or the QPAM exemption. \15\ UBS Securities Japan Co. Ltd is a wholly owned subsidiary of UBS incorporated under the laws of Japan. \16\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of ERISA (``ERISA-covered plan'') or a plan subject to section 4975 of the Code (``IRA'') with respect to which a UBS QPAM relies on PTE 84-14, or with respect to which a UBS QPAM (or any UBS affiliate) has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption (PTE 84-14). A Covered Plan does not include an ERISA-covered plan or IRA to the extent the UBS QPAM has expressly disclaimed reliance on QPAM status or PTE 84-14 in entering into its contract, arrangement, or agreement with the ERISA-covered plan or IRA. --------------------------------------------------------------------------- Technical Corrections Section I(f) Section I(f) of the exemption states: ``[a] UBS QPAM did not exercise authority over the assets of any plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or section 4975 of the Code (an IRA) in a manner that it knew or should have known would: Further the FX Misconduct or the criminal conduct that is the subject of the Convictions; or cause the UBS QPAM, its affiliates or related parties to directly or indirectly profit from the FX Misconduct or the criminal conduct that is the subject of the Convictions.'' The Department is revising Section I(f) by inserting the word ``or'' between the phrase ``or cause the UBS QPAM'' and the phrase ``its affiliates'' and by removing the phrase ``or related parties.'' As revised, Section I(f) now reads, ``A UBS QPAM did not exercise authority over the assets of any plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or section 4975 of the Code (an IRA) in a manner that it knew or should have known would: further the FX Misconduct or the criminal conduct that is the subject of the Convictions; or cause the UBS QPAM or its affiliates to directly or indirectly profit from the FX Misconduct or the criminal conduct that is the subject of the Convictions.'' Section I(h)(1)(ii) Section I(h)(1)(ii) of the exemption states: ``[t]he UBS QPAM fully complies with ERISA's fiduciary duties, and with ERISA and the Code's prohibited transaction provisions, in such case as applicable, and does not knowingly participate in any violation of these duties and provisions with respect to Covered Plans.'' For clarity and consistency, the Department is replacing the word ``such'' with the word ``each'' and by inserting the phrase ``with respect to each Covered Plan'' after the phrase ``as applicable.'' As revised, Section I(h)(1)(ii) now reads, ``The UBS QPAM fully complies with ERISA's fiduciary duties, and with ERISA and the Code's prohibited transaction provisions, in each case as applicable with respect to each Covered Plan, and does not knowingly participate in any violation of these duties and provisions with respect to Covered Plans.'' Section I(h)(2)(ii) and Section I(i)(10) Section I(h)(2)(ii) of the exemption states: ``(2) Each UBS QPAM must develop and implement a program of training (the Training), conducted at least annually, for all relevant UBS QPAM asset/portfolio management, trading, legal, compliance, and internal audit personnel. The Training must: . . . . (ii) [b]e conducted by an independent professional who has been prudently selected and who has appropriate technical training and proficiency with ERISA and the Code.'' The Department is revising Section I(h)(2)(ii) to reflect that the required training may be conducted by appropriate UBS personnel who have been prudently selected. Therefore, the Department is removing the word ``independent'' from Section I(h)(2)(ii) and, as revised, Section I(h)(2)(ii) now reads: ``Be conducted by a professional who has been prudently selected and who has appropriate technical training and proficiency with ERISA and the Code.'' Section I(i)(10) of the exemption states: ``[e]ach UBS QPAM and the auditor must submit to OED any engagement agreement(s) entered into pursuant to the engagement of the auditor under this exemption. Further, each UBS QPAM must submit to OED any engagement entered into with any other person or entity retained in connection with such QPAM's compliance with the Training or Policies conditions of this exemption no later than two (2) months after the execution of any such engagement agreement.'' The Department is revising Section I(i)(10) to reflect that the UBS QPAMs need not submit to Office of Exemption Determinations (OED) an engagement agreement entered into to comply with the training or Policy conditions, and to reflect that any engagement agreement entered into with the auditor prior to or on January 10, 2018 in order to comply with this exemption must be submitted by March 9, 2018. Section I(i)(10), as revised, now reads: ``Any engagement agreement with an auditor to perform the audits [[Page 7233]] required under the terms of this exemption must be submitted to OED by March 9, 2018 if the agreement was executed on or prior to January 10, 2018. Any engagement agreement(s) entered into subsequent to January 10, 2018 must be submitted to OED no later than two (2) months after the execution of such engagement agreement.'' Section I(i)(1) and Footnote 71 Section I(i)(1) of the exemption states, in relevant part: ``Each UBS QPAM submits to an audit conducted annually by an independent auditor, who has been prudently selected and who has appropriate technical training and proficiency with ERISA and the Code, to evaluate the adequacy of, and each UBS QPAM's compliance with, the Policies and Training described herein. The audit requirement must be incorporated in the Policies. The first annual audit must cover a fourteen-month period that begins on January 10, 2017 (the Initial Audit Period) and all subsequent audits must cover consecutive twelve month periods commencing upon the end of the Initial Audit Period. The Initial Audit Period shall cover the period of time during which PTE 2016-17 is effective and a portion of the time during which this exemption is effective and the audit terms contained in this Section I(i) will supersede the terms of Section I(i) of PTE 2016-17 except as otherwise provided in this exemption. In determining compliance with the conditions for relief in PTE 2016-17 and this exemption, including the Policies and Training requirements, for purposes of conducting the audit, the auditor will rely on the conditions for exemptive relief as then applicable to the respective periods under audit'' (footnotes omitted). To correct the timing of the audit requirement, the Department is revising Section I(i)(1) of the exemption to reflect that the Initial Audit Period begins on January 10, 2018 and ends on March 9, 2019, and the corresponding Audit Report must be completed by September 9, 2019. Additionally, the Second audit period must cover the period March 10, 2019 through March 9, 2020 and must be completed by September 9, 2020 and the third audit must cover the period from March 10, 2020 through March 9, 2021. In connection with the revision, the Department is deleting from Section I(i) the following language and corresponding footnote 72 on page 61917 of the exemption: ``The Initial Audit Period shall cover the period of time during which PTE 2016-17 is effective and a portion of the time during which this exemption is effective and the audit terms contained in this Section I(i) will supersede the terms of Section I(i) of PTE 2016-17 except as otherwise provided in this exemption. In determining compliance with the conditions for relief in PTE 2016-17 and this exemption, including the Policies and Training requirements, for purposes of conducting the audit, the auditor will rely on the conditions for exemptive relief as then applicable to the respective periods under audit.'' As revised, Section I(i)(1) in relevant part now states, ``Each UBS QPAM submits to an audit conducted annually by an independent auditor, who has been prudently selected and who has appropriate technical training and proficiency with ERISA and the Code, to evaluate the adequacy of, and each UBS QPAM's compliance with, the Policies and Training described herein. The audit requirement must be incorporated in the Policies. The first annual audit must cover a fourteen-month period that begins on January 10, 2018 and ends on March 9, 2019 (the Initial Audit Period), and must be completed by September 9, 2019. The second audit must cover the period from March 10, 2019 through March 9, 2020 and must be completed by September 9, 2020. In the event that the Exemption Period is extended or a new exemption is granted, the third audit would cover the period from March 10, 2020 through March 9, 2021 and would have to be completed by September 9, 2021 (unless the Department chooses to alter the annual audit requirement in the new or extended exemption).'' In coordination with the correction to Section I(i)(1) above, Footnote 71 on page 61917 included with Section I(i) is revised to state, ``The third audit referenced above would not have to be completed until after the Exemption Period expires. If the Department ultimately decides to grant relief for an additional period, it could decide to alter the terms of the exemption, including the audit conditions (and the timing of the audit requirements). Nevertheless, the Applicant should anticipate that the Department will insist on strict compliance with the audit terms and schedule set forth above. As it considers any new exemption application, the Department may also contact the auditor for any information relevant to its determination.'' The Department's discussion in Comment V on page 61909 of the exemption should be read in a manner that is consistent with these revisions. Section I(i)(5)(ii) Section I(i)(5)(ii) of the exemption states: ``(5) For each audit, on or before the end of the relevant period described in Section I(i)(1) for completing the audit, the auditor must issue a written report (the Audit Report) to UBS and the UBS QPAM to which the audit applies that describes the procedures performed by the auditor during the course of its examination. The auditor, at its discretion, may issue a single consolidated Audit Report that covers all the UBS QPAMs. The Audit Report must include the auditor's specific determinations regarding: . . . (ii) The adequacy of the Annual Review described in Section I(m).'' For clarity, the Department is revising Section I(i)(5)(ii) of the exemption by adding the phrase ``most recent'' before the phrase ``Annual Review''. As revised, Section I(i)(5)(ii) now reads, in relevant part, ``The adequacy of the most recent Annual Review described in Section I(m).'' Section I((i)(7) Section I(i)(7) of the exemption states: ``[w]ith respect to each Audit Report, the General Counsel, or one of the three most senior executive officers of the UBS QPAM to which the Audit Report applies, must certify in writing, under penalty of perjury, that the officer has reviewed the Audit Report and this exemption; that, such UBS QPAM has addressed, corrected, remedied any noncompliance and inadequacy or has an appropriate written plan to address any inadequacy regarding the Policies and Training identified in the Audit Report. Such certification must also include the signatory's determination, that the Policies and Training in effect at the time of signing are adequate to ensure compliance with the conditions of this exemption and with the applicable provisions of ERISA and the Code.'' For consistence with the Department's intention, as expressed in the exemption's comment section on page 61911 regarding certification of the Audit Report, Section I(i)(7) is revised by adding the phrase ``to the best of such officer's knowledge at the time'' after the phrase ``that the officer has reviewed the Audit Report and this exemption; that . . .'' and after the phrase ``Such certification must also include the signatory's determination that. . . .'' As revised, Section I(i)(7) now reads, ``With respect to each Audit Report, the General Counsel, or one of the three most senior executive officers of the UBS QPAM to which the Audit Report applies, must certify in writing, under penalty of perjury, that the officer has reviewed the Audit Report and this exemption; that, to the best of such officer's knowledge at the time, such [[Page 7234]] UBS QPAM has addressed, corrected, remedied any noncompliance and inadequacy or has an appropriate written plan to address any inadequacy regarding the Policies and Training identified in the Audit Report. Such certification must also include the signatory's determination that, to the best of such officer's knowledge at the time, the Policies and Training in effect at the time of signing are adequate to ensure compliance with the conditions of this exemption and with the applicable provisions of ERISA and the Code.'' Section I(i)(9) Section I(i)(9) of the proposed exemption states: ``(9) Each UBS QPAM must provide its certified Audit Report, by regular mail to: The Department's Office of Exemption Determinations (OED), 200 Constitution Avenue NW, Suite 400, Washington, DC 20210, or by private carrier to: 122 C Street NW, Suite 400, Washington, DC 20001-2109, no later than 45 days following its completion.'' Section I(i)(9) of the final exemption states: ``(9) Each UBS QPAM provides its certified Audit Report, by regular mail . . . . This delivery must take place no later than 30 days following completion of the Audit Report.'' The Department is revising Section I(i)(9) for consistence with the proposed exemption, by replacing the phrase ``30 days'' with the phrase ``45 days.'' As revised, Section I(i)(9) in relevant part now states, ``This delivery must take place no later than 45 days following completion of the Audit Report.'' Section I(j)(7) Section I(j)(7) of the exemption states: ``[b]y July 9, 2018, each UBS QPAM must provide a notice of its obligations under this Section I(j) to each Covered Plan. For all other prospective Covered Plans, the UBS QPAM will agree to its obligations under this Section I(j) in an updated investment management agreement between the UBS QPAM and such clients or other written contractual agreement. This condition will be deemed met for each Covered Plan that received a notice pursuant to PTE 2016-17 that meets the terms of this condition. Notwithstanding the above, a UBS QPAM will not violate the condition solely because a Plan or IRA refuses to sign an updated investment management agreement.'' The Department notes that the term ``prospective Covered Plan,'' as used in Section I(j)(7), means a Covered Plan that enters into a written asset or investment management agreement with a UBS QPAM on or after July 9, 2018. Section I(k) Section I(k) of the exemption states: ``By March 10, 2018, each UBS QPAM will provide a notice of the exemption, along with a separate summary describing the facts that led to the Convictions (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that each Conviction separately results in a failure to meet a condition in PTE 84-14, to each sponsor and beneficial owner of a Covered Plan, or the sponsor of an investment fund in any case where a UBS QPAM acts as a sub-advisor to the investment fund in which such ERISA-covered plan and IRA invests. Any prospective client for which a UBS QPAM relies on PTE 84-14 or has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption must receive the proposed and final exemptions with the Summary and the Statement prior to, or contemporaneously with, the client's receipt of a written asset management agreement from the UBS QPAM. Disclosures may be delivered electronically.'' The Department is revising Section I(k) by adding the phrase ``that entered into a written asset or investment management agreement with a UBS QPAM on or before March 9, 2018'' following the phrase ``to each sponsor and beneficial owner of a Covered Plan'' to clarify that Covered Plans that have entered into a written asset or investment management agreement with a UBS QPAM on or before March 9, 2018 must receive the disclosure material required under Section I(k) by March 10, 2018. As revised, Section I(k) in relevant part now states, ``By March 10, 2018, each UBS QPAM will provide a notice of the exemption, along with a separate summary describing the facts that led to the Convictions (the Summary), which have been submitted to the Department, and a prominently displayed statement (the Statement) that each Conviction separately results in a failure to meet a condition in PTE 84-14, to each sponsor and beneficial owner of a Covered Plan that entered into a written asset or investment management agreement with a UBS QPAM on or before March 9, 2018, or the sponsor of an investment fund in any case where a UBS QPAM acts as a sub-advisor to the investment fund in which such ERISA-covered plan and IRA invests.'' The Department notes that the phrase, ``Any prospective client for which a UBS QPAM relies on PTE 84-14 or has expressly represented that the manager qualifies as a QPAM or relies on the QPAM class exemption . . .'' means: Any Covered Plan that enters into a written asset or investment management agreement with a UBS QPAM on or after March 10, 2018. Section I(m)(1) and Footnote 73 Section I(m)(1) of the exemption states: ``[b]y July 9, 2018, UBS designates a senior compliance officer (the Compliance Officer) who will be responsible for compliance with the Policies and Training requirements described herein. The Compliance Officer must conduct an annual review for each period corresponding to the audit periods set forth in Section I(i)(1) (including the Initial Audit Period) (the Annual Review) to determine the adequacy and effectiveness of the implementation of the Policies and Training. With respect to the Compliance Officer, the following conditions must be met'' (footnote omitted). Footnote 73 on page 61919 of the exemption provides that, ``Note that such Annual Review must be completed with respect to the annual periods ending January 9, 2019; January 9, 2020; and January 9, 2021.'' For consistence with the Department's intention, as expressed in the exemption's comment section V on page 61909, that it would be efficient for the time frame for the Annual Review to coordinate with the time frame for the compliance review conducted by the UBS QPAMs for other regulators, the Department is revising the Initial Audit Period to reflect that such period begins on January 10, 2018 and ends on March 9, 2019. Additionally, the Department is revising footnote 73 on page 61919 of the exemption to be consistent with the revised dates of the audit periods and to remove the word ``annual'' before the word ``periods.'' As revised, footnote 73 now reads, ``Note that such Annual Review must be completed with respect to the periods ending March 9, 2019; March 9, 2020; and March 9, 2021.'' Section I(m)(1)(ii) Section I(m)(1)(ii) provides that, ``[t]he Compliance Officer has a dual-reporting line within UBS's Compliance and Operational Risk Control (C&ORC) function: (A) a divisional reporting line to the Head of Compliance and Operational Risk Control, Asset Management, and (B) a regional reporting line to the Head of Americas Compliance and Operational Risk Control. The C&ORC function will be organizationally independent of UBS's business divisions--including Asset Management and the Investment Bank--and is led by the Global Head of [[Page 7235]] C&ORC, who will report directly to UBS's Chief Risk Officer.'' To accommodate UBS's organizational structure in a manner consistent with the requirements of this exemption, Section I(m)(1)(ii) of the exemption is revised to read, ``The Compliance Officer has a reporting line within UBS's Compliance and Operational Risk Control (C&ORC) function to the Head of Compliance and Operational Risk Control, Asset Management. The C&ORC function is organizationally independent of UBS's business divisions--including Asset Management and the Investment Bank--and is led by the Global Head of C&ORC, who will report directly to UBS's Chief Risk Officer.'' Section I(m)(2)(v) Section I(m)(2)(v) of the exemption states that, ``[e]ach Annual Review, including the Compliance Officer's written Annual Report, must be completed within at least three (3) months following the end of the period to which it relates.'' Section I(m)(2)(v) of the exemption is revised by deleting the phrase ``at least.'' As revised, Section I(m)(2)(v) now reads, ``Each Annual Review, including the Compliance Officer's written Annual Report, must be completed within three (3) months following the end of the period to which it relates.'' Comment Section Regarding Notice of Right To Obtain Copy of Policies-- Section I(r) The comment section on page 61915 of the exemption discussing the right to obtain a copy of the Polices is hereby revised to be consistent with Section I(r) of the exemption, which provides that ``[b]y July 09, 2018, each UBS QPAM, in its agreements with, or in other written disclosures provided to Covered Plans, will clearly and prominently inform Covered Plan clients of their right to obtain a copy of the Policies or a description (Summary Policies) which accurately summarizes key components of the UBS QPAM's written Policies developed in connection with this exemption. . . .'' Accordingly, the sentence beginning ``[t]he Department also agrees with the Applicant . . .'' in the first full paragraph in the second column on page 61915 is revised to read, ``The Department also agrees with the Applicant that the timing requirement for disclosure should be revised and, accordingly, has modified the condition of Section I(r) to require notice regarding the information on the website within 6 months of the effective date of this exemption (by July 09, 2018), and thereafter to the extent certain material changes are made to the Policies.'' References to ``UBS'' and ``UBS, AG'' The term ``UBS, AG'' as it appears in Section II(g) is revised to ``UBS AG.'' The term ``UBS, AG'' is it appears elsewhere in the exemption is revised to mean ``UBS.'' Definition of UBS QPAM--Section II(h) Section II(h) of the exemption states: ``[t]he term `UBS QPAM' means UBS Asset Management (Americas) Inc., UBS Realty Investors LLC, UBS Hedge Fund Solutions LLC, UBS O'Connor LLC, and any future entity within the Asset Management or the Wealth Management Americas divisions of UBS, AG that qualifies as a `qualified professional asset manager' (as defined in Section VI(a) of PTE 84-14) and that relies on the relief provided by PTE 84-14 or represents to ERISA-covered plans and IRAs that it qualifies as a QPAM and with respect to which UBS, AG is an `affiliate' (as defined in Part VI(d) of PTE 84-14). The term `UBS QPAM' excludes UBS, AG and UBS Securities Japan'' (footnote omitted). The Department is revising Section II(h) of the exemption by deleting the phrase ``or represents to ERISA-covered plans and IRAs that it qualifies as a QPAM.'' As revised, Section II(h) now reads, ``The term `UBS QPAM' means UBS Asset Management (Americas) Inc., UBS Realty Investors LLC, UBS Hedge Fund Solutions LLC, UBS O'Connor LLC, and any future entity within the Asset Management or the Wealth Management Americas divisions of UBS that qualifies as a `qualified professional asset manager' (as defined in Section VI(a) \17\ of PTE 84-14) and that relies on the relief provided by PTE 84-14 and with respect to which UBS is an `affiliate' (as defined in Part VI(d) of PTE 84-14). The term `UBS QPAM' excludes UBS and UBS Securities Japan.'' --------------------------------------------------------------------------- \17\ In general terms, a QPAM is an independent fiduciary that is a bank, savings and loan association, insurance company, or investment adviser that meets certain equity or net worth requirements and other licensure requirements and that has acknowledged in a written management agreement that it is a fiduciary with respect to each plan that has retained the QPAM. FOR FURTHER INFORMATION CONTACT: Mr. Brian Mica of the Department, --------------------------------------------------------------------------- telephone (202) 693-8402. (This is not a toll-free number). Lyssa E. Hall, Director of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor. [FR Doc. 2018-03396 Filed 2-16-18; 8:45 am] BILLING CODE 4510-29-P
![7226 Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
pending applications to renew or JPMorgan Chase Co. (JPMC or the as additional incentive for JPMC and
modify his registration. See R.D. at 7. Applicant) Located in New York, New JPMorgan Chase Bank to comply in
York good-faith with the provisions of
Order
[Prohibited Transaction Exemption (PTE) Sections I(g) and (m).’’
Pursuant to the authority vested in me The Department is revising its
2017–03; Exemption Application No. D–
by 21 U.S.C. 823(f) and 824(a), as well 11906]. response to Comment 36 by removing
as 28 CFR 0.100(b), I order that DEA references to ‘‘the Investment Bank of
Certificate of Registration No. Discussion JPMorgan Chase Bank’’ because Section
BW6830500, issued to Kenneth N. On December 29, 2017, the I(g) and I(m) do not apply to such entity.
Woliner, M.D., be, and it hereby is, Department published PTE 2017–03 in Similarly, the Department is also
revoked. I further order that any the Federal Register at 82 FR 61816. removing the phrase ‘‘JPMorgan Chase
pending application of Kenneth N. PTE 2017–03 is an administrative Bank’’ from the sentence that reads,
Woliner to renew or modify the above exemption from the prohibited ‘‘[t]he Department also believes that the
registration, or any pending application transaction provisions of the Employee potential for disqualification of all JPMC
of Kenneth N. Woliner for any other Retirement Income Security Act of 1974 Affiliated QPAMs under this agreement
registration, be, and it hereby is, denied. (the Act), and the Internal Revenue will serve as additional incentive for
This Order is effective immediately.7 Code of 1986, that permits certain JPMC and JPMorgan Chase Bank to
Dated: February 7, 2018. entities with specified relationships to comply in good-faith with the
Robert W. Patterson, JPMC to continue to rely upon the relief provisions of Sections I(g) and (m).’’
Acting Administrator. provided by PTE 84–14 1 for a period of
Section I(h)(1)(vii)
[FR Doc. 2018–03299 Filed 2–16–18; 8:45 am]
five years, notwithstanding JPMC’s
criminal conviction (the Conviction). The Department is adding the term
BILLING CODE 4410–09–P
The Department granted PTE 2017–03 to ‘‘as reasonably possible’’ to the first
ensure that Covered Plans 2 whose sentence of the first full paragraph on
assets are managed by a JPMC Affiliated page 61821 of the preamble to the
DEPARTMENT OF LABOR QPAM or a JPMC Related QPAM may exemption. As revised, the first sentence
continue to benefit from the relief of the first full paragraph on page 61821
Employee Benefits Security
provided by PTE 84–14. The exemption now reads: ‘‘The Department has
Administration
is effective from January 10, 2018 revised the term ‘corrected promptly’ to
Technical Corrections to Exemptions through January 9, 2023. be consistent with the Department’s
From Certain Prohibited Transaction The Department has decided to make intent that violations or compliance
Restrictions certain technical and clarifying failures be corrected ‘as soon as
corrections to the exemption, as reasonably possible upon discovery or
AGENCY: Employee Benefits Security described below. as soon as reasonably possible after the
Administration, Labor. QPAM reasonably should have known
ACTION: Notice of technical corrections.
Technical Corrections
of the noncompliance (whichever is
Sections I(g) and I(m) earlier).’ ’’
SUMMARY: On December 29, 2017 the
Department of Labor (the Department) The Department’s response to Section I(i)(10)
published notices of exemptions in the Comment 36 on page 61833 of the
exemption states: ‘‘Section I(g) requires Section I(i)(10) of the exemption
Federal Register granting relief from states: ‘‘(10) Each JPMC Affiliated
certain of the prohibited transaction two specific entities, JPMC and the
Investment Bank of JPMorgan Chase QPAM and the auditor must submit to
restrictions of the Employee Retirement [the Office of Exemption
Income Security Act of 1974 (ERISA or Bank, to refrain from providing
investment management services to Determinations] OED: Any engagement
the Act) and/or the Internal Revenue agreement(s) entered into pursuant to
Code of 1986 (the Code). This notice plans. . . . Thus, with respect to
Sections I(g) and (m), the obligations the engagement of the auditor under this
includes technical corrections to those exemption, no later than two (2) months
published prohibited transaction imposed extend exclusively to JPMC
and the Investment Bank of JPMorgan after the execution of any such
exemptions (PTEs): PTE 2017–03, engagement agreement.’’
JPMorgan Chase & Co., D–11906; PTE Chase Bank. . . . The Department also
believes that the potential for The Department is revising Section
2017–04, Deutsche Investment I(i)(10) of the exemption to clarify the
Management Americas Inc. (DIMA) and disqualification of all JPMC Affiliated
QPAMs under this agreement will serve timing requirements for submission of
Certain Current and Future Asset the auditor agreements. As revised,
Management Affiliates of Deutsche Bank Section I(i)(10) of the exemption now
1 49 FR 9494, March 13, 1984, as corrected at 50
AG, D–11908; PTE 2017–05, Citigroup FR 41430 (October 10, 1985), as amended at 70 FR states: ‘‘(10) Any engagement agreement
Inc., D–11909; PTE 2017–06, Barclays 49305 (August 23, 2005) and as amended at 75 FR with an auditor to perform the audits
Capital Inc., D–11910; PTE 2017–07, 38837 (July 6, 2010), hereinafter referred to as PTE required under the terms of this
UBS Assets Management (Americas) 84–14 or the QPAM Exemption.
2 A ‘‘Covered Plan’’ is a plan subject to Part 4 of exemption must be submitted to OED by
Inc.; UBS Realty Investors LLC; UBS March 9, 2018 if the agreement was
Title 1 of ERISA (‘‘ERISA-covered plan’’) or a plan
Hedge Fund Solutions LLC; UBS subject to Section 4975 of the Code (‘‘IRA’’), with executed on or prior to January 10,
O’Connor LLC; and Certain Future respect to which a JPMC Affiliated QPAM relies on 2018. Any engagement agreement(s)
Affiliates in UBS’s Asset Management PTE 84–14, or with respect to which a JPMC
sradovich on DSK3GMQ082PROD with NOTICES
Affiliated QPAM (or any JPMC affiliate) has
entered into subsequent to January 10,
and Wealth Management Americas 2018 must be submitted to OED no later
expressly represented that the manager qualifies as
Divisions, D–11907. a QPAM or relies on the QPAM class exemption than two (2) months after the execution
(PTE 84–14). A Covered Plan does not include an of such engagement agreement.’’
7 For the same reasons which led the Florida ERISA-covered Plan or IRA to the extent the JPMC
Board of Medicine to revoke Respondent’s medical Affiliated QPAM has expressly disclaimed reliance Section I(j)(7)
license, I conclude that the public interest on QPAM status or PTE 84–14 in entering into its
necessitates that this Order be effective contract, arrangement, or agreement with the ERISA Section I(j)(7) of the exemption states:
immediately. 21 CFR 1316.67. covered plan or IRA. ‘‘(7) By July 9, 2018, each JPMC
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![Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices 7227
Affiliated QPAM must provide a notice reference describes the site as managed by an asset manager within the
of its obligations under this Section I(j) containing the required obligations corporate family of Deutsche Bank AG
to each Covered Plan. For all other under the temporary exemption), and (together with its current and future
prospective Covered Plans, the JPMC the Applicant informs clients who are affiliates, Deutsche Bank) may continue
Affiliated QPAM will agree to its Covered Plan clients as of the effective to benefit from the relief provided by
obligations under this Section I(j) in an date of this exemption, in writing, by PTE 84–14. The exemption is effective
updated investment management March 10, that they can go back to the from April 18, 2018 through April 17,
agreement between the JPMC Affiliated website to find the additional 2021 (the Exemption Period). The
QPAM and such clients or other written documents, which are identified. Department has decided to make certain
contractual agreement.’’ The Department is also clarifying that, technical and clarifying corrections to
The Department notes that the term for Covered Plans that enter into a the exemption, as described below.
‘‘prospective Covered Plan,’’ as used in written asset or investment management
Section I(j)(7), means a Covered Plan agreement with the Applicant between Technical Corrections
that enters into a written asset or January 11, 2018, and March 9, 2018, Section I Prefatory Language
investment management agreement with the written notice that the website has The prefatory language of Section I of
a JPMC Affiliated QPAM on or after July been updated must be provided to such the exemption states, in relevant part:
10, 2018. Covered Plans by March 31, 2018. ‘‘Certain entities with specified
Section I(k) FOR FURTHER INFORMATION CONTACT: Mr. relationships to Deutsche Bank AG . . .
Joseph Brennan of the Department, will not be precluded from relying on
Section I(k) of the exemption states: telephone (202) 693–8456. (This is not
‘‘(k) By March 10, 2018, each JPMC the exemptive relief provided by
a toll-free number). Prohibited Transaction Class Exemption
Affiliated QPAM will provide a notice
of the exemption, along with a separate Deutsche Investment Management 84–14 . . . notwithstanding: . . . . (2)
summary describing the facts that led to Americas Inc. (DIMA) and Certain the ‘US Conviction’ against DB Group
the Conviction (the Summary), which Current and Future Asset Management Services (UK) Limited, an affiliate of
have been submitted to the Department, Affiliates of Deutsche Bank AG Deutsche Bank based in the United
and a prominently displayed statement (Collectively, the Applicant or the DB Kingdom (hereinafter, DB Group
(the Statement) that the Conviction QPAMs), Located in New York, New Services, as further defined in Section
results in a failure to meet a condition York II(e)) . . . .’’
For consistency with the re-ordered
in PTE 84–14, to each sponsor and [Prohibited Transaction Exemption (PTE) Definitions in Section II of the
beneficial owner of a Covered Plan, or 2017–04; Exemption Application No. D– exemption, the relevant prefatory
the sponsor of an investment fund in 11908] language of Section I now reads, ‘‘DB
any case where a JPMC Affiliated QPAM
Discussion Group Services (UK) Limited, an
acts as a sub-advisor to the investment
affiliate of Deutsche Bank based in the
fund in which such ERISA-covered plan On December 29, 2017, the
United Kingdom (hereinafter, DB Group
and IRA invests. Any prospective client Department published PTE 2017–04 in
Services, as further defined in Section
for which a JPMC Affiliated QPAM the Federal Register at 82 FR 61840.
II(c)).’’
relies on PTE 84–14 or has expressly PTE 2017–04 is an administrative
represented that the manager qualifies exemption from the prohibited Section I(h)(1)(v)
as a QPAM or relies on the QPAM class transaction provisions of the Employee Section I(h)(1)(v) in the exemption
exemption must receive the proposed Retirement Income Security Act of 1974 states, in relevant part: ‘‘The Policies
and final exemptions with the Summary (the Act), and the Internal Revenue must require, and must be reasonably
and the Statement prior to, or Code of 1986, that permits certain designed to ensure that: . . . . (v) To
contemporaneously with, the client’s entities with specified relationships to the best of the DB QPAM’s knowledge
receipt of a written asset management Deutsche Securities Korea, Co. (DSK) 3 at the time, the DB QPAM does not
agreement from the JPMC Affiliated or DB Group Services (UK) Limited (DB make material misrepresentations or
QPAM. Disclosures may be delivered Group Services) 4 to continue to rely omit material information in its
electronically.’’ upon the relief provided by PTE 84–14 communications with such regulators
The Department is replacing the term for a period of three years,5 with respect to ERISA-covered plans or
‘‘prospective client’’ with ‘‘prospective notwithstanding certain criminal IRAs with respect to Covered Plans.’’
Covered Plan.’’ As revised, ‘‘prospective convictions (the Convictions). The For clarity, the Department has
Covered Plan,’’ as used in Section I(k), Department granted PTE 2017–04 to deleted the phrase ‘‘with respect to
means a Covered Plan that enters into a ensure that Covered Plans 6 with assets ERISA-covered plans or IRAs.’’ As
written asset or investment management revised, Section I(h)(1)(v) now reads, in
agreement with a JPMC Affiliated 3 Deutsche Securities Korea, Co. is a South
relevant part: ‘‘The Policies must
QPAM on or after March 10, 2018. Korean ‘‘affiliate’’ (as defined in Section VI(d) of
PTE 84–14) of Deutsche Bank AG.
require, and must be reasonably
The Department is clarifying that the 4 DB Group Services (UK) Limited is United designed to ensure that: . . . . (v) To
requirements of Section I(k) will be met Kingdom-based ‘‘affiliate’’ (as defined in Section the best of the DB QPAM’s knowledge
with respect to all current and VI(d) of PTE 84–14) of Deutsche Bank AG. at the time, the DB QPAM does not
prospective Covered Plans if, by March 5 49 FR 9494 (March 13, 1984), as corrected at 50
make material misrepresentations or
10, 2018, the Applicant posts the FR 41430 (October 10, 1985), as amended at 70 FR omit material information in its
required Section I(k) disclosure 49305 (August 23, 2005) and as amended at 75 FR
sradovich on DSK3GMQ082PROD with NOTICES
38837 (July 6, 2010), hereinafter referred to as PTE communications with such regulators
documents on a website whose link/ 84–14 or the QPAM exemption. with respect to Covered Plans.’’
address is referenced in: (a) The notice 6 A ‘‘Covered Plan’’ is a plan subject to Part 4 of
sent by the Applicant following the Title 1 of ERISA (‘‘ERISA-covered plan’’) or a plan the QPAM class exemption (PTE 84–14). A Covered
grant of the temporary exemption; or (b) subject to section 4975 of the Code (‘‘IRA’’) with Plan does not include an ERISA-covered plan or
respect to which a DB QPAM relies on PTE 84–14, IRA to the extent the DB QPAM has expressly
the relevant investment management or with respect to which a DB QPAM (or any disclaimed reliance on QPAM status or PTE 84–14
agreement received by the client Deutsche Bank affiliate) has expressly represented in entering into its contract, arrangement, or
(including instances where such that the manager qualifies as a QPAM or relies on agreement with the ERISA-covered plan or IRA.
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![Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices 7229
I(i)(10), as revised, now reads: ‘‘(10) Any proposed and final exemptions with the The Department is removing the word
engagement agreement to perform the Summary and the Statement prior to, or ‘‘legal’’ from Section I(m)(1)(i). As
audits required under the terms of this contemporaneously with, the client’s revised, Section I(m)(1)(i) now reads:
exemption must be submitted to OED by receipt of a written asset management ‘‘(i) The Compliance Officer must be a
June 17, 2018 if the agreement was agreement from the DB QPAM. professional who has extensive
executed on or prior to April 18, 2018. Disclosures may be delivered experience with, and knowledge of, the
Any engagement agreement(s) entered electronically.’’ regulation of financial services and
into subsequent to April 18, 2018 must The Department is revising Section products, including under ERISA and
be submitted to OED no later than two I(k) by adding the phrase ‘‘that entered the Code.’’
(2) months after the execution of such into a written asset or investment
engagement agreement.’’ management agreement with a DB Section I(m)(1)(ii)
Section I(j)(7) QPAM on or before June 16, 2018’’
Section I(m)(1)(ii) of the exemption
following the phrase ‘‘to each sponsor
Section I(j)(7) of the exemption in and beneficial owner of a Covered states: ‘‘(ii) The Compliance Officer
relevant part states: ‘‘(7) By October 17, Plan.’’ As revised, Section I(k) now must have a direct reporting line to the
2018, each DB QPAM must provide a states, in relevant part: ‘‘By June 17, highest-ranking corporate officer in
notice of its obligations under this 2018, each DB QPAM will provide a charge of legal compliance for asset
Section I(j) to each Covered Plan. For all notice of the exemption, along with a management.’’
other prospective Covered Plans, the DB separate summary describing the facts The Department is removing the word
QPAM will agree to its obligations that led to the Convictions (the ‘‘legal’’ from Section I(m)(1)(ii). As
under this Section I(j) in an updated Summary), which have been submitted
investment management agreement revised, Section I(m)(1)(ii) now reads:
to the Department, and a prominently ‘‘(ii) The Compliance Officer must have
between the DB QPAM and such clients
displayed statement (the Statement) that a direct reporting line to the highest-
or other written contractual agreement.
each Conviction separately results in a ranking corporate officer in charge of
This condition will be deemed met for
failure to meet a condition in PTE 84– compliance for asset management.’’
each Covered Plan that received a notice
14, to each sponsor and beneficial
pursuant to PTE 2016–13 that meets the Section II(a)
owner of a Covered Plan that entered
terms of this condition.’’
The Department notes that the term into a written asset or investment
management agreement with a DB Section II(a) of the exemption states:
‘‘prospective Covered Plan,’’ as used in ‘‘The term ‘Convictions’ means (1) the
Section I(j)(7), means a Covered Plan QPAM on or before June 16, 2018, or the
sponsor of an investment fund in any judgment of conviction against DB
that enters into a written asset or Group Services, in case number 3:15–
investment management agreement with case where a DB QPAM acts as a sub-
advisor to the investment fund in which cr–00062–RNC to be entered in the
a DB QPAM on or after October 17, United States District Court for the
2018. such ERISA-covered plan and IRA
invests.’’ District of Connecticut to a single count
The Department also notes that the
phrase, ‘‘This condition will be deemed The Department notes that the phrase, of wire fraud, in violation of 18 § U.S.C.
met for each Covered Plan that received ‘‘Any prospective client for which a DB 1343 . . .’’ This Section is revised to
a notice pursuant to PTE 2016–13 that QPAM relies on PTE 84–14 or has read,: ‘‘The term ‘Convictions’ means (1)
meets the terms of this condition,’’ expressly represented that the manager the judgment of conviction against DB
means that a notice that satisfies Section qualifies as a QPAM or relies on the Group Services that was entered on
I(j) of PTE 2016–13 will satisfy Section QPAM class exemption . . .’’ means April 18, 2017, in case number 3:15-cr-
I(j)(7) of this exemption, unless such any Covered Plan that enters into a 00062–RNC in the United States District
notice contains any language that limits, written asset or investment management Court for the District of Connecticut to
or is inconsistent with, the scope of this agreement with a DB QPAM on or after a single count of wire fraud, in violation
exemption. June 17, 2018. of 18 U.S.C. 1343 . . .’’
Section I(k) Section I(m)(1) Discussion of Written Comments
Section I(k) of the exemption states: Section I(m)(1) of the exemption
The prefatory section to the
‘‘(k) By June 17, 2018, each DB QPAM states: ‘‘(1) By October 17, 2018,
discussion of written comments on page
will provide a notice of the exemption, Deutsche Bank designates a senior
compliance officer (the Compliance 61840 of the Federal Register states:
along with a separate summary
Officer) who will be responsible for ‘‘[t]he Department received written
describing the facts that led to the
Convictions (the Summary), which have compliance with the Policies and comments from the Applicant, members
been submitted to the Department, and Training requirements described of the U.S. Congress, and a number of
a prominently displayed statement (the herein.’’ plan and IRA clients of Deutsche Bank.’’
Statement) that the Convictions result in The Department notes that each This section is revised to read, in
a failure to meet a condition in PTE 84– relevant line of business may designate relevant part, ‘‘[t]he Department
14, to each sponsor and beneficial its own Compliance Officer in order to received written comments from the
owner of a Covered Plan, or the sponsor comply with this condition. Applicant, members of the U.S.
of an investment fund in any case where Congress, and several other
Section I(m)(1)(i) commenters.’’
a DB QPAM acts as a sub-advisor to the
sradovich on DSK3GMQ082PROD with NOTICES
investment fund in which such ERISA- Section I(m)(1)(i) of the exemption
covered plan and IRA invests. Any states: ‘‘(i) The Compliance Officer must FOR FURTHER INFORMATION CONTACT: Mr.
prospective client for which a DB be a legal professional who has Scott Ness of the Department, telephone
QPAM relies on PTE 84–14 or has extensive experience with, and (202) 693–8561. (This is not a toll-free
expressly represented that the manager knowledge of, the regulation of financial number).
qualifies as a QPAM or relies on the services and products, including under
QPAM class exemption must receive the ERISA and the Code.’’
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![7230 Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
Citigroup Inc. (Citigroup or the QPAM,’’ with the following: ‘‘The QPAM acts as a sub-advisor to the
Applicant) Located in New York, New Department notes that Section I(i) investment fund in which such ERISA-
York requires the audit of each Citigroup covered plan and IRA invests. Any
[Prohibited Transaction Exemption (PTE)
Affiliated QPAM.’’ prospective clients for which a
2017–05; Exemption Application No. D– Section I(i)(10) Citigroup Affiliated QPAM relies on
11909] PTE 84–14 or has expressly represented
Section I(i)(10) of the exemption that the manager qualifies as a QPAM or
Discussion states: ‘‘(10) Each Citigroup Affiliated relies on the QPAM class exemption
On December 29, 2017, the QPAM and the auditor must submit to must receive the proposed and final
Department published PTE 2017–05 in [the Office of Exemption exemptions with the Summary and the
the Federal Register at 82 FR 61864. Determinations] OED: Any engagement Statement prior to, or
PTE 2017–05 is an administrative agreement(s) entered into pursuant to contemporaneously with, the client’s
exemption from the prohibited the engagement of the auditor under this receipt of a written asset or investment
transaction provisions of the Employee exemption, no later than two (2) months management agreement from the
Retirement Income Security Act of 1974 after the execution of any such Citigroup Affiliated QPAM. Disclosures
(the Act), and the Internal Revenue engagement agreement.’’ may be delivered electronically.’’
Code of 1986, that permits certain The Department is revising Section
I(i)(10) of the exemption to clarify the The Department notes that
entities with specified relationships to
timing requirements for submission of ‘‘prospective clients,’’ as referred to in
Citigroup to continue to rely upon the
the auditor agreements. As revised, Section I(k), means Covered Plans that
relief provided by PTE 84–14 7 for a
Section I(i)(10) of the exemption now enter into a written asset or investment
period of five years,8 notwithstanding
states: ‘‘(10) Any engagement agreement management agreement with a Citigroup
Citicorp’s criminal conviction (the
with an auditor to perform the audits Affiliated QPAM on or after March 10,
Conviction). The Department granted
required under the terms of this 2018. The Department also notes that
PTE 2017–05 to ensure that Covered
exemption must be submitted to OED by the disclosure materials required to be
Plans 9 whose assets are managed by a
March 9, 2018 if the agreement was provided to prospective clients under
Citigroup Affiliated QPAM or Citigroup
executed on or prior to January 10, Section I(k) do not need to be provided
Related QPAM may continue to benefit
from the relief provided by PTE 84–14. 2018. Any engagement agreement(s) to such clients prior to March 10, 2018.
The Department has decided to make entered into subsequent to January 10, Such disclosures, rather, must be made,
certain technical and clarifying 2018 must be submitted to OED no later ‘‘prior to, or contemporaneously with,
corrections to the exemption, as than two (2) months after the execution the client’s receipt of a written asset or
described below. of such engagement agreement.’’ investment management agreement from
the Citigroup Affiliated QPAM.’’
Technical Corrections Section I(j)(7) Finally, the Department notes that the
Preamble Section I(j)(7) of the exemption states: disclosure materials required to be
‘‘(7) By July 9, 2018, each Citigroup provided to prospective clients under
The Department is replacing the term Affiliated QPAM must provide a notice the second sentence of Section I(k) are
‘‘Citcorp’’ with ‘‘Citicorp’’ on page of its obligations under this Section I(j) the same materials referenced in the
61876 of the preamble to the exemption. to each Covered Plan. For all other first sentence of Section I(k).
Section I(i)(1) prospective Covered Plans, the
Citigroup Affiliated QPAM will agree to Section I(p)
The Department is revising its its obligations under this Section I(j) in
discussion of the entities subject to the The discussion of the Right to Copies
an updated investment management of Policies and Procedures on page
Section I(i) Audit requirement. On page agreement between the Citigroup
61869 of the exemption, the Department 61876 of the exemption states: ‘‘The
Affiliated QPAM and such clients or Department has also modified Section
is replacing the sentence that reads: other written contractual agreement.’’
‘‘The Department notes that Section I(i) I(p) to require that the Citigroup
The Department notes that the term
requires the audit of each Citigroup Affiliated QPAMs provide notice
‘‘prospective Covered Plan,’’ as used in
entity that relies upon QPAM status, or regarding the information on the
Section I(j)(7), means a Covered Plan
expressly represents to ERISA-covered website within 60 days of the effective
that enters into a written asset or
plan or IRA clients that it qualifies as a date of this exemption, and thereafter to
investment management agreement with
the extent certain material changes are
a Citigroup Affiliated QPAM on or after
7 49 FR 9494, March 13, 1984, as corrected at 50 made to the Policies.’’
FR 41430 (October 10, 1985), as amended at 70 FR
July 10, 2018.
49305 (August 23, 2005) and as amended at 75 FR
The Department is revising the
Section I(k) discussion of the Right to Copies of
38837 (July 6, 2010), hereinafter referred to as PTE
84–14 or the QPAM Exemption. Section I(k) of the exemption states: Policies and Procedures to conform with
8 PTE 2017–05 is effective from January 10, 2018
‘‘(k) By March 10, 2018, each Citigroup the language of Section I(p). As revised,
through January 9, 2023. Affiliated QPAM will provide a notice the discussion on page 61876 now
9 A ‘‘Covered Plan’’ is a plan subject to Part 4 of
Title 1 of ERISA (‘‘ERISA-covered plan’’) or a plan
of the exemption, along with a separate states: ‘‘The Department has also
subject to Section 4975 of the Code (‘‘IRA’’), with summary describing the facts that led to modified Section I(p) to require that the
respect to which a Citigroup Affiliated QPAM relies the Conviction (the Summary), which Citigroup Affiliated QPAMs provide
on PTE 84–14, or with respect to which a Citigroup have been submitted to the Department, notice regarding the information on the
sradovich on DSK3GMQ082PROD with NOTICES
Affiliated QPAM (or any Citigroup affiliate) has
expressly represented that the manager qualifies as
and a prominently displayed statement website by July 9, 2018. If the Policies
a QPAM or relies on the QPAM class exemption (the Statement) that the Conviction are thereafter changed, each Covered
(PTE 84–14). A Covered Plan does not include an results in a failure to meet a condition Plan client must receive a new
ERISA-covered Plan or IRA to the extent the in PTE 84–14, to each sponsor and disclosure within six (6) months
Citigroup Affiliated QPAM has expressly
disclaimed reliance on QPAM status or PTE 84–14
beneficial owner of a Covered Plan, or following the end of the calendar year
in entering into its contract, arrangement, or the sponsor of an investment fund in during which the Policies were
agreement with the ERISA covered plan or IRA. any case where a Citigroup Affiliated changed.’’
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![Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices 7231
FOR FURTHER INFORMATION CONTACT: Mr. Affiliated QPAMs) did not receive direct displayed statement (the Statement) that
Joseph Brennan of the Department, compensation, or knowingly receive the Conviction results in a failure to
telephone (202) 693–8456. (This is not indirect compensation, in connection meet a condition in PTE 84–14, prior to,
a toll-free number). with the criminal conduct that is the or contemporaneously with, the client’s
subject of the Conviction.’’ This Section receipt of a written asset management
Barclays Capital Inc. (BCI or the
is revised by replacing ‘‘within BCI’’ agreement from the Barclays Affiliated
Applicant), Located in New York, New
with ‘‘of a BPLC subsidiary.’’ In QPAM. Disclosures may be delivered
York
addition, the phrase, ‘‘who had electronically.’’
[Prohibited Transaction Exemption (PTE) responsibility for or exercised authority The Department is replacing the term
2017–06; Exemption Application No. D– in connection with the management of ‘‘client’’ with ‘‘Covered Plan.’’ As
11910] plan assets’’ now appears after revised, ‘‘Covered Plan,’’ as used in
Discussion ‘‘Barclays Affiliated QPAMs’’ in the Section I(k), means a Covered Plan that
parenthetical. As revised, Section I(b) enters into a written asset or investment
On December 29, 2017, the reads, in pertinent part, ‘‘Apart from a
Department published PTE 2017–06 in management agreement with a Barclays
non-fiduciary line of business of a BPLC Affiliated QPAM.
the Federal Register at 82 FR 61881. subsidiary, the Barclays Affiliated
PTE 2017–06 is an administrative QPAMs and the Barclays Related Section I(m)(1)(iv)
exemption from the prohibited QPAMs (including their officers,
transaction provisions of the Employee Section I(m)(1)(iv) states: ‘‘(iv) Each
directors, and agents other than BPLC, Annual Report must be provided to the
Retirement Income Security Act of 1974 and employees of such Barclays
(the Act), and the Internal Revenue appropriate corporate officers of BPLC
Affiliated QPAMs who had and each Barclays Affiliated QPAM to
Code of 1986, that permits certain responsibility for or exercised authority
entities with specified relationships to which such report relates; the head of
in connection with the management of compliance and the General Counsel (or
Barclays PLC (BPLC) to continue to rely plan assets) did not receive direct
upon the relief provided by PTE 84–14 their functional equivalent) of the
compensation . . . .’’ relevant Barclays Affiliated QPAM and
for a period of five years,10
notwithstanding certain criminal Section I(j) the General Counsel (or their functional
convictions (the Convictions). The equivalent) of BPLC; and must be made
Section I(j) of the exemption states, in unconditionally available to the
Department granted PTE 2017–06 to relevant part:
ensure that Covered Plans 11 with assets independent auditor described in
‘‘As of January 10, 2018 and
managed by an asset manager within the Section I(i) above.’’
throughout the Exemption Period, with
corporate family of BPLC may continue respect to any arrangement, agreement, Comment Section 37 of the exemption
to benefit from the relief provided by or contract between a Barclays Affiliated at 82 FR 61896 states that the
PTE 84–14. The effective date of PTE QPAM and a Covered Plan, the Barclays Department intended to revise Section
2017–06 is January 10, 2018, and the Affiliated QPAM agrees and I(m)(1)(iv) by deleting the phrase, ‘‘the
exemption is effective from January 10, warrants . . . .’’ appropriate corporate officers of BPLC
2018, through January 9, 2023 (the For clarity, the phrase, ‘‘As of January and each Barclays Affiliated QPAM to
Exemption Period). 10, 2018 and throughout the Exemption which such report relates’’ from the
The Department has decided to make Period,’’ is revised to read, ‘‘Effective on condition. Such revision did not appear
certain technical and clarifying the date that a Barclays Affiliated in the text. Therefore, the Department is
corrections to the exemption, as QPAM enters into any arrangement, now revising Section I(m)(1)(iv) to read,
described below. agreement, or contract, after January 10, ‘‘(iv) Each Annual Report must be
2018, with any Covered Plan, and provided to the head of compliance and
Technical Corrections the General Counsel (or their functional
throughout the Exemption
Section I(b) Period, . . . .’’ equivalent) of the relevant Barclays
Section I(b) of the exemption states: Affiliated QPAM and the General
Section I(j)(7) Counsel (or their functional equivalent)
‘‘Apart from a non-fiduciary line of
business within BCI, the Barclays Section I(j)(7) states: ‘‘Prior to a of BPLC; and must be made
Affiliated QPAMs and the Barclays Barclays Affiliated QPAM’s engagement unconditionally available to the
Related QPAMs (including their with an ERISA-covered plan or IRA for independent auditor described in
officers, directors, and agents other than the provision of asset management or Section I(i) above.’’
BPLC, and employees of such Barclays other discretionary fiduciary Section II(d) 12
services . . . .’’ The Department is
10 49 FR 9494, March 13, 1984, as corrected at 50 replacing the phrase, ‘‘an ERISA- Section II(d) states, ‘‘The term
FR 41430 (October 10, 1985), as amended at 70 FR covered plan or IRA’’ with ‘‘a Covered ‘‘Conviction’’ means the judgment of
49305 (August 23, 2005) and as amended at 75 FR Plan.’’ conviction against BPLC for violation of
38837 (July 6, 2010), hereinafter referred to as PTE the Sherman Antitrust Act, 15 U.S.C. 1,
84–14. Section I(k)
11 A ‘‘Covered Plan’’ is a plan subject to Part 4
which is scheduled to be entered in the
of Title 1 of ERISA (‘‘ERISA-covered plan’’) or a
Section I(k) states: ‘‘Any client for District Court for the District of
plan subject to section 4975 of the Code (‘‘IRA’’) which a Barclays Affiliated QPAM relies Connecticut (the District Court), Case
with respect to which a Barclays Affiliated QPAM on PTE 84–14 or has expressly Number 3:15–cr–00077–SRU–1.’’
relies on PTE 84–14, or with respect to which a represented that the manager qualifies
sradovich on DSK3GMQ082PROD with NOTICES
Barclays Affiliated QPAM (or any BPLC affiliate) Section II(d) is revised to reflect that
has expressly represented that the manager qualifies
as a QPAM or relies on the QPAM class the Conviction occurred prior to the
as a QPAM or relies on the QPAM class exemption exemption must receive the proposed effective date of the exemption. Section
(PTE 84–14). A Covered Plan does not include an and final exemptions, along with a II(d) now reads, in pertinent part,
ERISA-covered plan or IRA to the extent the separate summary describing the facts
Barclays Affiliated QPAM has expressly disclaimed
reliance on QPAM status or PTE 84–14 in entering
that led to the Conviction (the 12 In the final grant notice, the Department
into its contract, arrangement, or agreement with Summary), which have been submitted renumbered Section II(d), which was previously
the ERISA-covered plan or IRA. to the Department, and a prominently Section II(e) in the proposed exemption.
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![7232 Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
‘‘. . . . 15 U.S.C. 1, which was entered ensure that Covered Plans 16 with assets the word ‘‘such’’ with the word ‘‘each’’
in the District Court. . . .’’ managed by UBS QPAMs may continue and by inserting the phrase ‘‘with
to benefit from the relief provided by respect to each Covered Plan’’ after the
Section II(e) 13 PTE 84–14. The exemption is effective phrase ‘‘as applicable.’’ As revised,
SectionII(e) states, ‘‘The term from January 10, 2018 through January Section I(h)(1)(ii) now reads, ‘‘The UBS
‘‘Conviction Date’’ means the date of the 9, 2021 (the Exemption Period). The QPAM fully complies with ERISA’s
judgment of the trial court. For Department has decided to make certain fiduciary duties, and with ERISA and
avoidance of confusion, the Conviction technical and clarifying corrections to the Code’s prohibited transaction
Date is January 10, 2017, as set forth in the exemption, as described below. provisions, in each case as applicable
Case Number 3:15–cr–00077–SRU.’’ with respect to each Covered Plan, and
Technical Corrections
Section II(e) is revised to add a ‘‘–1’’ does not knowingly participate in any
after the letters ‘‘SRU’’ in the case Section I(f) violation of these duties and provisions
number. As revised, Section II(e) now Section I(f) of the exemption states: with respect to Covered Plans.’’
reads, in pertinent part, ‘‘. . . . as set ‘‘[a] UBS QPAM did not exercise Section I(h)(2)(ii) and Section I(i)(10)
forth in Case Number 3:15–cr–00077– authority over the assets of any plan
Section I(h)(2)(ii) of the exemption
SRU–1.’’ subject to Part 4 of Title I of ERISA (an
states: ‘‘(2) Each UBS QPAM must
ERISA-covered plan) or section 4975 of
FOR FURTHER INFORMATION CONTACT: Ms. develop and implement a program of
the Code (an IRA) in a manner that it
Anna Mpras Vaughan of the training (the Training), conducted at
knew or should have known would:
Department, telephone (202) 693–8565. least annually, for all relevant UBS
Further the FX Misconduct or the
(This is not a toll-free number). QPAM asset/portfolio management,
criminal conduct that is the subject of
trading, legal, compliance, and internal
UBS Assets Management (Americas) the Convictions; or cause the UBS
audit personnel. The Training must:
Inc.; UBS Realty Investors LLC; UBS QPAM, its affiliates or related parties to
. . . . (ii) [b]e conducted by an
Hedge Fund Solutions LLC; UBS directly or indirectly profit from the FX
independent professional who has been
O’Connor LLC; and Certain Future Misconduct or the criminal conduct that
prudently selected and who has
Affiliates in UBS’s Asset Management is the subject of the Convictions.’’ The
appropriate technical training and
and Wealth Management Americas Department is revising Section I(f) by
proficiency with ERISA and the Code.’’
Divisions (collectively, the Applicants inserting the word ‘‘or’’ between the
The Department is revising Section
or the UBS QPAMs) Located in Chicago, phrase ‘‘or cause the UBS QPAM’’ and
I(h)(2)(ii) to reflect that the required
Illinois; Hartford, Connecticut; New the phrase ‘‘its affiliates’’ and by
training may be conducted by
York, New York; and Chicago, Illinois, removing the phrase ‘‘or related
appropriate UBS personnel who have
Respectively parties.’’ As revised, Section I(f) now
been prudently selected. Therefore, the
reads, ‘‘A UBS QPAM did not exercise
[Prohibited Transaction Exemption (PTE) Department is removing the word
authority over the assets of any plan
2017–07; Exemption Application No. D– ‘‘independent’’ from Section I(h)(2)(ii)
subject to Part 4 of Title I of ERISA (an
11907] and, as revised, Section I(h)(2)(ii) now
ERISA-covered plan) or section 4975 of
reads: ‘‘Be conducted by a professional
Discussion the Code (an IRA) in a manner that it
who has been prudently selected and
knew or should have known would:
who has appropriate technical training
On December 29, 2017, the further the FX Misconduct or the
and proficiency with ERISA and the
Department published PTE 2017–07 in criminal conduct that is the subject of
Code.’’
the Federal Register at 82 FR 61903. the Convictions; or cause the UBS Section I(i)(10) of the exemption
PTE 2017–07 is an administrative QPAM or its affiliates to directly or states: ‘‘[e]ach UBS QPAM and the
exemption from the prohibited indirectly profit from the FX auditor must submit to OED any
transaction provisions of the Employee Misconduct or the criminal conduct that engagement agreement(s) entered into
Retirement Income Security Act of 1974 is the subject of the Convictions.’’ pursuant to the engagement of the
(the Act), and the Internal Revenue auditor under this exemption. Further,
Section I(h)(1)(ii)
Code of 1986, that permits certain each UBS QPAM must submit to OED
entities with specified relationships to Section I(h)(1)(ii) of the exemption
states: ‘‘[t]he UBS QPAM fully complies any engagement entered into with any
UBS (as defined in Section II(g)) other person or entity retained in
(hereinafter, the UBS QPAMs) to with ERISA’s fiduciary duties, and with
ERISA and the Code’s prohibited connection with such QPAM’s
continue to rely upon the relief compliance with the Training or
provided by PTE 84–14 for a period of transaction provisions, in such case as
applicable, and does not knowingly Policies conditions of this exemption no
three years,14 notwithstanding the later than two (2) months after the
‘‘2013 Conviction’’ of UBS Securities participate in any violation of these
duties and provisions with respect to execution of any such engagement
Japan Co. Ltd 15 and the ‘‘2017 agreement.’’ The Department is revising
Conviction’’ of UBS (collectively, the Covered Plans.’’ For clarity and
consistency, the Department is replacing Section I(i)(10) to reflect that the UBS
Convictions as defined in Section II(a)). QPAMs need not submit to Office of
The Department granted PTE 2017–07 to Exemption Determinations (OED) an
16 A ‘‘Covered Plan’’ is a plan subject to Part 4
of Title 1 of ERISA (‘‘ERISA-covered plan’’) or a engagement agreement entered into to
13 Inthe final grant notice, the Department plan subject to section 4975 of the Code (‘‘IRA’’) comply with the training or Policy
renumbered Section II(e), which was previously with respect to which a UBS QPAM relies on PTE conditions, and to reflect that any
sradovich on DSK3GMQ082PROD with NOTICES
Section II(f) in the proposed exemption. 84–14, or with respect to which a UBS QPAM (or
14 49 FR 9494, March 13, 1984, as corrected at 50
any UBS affiliate) has expressly represented that the
engagement agreement entered into with
FR 41430 (October 10, 1985), as amended at 70 FR manager qualifies as a QPAM or relies on the the auditor prior to or on January 10,
49305 (August 23, 2005) and as amended at 75 FR QPAM class exemption (PTE 84–14). A Covered 2018 in order to comply with this
38837 (July 6, 2010), hereinafter referred to as PTE Plan does not include an ERISA-covered plan or exemption must be submitted by March
84–14 or the QPAM exemption. IRA to the extent the UBS QPAM has expressly
15 UBS Securities Japan Co. Ltd is a wholly disclaimed reliance on QPAM status or PTE 84–14
9, 2018. Section I(i)(10), as revised, now
owned subsidiary of UBS incorporated under the in entering into its contract, arrangement, or reads: ‘‘Any engagement agreement with
laws of Japan. agreement with the ERISA-covered plan or IRA. an auditor to perform the audits
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![Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices 7233
required under the terms of this Section I(i) will supersede the terms of the end of the relevant period described
exemption must be submitted to OED by Section I(i) of PTE 2016–17 except as in Section I(i)(1) for completing the
March 9, 2018 if the agreement was otherwise provided in this exemption. audit, the auditor must issue a written
executed on or prior to January 10, In determining compliance with the report (the Audit Report) to UBS and the
2018. Any engagement agreement(s) conditions for relief in PTE 2016–17 and UBS QPAM to which the audit applies
entered into subsequent to January 10, this exemption, including the Policies that describes the procedures performed
2018 must be submitted to OED no later and Training requirements, for purposes by the auditor during the course of its
than two (2) months after the execution of conducting the audit, the auditor will examination. The auditor, at its
of such engagement agreement.’’ rely on the conditions for exemptive discretion, may issue a single
relief as then applicable to the consolidated Audit Report that covers
Section I(i)(1) and Footnote 71
respective periods under audit.’’ all the UBS QPAMs. The Audit Report
Section I(i)(1) of the exemption states, As revised, Section I(i)(1) in relevant must include the auditor’s specific
in relevant part: ‘‘Each UBS QPAM part now states, ‘‘Each UBS QPAM determinations regarding: . . . (ii) The
submits to an audit conducted annually submits to an audit conducted annually adequacy of the Annual Review
by an independent auditor, who has by an independent auditor, who has described in Section I(m).’’
been prudently selected and who has been prudently selected and who has For clarity, the Department is revising
appropriate technical training and appropriate technical training and Section I(i)(5)(ii) of the exemption by
proficiency with ERISA and the Code, to proficiency with ERISA and the Code, to adding the phrase ‘‘most recent’’ before
evaluate the adequacy of, and each UBS evaluate the adequacy of, and each UBS the phrase ‘‘Annual Review’’. As
QPAM’s compliance with, the Policies QPAM’s compliance with, the Policies revised, Section I(i)(5)(ii) now reads, in
and Training described herein. The and Training described herein. The relevant part, ‘‘The adequacy of the
audit requirement must be incorporated audit requirement must be incorporated most recent Annual Review described in
in the Policies. The first annual audit in the Policies. The first annual audit Section I(m).’’
must cover a fourteen-month period that must cover a fourteen-month period that
begins on January 10, 2017 (the Initial Section I((i)(7)
begins on January 10, 2018 and ends on
Audit Period) and all subsequent audits March 9, 2019 (the Initial Audit Period), Section I(i)(7) of the exemption states:
must cover consecutive twelve month and must be completed by September 9, ‘‘[w]ith respect to each Audit Report,
periods commencing upon the end of 2019. The second audit must cover the the General Counsel, or one of the three
the Initial Audit Period. The Initial period from March 10, 2019 through most senior executive officers of the
Audit Period shall cover the period of March 9, 2020 and must be completed UBS QPAM to which the Audit Report
time during which PTE 2016–17 is by September 9, 2020. In the event that applies, must certify in writing, under
effective and a portion of the time the Exemption Period is extended or a penalty of perjury, that the officer has
during which this exemption is effective new exemption is granted, the third reviewed the Audit Report and this
and the audit terms contained in this audit would cover the period from exemption; that, such UBS QPAM has
Section I(i) will supersede the terms of March 10, 2020 through March 9, 2021 addressed, corrected, remedied any
Section I(i) of PTE 2016–17 except as and would have to be completed by noncompliance and inadequacy or has
otherwise provided in this exemption. September 9, 2021 (unless the an appropriate written plan to address
In determining compliance with the Department chooses to alter the annual any inadequacy regarding the Policies
conditions for relief in PTE 2016–17 and audit requirement in the new or and Training identified in the Audit
this exemption, including the Policies extended exemption).’’ Report. Such certification must also
and Training requirements, for purposes In coordination with the correction to include the signatory’s determination,
of conducting the audit, the auditor will Section I(i)(1) above, Footnote 71 on that the Policies and Training in effect
rely on the conditions for exemptive page 61917 included with Section I(i) is at the time of signing are adequate to
relief as then applicable to the revised to state, ‘‘The third audit ensure compliance with the conditions
respective periods under audit’’ referenced above would not have to be of this exemption and with the
(footnotes omitted). completed until after the Exemption applicable provisions of ERISA and the
To correct the timing of the audit Period expires. If the Department Code.’’
requirement, the Department is revising ultimately decides to grant relief for an For consistence with the Department’s
Section I(i)(1) of the exemption to reflect additional period, it could decide to intention, as expressed in the
that the Initial Audit Period begins on alter the terms of the exemption, exemption’s comment section on page
January 10, 2018 and ends on March 9, including the audit conditions (and the 61911 regarding certification of the
2019, and the corresponding Audit timing of the audit requirements). Audit Report, Section I(i)(7) is revised
Report must be completed by September Nevertheless, the Applicant should by adding the phrase ‘‘to the best of
9, 2019. Additionally, the Second audit anticipate that the Department will such officer’s knowledge at the time’’
period must cover the period March 10, insist on strict compliance with the after the phrase ‘‘that the officer has
2019 through March 9, 2020 and must audit terms and schedule set forth reviewed the Audit Report and this
be completed by September 9, 2020 and above. As it considers any new exemption; that . . .’’ and after the
the third audit must cover the period exemption application, the Department phrase ‘‘Such certification must also
from March 10, 2020 through March 9, may also contact the auditor for any include the signatory’s determination
2021. In connection with the revision, information relevant to its that. . . .’’ As revised, Section I(i)(7)
the Department is deleting from Section determination.’’ now reads, ‘‘With respect to each Audit
I(i) the following language and Report, the General Counsel, or one of
sradovich on DSK3GMQ082PROD with NOTICES
The Department’s discussion in
corresponding footnote 72 on page Comment V on page 61909 of the the three most senior executive officers
61917 of the exemption: ‘‘The Initial exemption should be read in a manner of the UBS QPAM to which the Audit
Audit Period shall cover the period of that is consistent with these revisions. Report applies, must certify in writing,
time during which PTE 2016–17 is under penalty of perjury, that the officer
effective and a portion of the time Section I(i)(5)(ii) has reviewed the Audit Report and this
during which this exemption is effective Section I(i)(5)(ii) of the exemption exemption; that, to the best of such
and the audit terms contained in this states: ‘‘(5) For each audit, on or before officer’s knowledge at the time, such
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![7234 Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
UBS QPAM has addressed, corrected, Section I(k) qualifies as a QPAM or relies on the
remedied any noncompliance and Section I(k) of the exemption states: QPAM class exemption . . .’’ means:
inadequacy or has an appropriate ‘‘By March 10, 2018, each UBS QPAM Any Covered Plan that enters into a
written plan to address any inadequacy will provide a notice of the exemption, written asset or investment management
regarding the Policies and Training along with a separate summary agreement with a UBS QPAM on or after
identified in the Audit Report. Such describing the facts that led to the March 10, 2018.
certification must also include the Convictions (the Summary), which have Section I(m)(1) and Footnote 73
signatory’s determination that, to the been submitted to the Department, and
best of such officer’s knowledge at the Section I(m)(1) of the exemption
a prominently displayed statement (the states: ‘‘[b]y July 9, 2018, UBS
time, the Policies and Training in effect Statement) that each Conviction
at the time of signing are adequate to designates a senior compliance officer
separately results in a failure to meet a (the Compliance Officer) who will be
ensure compliance with the conditions condition in PTE 84–14, to each sponsor
of this exemption and with the responsible for compliance with the
and beneficial owner of a Covered Plan, Policies and Training requirements
applicable provisions of ERISA and the
or the sponsor of an investment fund in described herein. The Compliance
Code.’’
any case where a UBS QPAM acts as a Officer must conduct an annual review
Section I(i)(9) sub-advisor to the investment fund in for each period corresponding to the
Section I(i)(9) of the proposed which such ERISA-covered plan and audit periods set forth in Section I(i)(1)
exemption states: ‘‘(9) Each UBS QPAM IRA invests. Any prospective client for (including the Initial Audit Period) (the
must provide its certified Audit Report, which a UBS QPAM relies on PTE 84– Annual Review) to determine the
by regular mail to: The Department’s 14 or has expressly represented that the adequacy and effectiveness of the
Office of Exemption Determinations manager qualifies as a QPAM or relies implementation of the Policies and
(OED), 200 Constitution Avenue NW, on the QPAM class exemption must Training. With respect to the
Suite 400, Washington, DC 20210, or by receive the proposed and final Compliance Officer, the following
private carrier to: 122 C Street NW, exemptions with the Summary and the conditions must be met’’ (footnote
Suite 400, Washington, DC 20001–2109, Statement prior to, or omitted). Footnote 73 on page 61919 of
no later than 45 days following its contemporaneously with, the client’s the exemption provides that, ‘‘Note that
completion.’’ Section I(i)(9) of the final receipt of a written asset management such Annual Review must be completed
exemption states: ‘‘(9) Each UBS QPAM agreement from the UBS QPAM. with respect to the annual periods
provides its certified Audit Report, by Disclosures may be delivered ending January 9, 2019; January 9, 2020;
regular mail . . . . This delivery must electronically.’’ and January 9, 2021.’’
take place no later than 30 days The Department is revising Section For consistence with the Department’s
following completion of the Audit I(k) by adding the phrase ‘‘that entered intention, as expressed in the
Report.’’ into a written asset or investment exemption’s comment section V on page
The Department is revising Section management agreement with a UBS 61909, that it would be efficient for the
I(i)(9) for consistence with the proposed QPAM on or before March 9, 2018’’ time frame for the Annual Review to
exemption, by replacing the phrase ‘‘30 following the phrase ‘‘to each sponsor coordinate with the time frame for the
days’’ with the phrase ‘‘45 days.’’ As and beneficial owner of a Covered Plan’’ compliance review conducted by the
revised, Section I(i)(9) in relevant part to clarify that Covered Plans that have UBS QPAMs for other regulators, the
now states, ‘‘This delivery must take entered into a written asset or Department is revising the Initial Audit
place no later than 45 days following investment management agreement with Period to reflect that such period begins
completion of the Audit Report.’’ a UBS QPAM on or before March 9, on January 10, 2018 and ends on March
2018 must receive the disclosure 9, 2019. Additionally, the Department is
Section I(j)(7) material required under Section I(k) by revising footnote 73 on page 61919 of
Section I(j)(7) of the exemption states: March 10, 2018. As revised, Section I(k) the exemption to be consistent with the
‘‘[b]y July 9, 2018, each UBS QPAM in relevant part now states, ‘‘By March revised dates of the audit periods and to
must provide a notice of its obligations 10, 2018, each UBS QPAM will provide remove the word ‘‘annual’’ before the
under this Section I(j) to each Covered a notice of the exemption, along with a word ‘‘periods.’’ As revised, footnote 73
Plan. For all other prospective Covered separate summary describing the facts now reads, ‘‘Note that such Annual
Plans, the UBS QPAM will agree to its that led to the Convictions (the Review must be completed with respect
obligations under this Section I(j) in an Summary), which have been submitted to the periods ending March 9, 2019;
updated investment management to the Department, and a prominently March 9, 2020; and March 9, 2021.’’
agreement between the UBS QPAM and displayed statement (the Statement) that
such clients or other written contractual each Conviction separately results in a Section I(m)(1)(ii)
agreement. This condition will be failure to meet a condition in PTE 84– Section I(m)(1)(ii) provides that,
deemed met for each Covered Plan that 14, to each sponsor and beneficial ‘‘[t]he Compliance Officer has a dual-
received a notice pursuant to PTE 2016– owner of a Covered Plan that entered reporting line within UBS’s Compliance
17 that meets the terms of this into a written asset or investment and Operational Risk Control (C&ORC)
condition. Notwithstanding the above, a management agreement with a UBS function: (A) a divisional reporting line
UBS QPAM will not violate the QPAM on or before March 9, 2018, or to the Head of Compliance and
condition solely because a Plan or IRA the sponsor of an investment fund in Operational Risk Control, Asset
Management, and (B) a regional
sradovich on DSK3GMQ082PROD with NOTICES
refuses to sign an updated investment any case where a UBS QPAM acts as a
management agreement.’’ sub-advisor to the investment fund in reporting line to the Head of Americas
The Department notes that the term which such ERISA-covered plan and Compliance and Operational Risk
‘‘prospective Covered Plan,’’ as used in IRA invests.’’ Control. The C&ORC function will be
Section I(j)(7), means a Covered Plan The Department notes that the phrase, organizationally independent of UBS’s
that enters into a written asset or ‘‘Any prospective client for which a business divisions—including Asset
investment management agreement with UBS QPAM relies on PTE 84–14 or has Management and the Investment Bank—
a UBS QPAM on or after July 9, 2018. expressly represented that the manager and is led by the Global Head of
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![Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices 7235
C&ORC, who will report directly to certain material changes are made to the DEPARTMENT OF LABOR
UBS’s Chief Risk Officer.’’ Policies.’’
To accommodate UBS’s Occupational Safety and Health
organizational structure in a manner References to ‘‘UBS’’ and ‘‘UBS, AG’’ Administration
consistent with the requirements of this The term ‘‘UBS, AG’’ as it appears in
[Docket No. OSHA–2011–0185]
exemption, Section I(m)(1)(ii) of the Section II(g) is revised to ‘‘UBS AG.’’
exemption is revised to read, ‘‘The The term ‘‘UBS, AG’’ is it appears Vehicle-Mounted Elevating and
Compliance Officer has a reporting line elsewhere in the exemption is revised to Rotating Work Platforms (Aerial Lifts);
within UBS’s Compliance and mean ‘‘UBS.’’ Extension of the Office of Management
Operational Risk Control (C&ORC) and Budget’s (OMB) Approval of
function to the Head of Compliance and Definition of UBS QPAM—Section II(h)
Information Collection (Paperwork)
Operational Risk Control, Asset Section II(h) of the exemption states:
Requirements
Management. The C&ORC function is ‘‘[t]he term ‘UBS QPAM’ means UBS
organizationally independent of UBS’s Asset Management (Americas) Inc., UBS AGENCY: Occupational Safety and Health
business divisions—including Asset Realty Investors LLC, UBS Hedge Fund Administration, Labor.
Management and the Investment Bank— Solutions LLC, UBS O’Connor LLC, and ACTION: Request for public comments.
and is led by the Global Head of any future entity within the Asset
C&ORC, who will report directly to Management or the Wealth Management SUMMARY: OSHA solicits public
UBS’s Chief Risk Officer.’’ Americas divisions of UBS, AG that comments concerning its proposal to
Section I(m)(2)(v) qualifies as a ‘qualified professional extend OMB approval of the
asset manager’ (as defined in Section information collection requirements
Section I(m)(2)(v) of the exemption VI(a) of PTE 84–14) and that relies on contained in the Standard on Vehicle-
states that, ‘‘[e]ach Annual Review, the relief provided by PTE 84–14 or Mounted Elevating and Rotating Work
including the Compliance Officer’s represents to ERISA-covered plans and Platforms (Aerial Lifts). The purpose of
written Annual Report, must be IRAs that it qualifies as a QPAM and the requirements is to reduce workers’
completed within at least three (3) with respect to which UBS, AG is an risk of death or serious injury by
months following the end of the period ‘affiliate’ (as defined in Part VI(d) of PTE ensuring that aerial lifts are in safe
to which it relates.’’ Section I(m)(2)(v) of 84–14). The term ‘UBS QPAM’ excludes operating condition.
the exemption is revised by deleting the UBS, AG and UBS Securities Japan’’ DATES: Comments must be submitted
phrase ‘‘at least.’’ As revised, Section (footnote omitted). (postmarked, sent, or received) by April
I(m)(2)(v) now reads, ‘‘Each Annual The Department is revising Section
Review, including the Compliance 23, 2018.
II(h) of the exemption by deleting the ADDRESSES:
Officer’s written Annual Report, must phrase ‘‘or represents to ERISA-covered
be completed within three (3) months Electronically: You may submit
plans and IRAs that it qualifies as a comments and attachments
following the end of the period to which QPAM.’’ As revised, Section II(h) now
it relates.’’ electronically at http://
reads, ‘‘The term ‘UBS QPAM’ means www.regulations.gov, which is the
Comment Section Regarding Notice of UBS Asset Management (Americas) Inc., Federal eRulemaking Portal. Follow the
Right To Obtain Copy of Policies— UBS Realty Investors LLC, UBS Hedge instructions online for submitting
Section I(r) Fund Solutions LLC, UBS O’Connor comments.
The comment section on page 61915 LLC, and any future entity within the Facsimile: If your comments,
of the exemption discussing the right to Asset Management or the Wealth including attachments, are not longer
obtain a copy of the Polices is hereby Management Americas divisions of UBS than 10 pages, you may fax them to the
revised to be consistent with Section I(r) that qualifies as a ‘qualified professional OSHA Docket Office at (202) 693–1648.
of the exemption, which provides that asset manager’ (as defined in Section Mail, hand delivery, express mail,
‘‘[b]y July 09, 2018, each UBS QPAM, in VI(a) 17 of PTE 84–14) and that relies on messenger, or courier service: When
its agreements with, or in other written the relief provided by PTE 84–14 and using this method, you must submit a
disclosures provided to Covered Plans, with respect to which UBS is an copy of your comments and attachments
will clearly and prominently inform ‘affiliate’ (as defined in Part VI(d) of PTE to the OSHA Docket Office, Docket No.
Covered Plan clients of their right to 84–14). The term ‘UBS QPAM’ excludes OSHA–2011–0185, Occupational Safety
obtain a copy of the Policies or a UBS and UBS Securities Japan.’’ and Health Administration, U.S.
description (Summary Policies) which FOR FURTHER INFORMATION CONTACT: Mr. Department of Labor, Room N–3653,
accurately summarizes key components Brian Mica of the Department, 200 Constitution Avenue NW,
of the UBS QPAM’s written Policies telephone (202) 693–8402. (This is not Washington, DC 20210. Deliveries
developed in connection with this a toll-free number). (hand, express mail, messenger, and
exemption. . . .’’ Accordingly, the Lyssa E. Hall, courier services) are accepted during the
sentence beginning ‘‘[t]he Department Director of Exemption Determinations,
Docket Office’s normal business hours,
also agrees with the Applicant . . .’’ in Employee Benefits Security Administration, 10:00 a.m. to 3:00 p.m., E.T.
the first full paragraph in the second U.S. Department of Labor. Instructions: All submissions must
column on page 61915 is revised to [FR Doc. 2018–03396 Filed 2–16–18; 8:45 am] include the Agency name and the OSHA
read, ‘‘The Department also agrees with BILLING CODE 4510–29–P
docket number (OSHA–2011–0185) for
the Applicant that the timing the Information Collection Request
sradovich on DSK3GMQ082PROD with NOTICES
requirement for disclosure should be 17 In general terms, a QPAM is an independent (ICR). All comments, including any
revised and, accordingly, has modified fiduciary that is a bank, savings and loan personal information you provide, are
the condition of Section I(r) to require association, insurance company, or investment placed in the docket without change
notice regarding the information on the adviser that meets certain equity or net worth and may be made available online at
requirements and other licensure requirements and
website within 6 months of the effective that has acknowledged in a written management
http://www.regulations.gov. For further
date of this exemption (by July 09, agreement that it is a fiduciary with respect to each information on submitting comments,
2018), and thereafter to the extent plan that has retained the QPAM. see the ‘‘Public Participation’’ heading
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Document Created: 2018-02-17 02:29:17
Document Modified: 2018-02-17 02:29:17
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | Notice of technical corrections. | |
| Contact | Mr. Joseph Brennan of the Department, telephone (202) 693-8456. (This is not a toll-free number). | |
| FR Citation | 83 FR 7226 |
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