[Federal Register Volume 60, Number 133 (Wednesday, July 12, 1995)]
[Notices]
[Pages 35932-35941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17075]



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[[Page 35933]]


DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 95-56; Exemption Application No. D-
09724, et al.]


Grant of Individual Exemptions; Mellon Bank, N.A., and Its 
Affiliated (Collectively, Mellon), et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, DC. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 
47713, October 17, 1978) transferred the authority of the Secretary of 
the Treasury to issue exemptions of the type proposed to the Secretary 
of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemptions are administratively feasible;
    (b) They are in the interests of the plans and their participants 
and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Mellon Bank, N.A., and Its Affiliates (Collectively, Mellon) Located in 
Pittsburgh, Pennsylvania

[Prohibited Transaction Exemption 95-56; Application No. D-09724]

Exemption

Section I--Exemption for Cross-Trading Between Certain Accounts

    The restrictions of sections 406(a)(1)(A) and 406(b)(2) of the Act, 
and the sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) of the Code, shall not apply 
to (1) the purchase and sale of securities (including the stock of 
Mellon Bank Corporation (MBC)) between Indexed Accounts, as defined in 
Section IV(a); and (2) the purchase and sale of securities, including 
the common stock of MBC, between Indexed Accounts and various large 
accounts (the Large Accounts) pursuant to portfolio restructuring 
programs of the Large Accounts; provided that the following conditions 
and the General Conditions of Section III are met:
    (a) The Indexed Account is based on an index which represents the 
investment performance of a specific segment of the public market for 
equity or debt securities in the United States and/or foreign 
countries. The organization creating and maintaining the index must be 
(1) engaged in the business of providing financial information, 
evaluation, advice or securities brokerage services to institutional 
clients, (2) a publisher of financial news or information, or (3) a 
public stock exchange or association of securities dealers. The index 
must be created and maintained by an organization independent of Mellon 
and its affiliates. The index must be a generally accepted standardized 
index of securities which is not specifically tailored for the use of 
Mellon or its affiliates.
    (b) The price for the securities is set at the current market value 
for the securities on the date of the transactions. For equity 
securities, the price shall be the closing price for the security on 
the day of trading; unless the security was added to or deleted from an 
index underlying an Indexed Account after the close of trading, in 
which case the price shall be the opening price for that security on 
the next business day after the announcement of the addition or 
deletion. For debt securities, the price shall be the fair market value 
determined as of the close of the day of trading pursuant to Rule 17a-
7(b) issued by the Securities and Exchange Commission under the 
Investment Company Act of 1940.
    (c) The transaction takes place within three business days of the 
``triggering event'' giving rise to the cross-trade opportunity. A 
triggering event is defined as:
    (1) A change in the composition or weighting of the index 
underlying an Indexed Account by the organization creating and 
maintaining the index;
    (2) A change in the overall level of investment in an Indexed 
Account as a result of investments and withdrawals made on the 
Account's opening date, where the Indexed Account is a collective 
investment fund, or on any relevant date, where the Indexed Account is 
not a collective investment fund; provided, however, that Mellon does 
not change the level of investment in the Indexed Account through 
investments or withdrawals of assets of any employee benefit plan 
maintained by Mellon or its affiliates (the Mellon Plans) other than 
any Mellon Plan which is a defined contribution plan under which 
participants direct the investment of their accounts among various 
investment options, including Indexed Accounts; or
    (3) A declaration by Mellon (recorded on Mellon's records) that a 
``triggering event'' has occurred, which will be made upon an 
accumulation of cash in an Indexed Account attributable to interest or 
dividends on, and/or tender offers for, portfolio securities equal to 
not more than .5 percent of the Indexed Account's total value.
    (d) With respect to any Indexed Account that is model-driven, no 
cross-trades are engaged in by the Account for 10 business days 
subsequent to any change made by Mellon to the model underlying the 
Account.
    (e) In the event that the amount of a particular security which all 
of the Indexed Accounts or Large Accounts propose to sell on a given 
day is less than the amount of such security which all of the Indexed 
Accounts or Large Accounts propose to buy, or vice versa, the direct 
cross-trade opportunity must be allocated by Mellon among potential 
buyers or sellers of the security on a pro rata basis.
    (f) An Indexed Account does not participate in a cross-trade if 
more than 10 percent of the assets of the Indexed Account at the time 
of the proposed cross-trade are comprised of assets of Mellon Plans for 
which Mellon exercises investment discretion. 

[[Page 35934]]

    (g) Prior to any proposed cross-trading by an Indexed Account or a 
Large Account, Mellon provides to each employee benefit plan invested 
in the Account information which describes the existence of the cross-
trading program, the ``triggering events'' which will create cross-
trade opportunities, the pricing mechanism that will be utilized for 
securities purchased or sold by the Accounts, and the allocation 
methods and other procedures which will be implemented by Mellon for 
its cross-trading practices. Any employee benefit plan which 
subsequently invests in the Indexed Account or Large Account shall be 
provided the same information prior to or immediately after the plan's 
initial investment in the Account.
    (h) With respect to cross-trade transactions involving a Large 
Account:
    (1) Total assets of the Large Account are in excess of $50 million.
    (2) Fiduciaries or other appropriate decisionmakers of the Large 
Account who are independent of Mellon are, prior to any cross-trade 
transactions, fully informed of the cross-trade technique and provide 
advance written approval of the cross-trade transactions.
    Such authorization shall be terminable at will by the Large Account 
upon receipt by Mellon of written notice of termination. A form 
expressly providing an election to terminate the authorization, with 
instructions on the use of the form, must be supplied to the 
authorizing Large Account fiduciary concurrent with the receipt of the 
written information describing the cross-trading program. The 
instructions for such form must include the following information:
    (i) The authorization is terminable at will by the Large Account, 
without penalty to the Large Account, upon receipt by Mellon of written 
notice from the authorizing Large Account fiduciary; and
    (ii) Failure to return the termination form will result in the 
continued authorization of Mellon to engage in cross-trade transactions 
on behalf of the Large Account.
    (3) Within 45 days of the completion of the Large Account's 
portfolio restructuring program, the Large Account's fiduciaries shall 
be fully apprised in writing of the transaction results. However, if 
the program takes longer than three months to complete, interim reports 
of the transaction results will be made within 30 days of the end of 
each three month period.
    (4) The Large Account transactions occur only in situations where 
Mellon has been authorized to restructure all or a portion of the Large 
Account's portfolio into an Indexed Account (including a separate 
account based on an index or computer model) or to act as a ``trading 
adviser'' in carrying out a Large Account-initiated liquidation or 
restructuring of its portfolio.
    (i) Mellon receives no additional direct or indirect compensation 
as a result of any cross-trade transactions.
    (j) Mellon does not purchase or sell any debt securities issued by 
Mellon or an affiliate for the Indexed Accounts.

Section II--Exemption for the Acquisition, Holding and Disposition of 
MBC Stock

    The restrictions of sections 406(a)(1)(D), 406(b)(1) and (b)(2) of 
the Act, and the sanctions resulting from the application of section 
4975 of the Code by reason of section 4975(c)(1)(D) and (E) of the 
Code, shall not apply to the acquisition, holding or disposition of the 
common stock of MBC (the MBC Stock) by Indexed Accounts, if the 
following conditions and the General Conditions of Section III are met:
    (a) The acquisition or disposition of the MBC stock is for the sole 
purpose of maintaining strict quantitative conformity with the relevant 
index upon which the Indexed Account is based.
    (b) In the event that MBC Stock is added to an index on which an 
Indexed Account is based or is added to the portfolio of the Indexed 
Account which tracks an index that includes MBC Stock, all acquisitions 
necessary to bring the Indexed Account's holdings of MBC Stock to its 
capitalization weighting in the index, other than cross-trade 
transactions meeting the conditions of Section I, shall comply with 
Rule 10b-18 of the Securities and Exchange Commission (SEC) under the 
Securities Exchange Act of 1934, including the limitations regarding 
the price paid for such stock.
    (c) Subsequent to acquisitions necessary to bring the Indexed 
Account's holdings of MBC Stock to its capitalization weighting in the 
index pursuant to the restrictions of SEC Rule 10b-18, all aggregate 
daily purchases of MBC stock, other than cross-trade purchases meeting 
the conditions of Section I, shall not constitute more than the greater 
of: (1) 15 percent of the stock's average daily trading volume for the 
previous five days; or (2) 15 percent of the stock's trading volume on 
the date of the transaction.
    (d) If the necessary number of shares of MBC stock cannot be 
acquired within 10 business days from the date of the event which 
causes the particular Indexed Account to require MBC stock, Mellon 
shall appoint a fiduciary which is independent of Mellon and its 
affiliates to design acquisition procedures and monitor Mellon's 
compliance with such procedures.
    (e) All purchases and sales of MBC stock, other than cross-trades 
meeting the conditions of Section I, shall be executed on the national 
exchange on which MBC stock is primarily traded.
    (f) No transactions shall involve purchases from, or sales to, 
Mellon or any affiliate, officer, director or employee of Mellon or any 
party in interest with respect to a plan which has invested in an 
Indexed Account.1 This requirement does not preclude purchases and 
sales of MBC stock in cross-trade transactions meeting the conditions 
of Section I, provided that the Indexed Accounts are not maintained by 
Mellon primarily for the investment of assets of Mellon or any 
affiliate, including officers, directors or employees of Mellon other 
than in connection with a Mellon Plan.

    \1\ The Department notes that ``blind transactions'', in which 
the identity of the purchaser or seller is not known because the 
transaction is executed by an independent broker, acting as agent, 
on a national securities exchange, would not be subject to this 
requirement.
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    (g) No more than five (5) percent of the total amount of MBC stock 
issued and outstanding at any time shall be held in the aggregate by 
the Indexed Accounts which hold plan assets.
    (h) MBC stock shall constitute no more than two (2) percent of the 
value of any independent third-party index on which the investments of 
an Indexed Account are based.
    (i) A plan fiduciary independent of Mellon authorizes the 
investment of such plan's assets in an Indexed Account which purchases 
and/or holds MBC stock.
    (j) A fiduciary independent of Mellon and its affiliates shall 
direct the voting of the MBC stock held by an Indexed Account on any 
matter in which shareholders of MBC stock are required or permitted to 
vote.

Section III--General Conditions

    (a) Mellon maintains or causes to be maintained for a period of six 
years from the date of the transaction the records necessary to enable 
the persons described in paragraph (b) of this Section to determine 
whether the conditions of the exemption have been met, except that (1) 
a prohibited transaction will not be considered to have occurred if, 
due to circumstances beyond the control of Mellon, the records are lost 
or destroyed prior to the end of the six-year period, and (2) no party 
in interest other than Mellon shall be subject to the civil penalty 
that may be assessed under section 502(i) of the 

[[Page 35935]]
Act or to the taxes imposed by section 4975(a) and (b) of the Code if 
the records are not maintained or are not available for examination as 
required by paragraph (b) below.
    (b)(1) Except as provided in paragraph (b)(2) and notwithstanding 
any provisions of section 504(a)(2) and (b) of the Act, the records 
referred to in paragraph (a) of this Section are available at their 
customary location for examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department of Labor or the Internal Revenue Service,
    (B) Any fiduciary of a plan participating in an Indexed Account who 
has authority to acquire or dispose of the interests of the plan, or 
any duly authorized employee or representative of such fiduciary,
    (C) Any contributing employer with respect to any plan 
participating in an Indexed Account or any duly authorized employee or 
representative of such employer, and
    (D) Any participant or beneficiary of any plan participating in an 
Indexed Account, or any duly authorized employee or representative of 
such participant or beneficiary.
    (2) None of the persons described in paragraph (b)(1)(B) through 
(D) shall be authorized to examine trade secrets of Mellon, any of its 
affiliates, or commercial or financial information which is privileged 
or confidential.
Section IV--Definitions

    (a) Indexed Account--Any Index Fund or Model-Driven Fund.
    (b) Index Fund--Any investment fund, account or portfolio 
sponsored, maintained, trusteed, or managed by Mellon or an affiliate 
in which one or more investors invest that is designed to replicate the 
capitalization-weighted composition of an independently maintained 
securities index which satisfies the conditions of Section I(a) and 
Section II(h).
    (c) Model-Driven Fund--Any investment fund, account or portfolio 
sponsored, maintained, trusteed, or managed by Mellon or an affiliate, 
in which one or more investors invest which is based on computer models 
using prescribed objective criteria to transform an independently 
maintained securities index which satisfies the conditions of Section 
I(a) and Section II(h).
    (d) Opening date--The date on which investments in or withdrawals 
from an Indexed Account that is a collective investment fund may be 
made.
    (e) Large Account--An account of an investor that is either: (1) an 
employee benefit plan within the meaning of section 3(3) of the Act 
that has $50 million or more in total assets; or (2) an institutional 
investor, other than an investment company registered under the 
Investment Company Act of 1940 (i.e. a mutual fund) advised or 
sponsored by Mellon, such as an insurance company separate account or 
general account, a governmental plan, a university endowment fund, a 
charitable foundation fund, or a trust or other fund which is exempt 
from taxation under section 501(a) of the Code, that has total assets 
in excess of $50 million. As noted in Section I(g)(4), a ``Large 
Account'' shall only be an account to which Mellon has been authorized 
to restructure all or a portion of the portfolio for such account into 
an Indexed Account or to which Mellon has been authorized to act as a 
``trading adviser'' (as defined below) in connection with a specific 
liquidation or restructuring program for the account.
    (f) Trading adviser--A person whose role is limited to arranging a 
Large Account-initiated liquidation or restructuring of an equity or 
debt portfolio within a stated period of time so as to minimize 
transaction costs. The person must not be a fiduciary with investment 
discretion for any underlying asset allocation, restructuring or 
liquidation decisions for the account in connection with such 
transactions.
    (g) Affiliate--Any person, directly or indirectly through one or 
more intermediaries, controlling, controlled by, or is under common 
control with Mellon (except Mellon/McMahon Real Estate Advisors, Inc.).
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on April 7, 1995, at 60 FR 
17814.

WRITTEN COMMENTS AND MODIFICATIONS: The applicant submitted the 
following comments and requests for modifications regarding the notice 
of proposed exemption (the Proposal).
    With respect to the heading used in the Proposal, the applicant 
states that the term ``Mellon'' refers specifically to Mellon Bank, 
N.A., but not to its affiliates. The applicant notes that in various 
places throughout the Proposal, the relevant provisions refer to 
``Mellon and its affiliates''. However, in numerous other provisions of 
the Proposal the reference is simply to Mellon which, as designated in 
the heading, is too narrow since the affiliates should also be covered. 
The applicant requests that the reference to ``Mellon'' in the heading 
be changed to include both Mellon Bank, N.A. and its affiliates. The 
Department concurs with the applicant's requested clarification and has 
so modified the heading of the Proposal.
    With respect to the definition of a ``triggering event'' in Section 
I(c) of the Proposal, the applicant states that subparagraph (2) limits 
investments and withdrawals from an Indexed Account to those occurring 
on a ``regularly scheduled opening date'' for the Indexed Account. The 
applicant represents that the concept of ``an opening date'', as 
defined in Section IV(d) of the Proposal, is not applicable to Indexed 
Accounts that are not collective investment funds, such as separate 
accounts for both employee benefit plans and other institutional 
clients. Since separate accounts would be encompassed within the 
definition of an Indexed Account under Section IV(a) of the Proposal, 
the applicant requests that an appropriate clarification be made. In 
addition, with respect to the concept of a ``regularly scheduled'' 
opening date, the applicant represents that the trend for collective 
investment funds is toward more frequent, and in many cases daily, 
opening dates. Thus, the applicant requests that the words ``regularly 
scheduled'' be deleted from Section I(c)(2) of the Proposal.
    The Department concurs with the applicant's requested 
clarifications and has modified the language of Sections I(c)(2) and 
IV(d) of the Proposal. In this regard, Section I(c)(2) has been 
modified as follows:

    * * * A change in the overall level of investment in an Indexed 
Account as a result of investments and withdrawals made on the 
Account's [regularly scheduled] opening date, where the Indexed 
Account is a collective investment fund, or on any relevant date, 
where the Indexed Account is not a collective investment fund * * *. 
(emphasis added)

In addition, Section IV(d) has been modified as follows:

    * * * Opening date--The [regularly-scheduled] date on which 
investments in or withdrawals from an Indexed Account that is a 
collective investment fund may be made. (emphasis added)

    With respect to the proviso in Section I(c)(2) of the Proposal 
relating to any Mellon Plans for which Mellon has investment 
discretion, the applicant states that its understanding of the intent 
of this proviso is to exclude from the definition of a ``triggering 
event'' those investments into or withdrawals from an Indexed Account 
which result from Mellon's exercise of its discretion 

[[Page 35936]]
for a Mellon Plan. However, the applicant states that this proviso was 
not intended to cover changes in the level of investment in an Indexed 
Account which result from investment elections made by individual 
participants in a Mellon Plan (i.e. a defined contribution plan) that 
permits such participants to direct the investment of their accounts 
among various available investment options, including Indexed Accounts. 
Thus, the applicant maintains that the language of the proviso is too 
broad in that it would apply to any Mellon Plan as to which Mellon 
exercises any investment discretion, including discretion for the 
management of assets which have been allocated to an Indexed Account, 
even though participants have directed the investment of their assets 
to such Indexed Accounts. Therefore, the applicant suggests that this 
proviso be clarified by deleting the phrase ``* * * for which Mellon 
has investment discretion'' and substituting therefor the following:

    * * * other than any Mellon Plan which is a defined contribution 
plan under which participants direct the investment of their 
accounts among various investment options, including Indexed 
Accounts.

    The Department concurs with the applicant's requested clarification 
and has so modified the language of Section I(c)(2) of the Proposal.
    With respect to Section II(f) of the Proposal, the applicant states 
that the first sentence sets forth a requirement that transactions by 
an Indexed Account involving MBC Stock not be with any affiliate, 
officer, director or employee of Mellon or any party in interest for 
any plan which has invested in the Indexed Account. The applicant 
requests that it be made clear that this limitation does not apply to 
any transaction on an exchange executed by an independent broker acting 
as agent, given that such transactions would be considered to be 
``blind transactions'' for this purpose.
    In this regard, the Department concurs with the applicant's 
requested clarification and has added a footnote at the end of the 
first sentence of Section II(f) stating that ``blind transactions'' 
executed on a national securities exchange by an independent broker 
will not be subject to the requirements of Section II(f).
    Finally, with respect to the definition of ``Large Account'' in 
Section IV(e) of the Proposal, the applicant states that the definition 
excludes any investment company registered under the Investment Company 
Act of 1940 (i.e. any mutual fund). The applicant represents that 
Mellon had previously agreed to exclude only affiliated mutual funds 
(i.e. mutual funds advised or sponsored by Mellon or an affiliate) from 
the definition of ``Large Account''. The Department acknowledges this 
error in the Proposal and concurs with the applicant's clarification. 
Thus, the Department has modified the language of Section IV(e)(2) of 
the Proposal by inserting the phrase ``* * * advised or sponsored by 
Mellon'' following the reference to mutual funds in the definition of 
``Large Account''.
    No other comments, and no requests for a hearing, were received by 
the Department during the comment period.
    Accordingly, based on the current exemption application file and 
record, the Department has determined to grant the proposed exemption 
as modified herein.

FOR FURTHER INFORMATION CONTACT: Mr. E.F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)

T.J. Lambrecht Construction, Inc.; Employees' Profit Sharing Plan and 
Trust; Brown & Lambrecht Earthmovers, Inc.; Employees' Profit Sharing 
Plan and Trust (collectively, the Plans) Located in Joliet, Illinois

[Prohibited Transaction Exemption 95-57; Application Nos. D-09872 and 
D-09873]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1) (A) through (E) of the Code 
shall not apply to the cash sale (the Sale) by each of the Plans of a 
12.5% partnership interest in Prime Industries (the Partnership 
Interest) to Mr. Thomas J. Lambrecht, a party in interest with respect 
to the Plans; provided the following conditions are satisfied: (1) The 
Sale is a one-time transaction for cash; (2) the sale price for each 
Partnership Interest will be the higher of (a) the fair market value of 
the Partnership Interest as determined by a qualified independent 
appraiser at the time of the Sale or, (b) each Plan's total investment 
in the Partnership Interest ($300,000); and (3) the Plans do not suffer 
any loss nor incur any expenses in connection with the transaction.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on May 10, 1995 at 60 FR 
24899.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller of the Department, 
telephone (202) 219-8971. (This is not a toll-free number.)
Guarantee Mutual Life Company (Guarantee Mutual) Located in Omaha, 
NE

[Prohibited Transaction Exemption 95-58; Exemption Application No. D-
09941]

Exemption

Section I. Covered Transaction

    The restrictions of section 406(a) of the Act and the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1) (A) through (D) of the Code, shall not apply to 
the proposed receipt of common stock of The Guarantee Life Companies 
Inc., or the receipt of cash or policy credits by an eligible 
policyholder (the Eligible Policyholder) of Guarantee Mutual which is 
an employee benefit plan (the Plan), other than an Eligible 
Policyholder which is a plan sponsored by Guarantee Mutual for its own 
employees, in exchange for the termination of such Eligible Plan 
Policyholder's membership interest in Guarantee Mutual, in accordance 
with the terms of a plan of demutualization (the Plan of Conversion or 
the Conversion Plan) adopted by Guarantee Mutual and implemented 
pursuant to the Nebraska Insurers Demutualization Act, Nebraska Revised 
Statutes, Sections 44-6101 through 44-6120.
    The exemption is subject to the general conditions set forth below 
in Section II.

Section II. General Conditions

    (a) The Conversion Plan is implemented in accordance with 
procedural and substantive safeguards that are imposed under Nebraska 
law and is subject to the review and supervision by the Director of the 
Department of Insurance of the State of Nebraska (the Director).
    (b) The Director reviews the terms of the options that are provided 
to Eligible Policyholders of Guarantee Mutual, as part of such 
Director's review of the Conversion Plan, and the Director only 
approves the Conversion Plan following a determination that such 
Conversion Plan is fair and equitable to all Eligible Policyholders.
    (c) Each Eligible Policyholder has an opportunity to comment on the 
Conversion Plan and decide whether to vote to approve such Conversion 
Plan after full written disclosure is given such Eligible Policyholder 
by Guarantee Mutual, of the terms of the Conversion Plan.
    (d) Any election by an Eligible Plan Policyholder to receive stock, 
cash or policy credits, pursuant to the terms of the Conversion Plan is 
made by one or more independent fiduciaries of such 

[[Page 35937]]
Plan and neither Guarantee Mutual nor any of its affiliates exercises 
any discretion or provides investment advice with respect to such 
election.
    (e) After each Eligible Policyholder entitled to receive stock is 
allocated at least 10 shares of common stock, additional consideration 
is allocated to Eligible Policyholders who own participating policies 
based on actuarial formulas that take into account each participating 
policy's contribution to the surplus of Guarantee Mutual which formulas 
have been approved by the Director.
    (f) All Eligible Plan Policyholders participate in the transactions 
on the same basis within their class groupings as other Eligible 
Policyholders that are not Plans.
    (g) No Eligible Policyholder pays any brokerage commissions or fees 
in connection with their receipt of stock or in connection with the 
implementation of the commission-free sales program.
    (h) All of Guarantee Mutual's policyholder obligations remain in 
force and are not affected by the Conversion Plan.

Section III. Definitions

    For purposes of this proposed exemption:
    (a) The term ``Guarantee Mutual'' means Guarantee Mutual Insurance 
Company and any affiliate of Guarantee Mutual as defined in paragraph 
(b) of this Section III.
    (b) An ``affiliate'' of Guarantee Mutual includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with Guarantee Mutual. (For purposes of this paragraph, the term 
``control'' means the power to exercise a controlling influence over 
the management or policies of a person other than an individual.)
    (2) Any officer, director or partner in such person, and
    (3) Any corporation or partnership of which such person is an 
officer, director or a 5 percent partner or owner.
    (c) The term ``Eligible Policyholder'' means a policyholder who is 
eligible to vote and to receive consideration in a demutualization. 
Such policyholder is a policyholder of the mutual insurer on the day 
the plan of conversion is adopted by the board of directors of the 
insurer.
    (d) The term ``policy credit'' means an increase in accumulation 
account value (to which no surrender or similar charges are applied) in 
the general account or an increase in a dividend accumulation on a 
policy.

Written Comments

    The Department received three written comments with respect to the 
notice of proposed exemption. Two comments were submitted by Plan 
policyholders of Guarantee Mutual. Of the comments in this category, 
one was withdrawn. The third comment was submitted by Guarantee Mutual.
    Following is a discussion of the Plan policyholder comment that was 
not withdrawn and the response made by Guarantee Mutual with respect to 
this comment. Also discussed is the comment that was submitted by 
Guarantee Mutual and the Department's response to that comment.
Plan Policyholder Comment
    The commentator states that he is opposed to the conversion because 
he does not believe there are adequate safeguards to ensure that 
management of Guarantee Mutual will not use the demutualization process 
as an opportunity to further their personal interests. The commentator 
explains that owners of corporations are no better off than owners of a 
mutual company in terms of democratic rule over the company. The 
commentator further asserts that managers should not be permitted to 
convert or change organizational structures of companies until 
corporate democratic principles can be guaranteed. Therefore, the 
commentator does not recommend that the Department approve the proposed 
exemption.
    In response, Guarantee Mutual states that the comment does not 
address the merits of the proposed transaction. Guarantee Mutual notes 
that before the Conversion Plan can proceed, it must be approved by the 
Director of the Nebraska Department of Insurance after a public 
hearing. According to Guarantee Mutual, the public hearing was held on 
April 13, 1995 and June 12, 1995 in Lincoln, Nebraska. Notice of the 
hearing was mailed to each Eligible Policyholder and published in the 
Omaha World-Herald, the Lincoln Journal-Star and the Omaha Daily 
Record.
    Guarantee Mutual points out that the next step of the Conversion 
Plan is for the Director to approve such Plan and find that (a) the 
Conversion Plan is fair and equitable to policyholders, (b) the 
Conversion Plan does not deprive policyholders of property rights or 
due process of law and (c) the new stock insurer would meet the minimum 
requirements to be issued a certificate of authority by the Director to 
transact business in Nebraska and the continued operations of the new 
stock insurer would not be hazardous to future policyholders and the 
public. Guarantee Mutual notes that the Director will continue to 
monitor the demutualization through the effective date of the 
conversion and, with respect to other matters, after the effective 
date. In addition, Guarantee Mutual points out that Nebraska law 
requires that two-thirds of voting Eligible Policyholders vote for the 
adoption of the Conversion Plan before the demutualization can occur.
    With respect to the commentator, Guarantee Mutual explains that he, 
along with other Eligible Policyholders, was mailed a notice of the 
public hearing and has been afforded the opportunity to express his 
views to the Director either in writing or at the public hearing. 
Guarantee Mutual also explains that the commentator will be given the 
opportunity to vote for or against the Conversion Plan. Accordingly, 
Guarantee Mutual believes that the commentator is being offered all of 
the procedural safeguards inherent in the Nebraska conversion statute 
and that the comment should not affect the Department's granting of the 
exemption.

Guarantee Mutual's Comment

    Guarantee Mutual's comment is intended to clarify information 
contained in a footnote to the Summary of Facts and Representations of 
the proposed exemption. In this regard, Footnote 16 of the Notice 
states, in pertinent part, that prior to the public hearing, Guarantee 
Mutual

    * * * will provide each Eligible Policyholder with a summary of 
the Conversion Plan, a notice of the public hearing and a more 
detailed policyholder information statement.

    Guarantee Mutual notes, however, that the Director will first 
conduct the public hearing, and later, if the Director makes an initial 
determination to approve Guarantee Mutual's application, a policyholder 
vote will take place. Guarantee Mutual explains that Eligible 
Policyholders will receive the more detailed policyholder statement 
before the vote, but not before the hearing. Therefore, Guarantee 
Mutual requests that Footnote 16 be modified to read as follows:

    Guarantee Mutual also represents that prior to the public 
hearing, it will provide each Eligible Policyholder with a summary 
of the Conversion Plan and a notice of the public hearing and that 
prior to the policyholder meeting and vote, it will provide each 
Eligible Policyholder with a more detailed policyholder information 
statement.

    In addition, Guarantee Mutual requests certain modifications in 

[[Page 35938]]
    references to Guarantee Mutual and The Guarantee Life Companies Inc. In 
this regard, Guarantee Mutual notes that Representations 10 (c), (d) 
and (h) of the Summary of Facts and Representations refer to ``State 
Mutual'' but not to ``Guarantee Mutual.'' Therefore, Guarantee Mutual 
requests that these references be corrected. Further, Guarantee Mutual 
explains that the reference to ``The Guarantee Companies, Inc.'' in 
Section I of the proposed exemption should be modified by deleting the 
comma after the word ``Companies.''
    Finally, it is noted that Guarantee Mutual did not comply with the 
notice to interested persons requirement within the time frame stated 
in the exemption application. By letter dated May 25, 1995, Guarantee 
Mutual certifies that it extended the comment period until June 5, 1995 
by mailing postcards to the same group of Eligible Policyholders it had 
previously notified of the proposed exemption. Other than the two 
comments that were submitted by the Plan policyholders of Guarantee 
Mutual and the comment submitted by Guarantee Mutual, no additional 
comments were received by the Department.
    The Department does not object to any of the clarifications or 
modifications to the proposed exemption. After giving full 
consideration to the entire record, including the written comments that 
were submitted, the Department has decided to grant the exemption as 
described and revised above. The comment letters have been included as 
part of the public record of the exemption application. The complete 
application file, including all supplemental submissions received by 
the Department, is made available for public inspection in the Public 
Documents Room of the Pension and Welfare Benefits Administration, Room 
N-5638, U.S. Department of Labor, 200 Constitution Avenue, N.W., 
Washington, D.C. 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on April 14, 1995 at 60 FR 
19096.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)
Rothschild, Incorporated (Rothschild) Located in New York, New York

[Prohibited Transaction Exemption 95-59; Exemption Application No. D-
09993]

Exemption

I. Transactions

    A. The restrictions of sections 406(a) and 407(a) of the Act and 
the taxes imposed by section 4975(a) and (b) of the Code by reason of 
section 4975(c)(1)(A) through (D) of the Code shall not apply to the 
following transactions involving trusts and certificates evidencing 
interests therein:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and an employee benefit plan when the sponsor, 
servicer, trustee or insurer of a trust, the underwriter of the 
certificates representing an interest in the trust, or an obligor is a 
party in interest with respect to such plan;
    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates; 
and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.A.(1) or (2).
    Notwithstanding the foregoing, section I.A. does not provide an 
exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and 
407 for the acquisition or holding of a certificate on behalf of an 
Excluded Plan by any person who has discretionary authority or renders 
investment advice with respect to the assets of that Excluded Plan.\2\

    \2\ Section I.A. provides no relief from sections 406(a)(1)(E), 
406(a)(2) and 407 for any person rendering investment advice to an 
Excluded Plan within the meaning of section 3(21)(A)(ii) and 
regulation 29 CFR 2510.3-21(c).
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    B. The restrictions of sections 406(b)(1) and 406(b)(2) of the Act 
and the taxes imposed by section 4975(a) and (b) of the Code by reason 
of section 4975(c)(1)(E) of the Code shall not apply to:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and a plan when the person who has discretionary 
authority or renders investment advice with respect to the investment 
of plan assets in the certificates is (a) an obligor with respect to 5 
percent or less of the fair market value of obligations or receivables 
contained in the trust, or (b) an affiliate of a person described in 
(a); if:
    (i) the plan is not an Excluded Plan;
    (ii) solely in the case of an acquisition of certificates in 
connection with the initial issuance of the certificates, at least 50 
percent of each class of certificates in which plans have invested is 
acquired by persons independent of the members of the Restricted Group 
and at least 50 percent of the aggregate interest in the trust is 
acquired by persons independent of the Restricted Group;
    (iii) a plan's investment in each class of certificates does not 
exceed 25 percent of all of the certificates of that class outstanding 
at the time of the acquisition; and
    (iv) immediately after the acquisition of the certificates, no more 
than 25 percent of the assets of a plan with respect to which the 
person has discretionary authority or renders investment advice are 
invested in certificates representing an interest in a trust containing 
assets sold or serviced by the same entity.\3\ For purposes of this 
paragraph B.(1)(iv) only, an entity will not be considered to service 
assets contained in a trust if it is merely a subservicer of that 
trust;

    \3\ For purposes of this exemption, each plan participating in a 
commingled fund (such as a bank collective trust fund or insurance 
company pooled separate account) shall be considered to own the same 
proportionate undivided interest in each asset of the commingled 
fund as its proportionate interest in the total assets of the 
commingled fund as calculated on the most recent preceding valuation 
date of the fund.
---------------------------------------------------------------------------

    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates, 
provided that the conditions set forth in paragraphs B.(1)(i), (iii) 
and (iv) are met; and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.B.(1) or (2).
    C. The restrictions of sections 406(a), 406(b) and 407(a) of the 
Act, and the taxes imposed by section 4975(a) and (b) of the Code by 
reason of section 4975(c) of the Code, shall not apply to transactions 
in connection with the servicing, management and operation of a trust, 
provided:
    (1) such transactions are carried out in accordance with the terms 
of a binding pooling and servicing arrangement; and
    (2) the pooling and servicing agreement is provided to, or 
described in all material respects in the prospectus or private 
placement memorandum provided to, investing plans before they purchase 
certificates issued by the trust.\4\

    \4\ In the case of a private placement memorandum, such 
memorandum must contain substantially the same information that 
would be disclosed in a prospectus if the offering of the 
certificates were made in a registered public offering under the 
Securities Act of 1933. In the Department's view, the private 
placement memorandum must contain sufficient information to permit 
plan fiduciaries to make informed investment decisions. 

[[Page 35939]]

---------------------------------------------------------------------------

    Notwithstanding the foregoing, section I.C. does not provide an 
exemption from the restrictions of section 406(b) of the Act or from 
the taxes imposed by reason of section 4975(c) of the Code for the 
receipt of a fee by a servicer of the trust from a person other than 
the trustee or sponsor, unless such fee constitutes a ``qualified 
administrative fee'' as defined in section III.S.
    D. The restrictions of sections 406(a) and 407(a) of the Act, and 
the taxes imposed by sections 4975(a) and (b) of the Code by reason of 
sections 4975(c)(1)(A) through (D) of the Code, shall not apply to any 
transactions to which those restrictions or taxes would otherwise apply 
merely because a person is deemed to be a party in interest or 
disqualified person (including a fiduciary) with respect to a plan by 
virtue of providing services to the plan (or by virtue of having a 
relationship to such service provider described in section 3(14)(F), 
(G), (H) or (I) of the Act or section 4975(e)(2)(F), (G), (H) or (I) of 
the Code), solely because of the plan's ownership of certificates.
II. General Conditions

    A. The relief provided under Part I is available only if the 
following conditions are met:
    (1) The acquisition of certificates by a plan is on terms 
(including the certificate price) that are at least as favorable to the 
plan as they would be in an arm's-length transaction with an unrelated 
party;
    (2) The rights and interests evidenced by the certificates are not 
subordinated to the rights and interests evidenced by other 
certificates of the same trust;
    (3) The certificates acquired by the plan have received a rating at 
the time of such acquisition that is in one of the three highest 
generic rating categories from either Standard & Poor's Corporation 
(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps Inc. 
(D & P) or Fitch Investors Service, Inc. (Fitch);
    (4) The trustee is not an affiliate of any member of the Restricted 
Group. However, the trustee shall not be considered to be an affiliate 
of a servicer solely because the trustee has succeeded to the rights 
and responsibilities of the servicer pursuant to the terms of a pooling 
and servicing agreement providing for such succession upon the 
occurrence of one or more events of default by the servicer;
    (5) The sum of all payments made to and retained by the 
underwriters in connection with the distribution or placement of 
certificates represents not more than reasonable compensation for 
underwriting or placing the certificates; the sum of all payments made 
to and retained by the sponsor pursuant to the assignment of 
obligations (or interests therein) to the trust represents not more 
than the fair market value of such obligations (or interests); and the 
sum of all payments made to and retained by the servicer represents not 
more than reasonable compensation for the servicer's services under the 
pooling and servicing agreement and reimbursement of the servicer's 
reasonable expenses in connection therewith; and
    (6) The plan investing in such certificates is an ``accredited 
investor'' as defined in Rule 501(a)(1) of Regulation D of the 
Securities and Exchange Commission under the Securities Act of 1933.
    B. Neither any underwriter, sponsor, trustee, servicer, insurer, or 
any obligor, unless it or any of its affiliates has discretionary 
authority or renders investment advice with respect to the plan assets 
used by a plan to acquire certificates, shall be denied the relief 
provided under Part I, if the provision of subsection II.A.(6) above is 
not satisfied with respect to acquisition or holding by a plan of such 
certificates, provided that (1) such condition is disclosed in the 
prospectus or private placement memorandum; and (2) in the case of a 
private placement of certificates, the trustee obtains a representation 
from each initial purchaser which is a plan that it is in compliance 
with such condition, and obtains a covenant from each initial purchaser 
to the effect that, so long as such initial purchaser (or any 
transferee of such initial purchaser's certificates) is required to 
obtain from its transferee a representation regarding compliance with 
the Securities Act of 1933, any such transferees will be required to 
make a written representation regarding compliance with the condition 
set forth in subsection II.A.(6) above.

III. Definitions

    For purposes of this exemption:
    A. ``Certificate'' means:
    (1) a certificate--
    (a) that represents a beneficial ownership interest in the assets 
of a trust; and
    (b) that entitles the holder to pass-through payments of principal, 
interest, and/or other payments made with respect to the assets of such 
trust; or
    (2) a certificate denominated as a debt instrument--
    (a) that represents an interest in a Real Estate Mortgage 
Investment Conduit (REMIC) within the meaning of section 860D(a) of the 
Internal Revenue Code of 1986; and
    (b) that is issued by and is an obligation of a trust;

with respect to certificates defined in (1) and (2) above for which 
Rothschild or any of its affiliates is either (i) the sole underwriter 
or the manager or co-manager of the underwriting syndicate, or (ii) a 
selling or placement agent. For purposes of this exemption, references 
to ``certificates representing an interest in a trust'' include 
certificates denominated as debt which are issued by a trust.
    B. ``Trust'' means an investment pool, the corpus of which is held 
in trust and consists solely of:
    (1) either
    (a) secured consumer receivables that bear interest or are 
purchased at a discount (including, but not limited to, home equity 
loans and obligations secured by shares issued by a cooperative housing 
association);
    (b) secured credit instruments that bear interest or are purchased 
at a discount in transactions by or between business entities 
(including, but not limited to, qualified equipment notes secured by 
leases, as defined in section III.T);
    (c) obligations that bear interest or are purchased at a discount 
and which are secured by single-family residential, multi-family 
residential and commercial real property (including obligations secured 
by leasehold interests on commercial real property);
    (d) obligations that bear interest or are purchased at a discount 
and which are secured by motor vehicles or equipment, or qualified 
motor vehicle leases (as defined in section III.U);
    (e) ``guaranteed governmental mortgage pool certificates,'' as 
defined in 29 CFR 2510.3-101(i)(2);
    (f) fractional undivided interests in any of the obligations 
described in clauses (a)-(e) of this section B.(1);
    (2) property which had secured any of the obligations described in 
subsection B.(1);
    (3) undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are to be 
made to certificateholders; and
    (4) rights of the trustee under the pooling and servicing 
agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship and other credit support 

[[Page 35940]]
arrangements with respect to any obligations described in subsection 
B.(1).

Notwithstanding the foregoing, the term ``trust'' does not include any 
investment pool unless: (i) the investment pool consists only of assets 
of the type which have been included in other investment pools, (ii) 
certificates evidencing interests in such other investment pools have 
been rated in one of the three highest generic rating categories by 
S&P's, Moody's, D & P, or Fitch for at least one year prior to the 
plan's acquisition of certificates pursuant to this exemption, and 
(iii) certificates evidencing interests in such other investment pools 
have been purchased by investors other than plans for at least one year 
prior to the plan's acquisition of certificates pursuant to this 
exemption.
    C. ``Underwriter'' means:
    (1) Rothschild;
    (2) any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
Rothschild; or
    (3) any member of an underwriting syndicate or selling group of 
which Rothschild or a person described in (2) is a manager or co-
manager with respect to the certificates.
    D. ``Sponsor'' means the entity that organizes a trust by 
depositing obligations therein in exchange for certificates.
    E. ``Master Servicer'' means the entity that is a party to the 
pooling and servicing agreement relating to trust assets and is fully 
responsible for servicing, directly or through subservicers, the assets 
of the trust.
    F. ``Subservicer'' means an entity which, under the supervision of 
and on behalf of the master servicer, services loans contained in the 
trust, but is not a party to the pooling and servicing agreement.
    G. ``Servicer'' means any entity which services loans contained in 
the trust, including the master servicer and any subservicer.
    H. ``Trustee'' means the trustee of the trust, and in the case of 
certificates which are denominated as debt instruments, also means the 
trustee of the indenture trust.
    I. ``Insurer'' means the insurer or guarantor of, or provider of 
other credit support for, a trust. Notwithstanding the foregoing, a 
person is not an insurer solely because it holds securities 
representing an interest in a trust which are of a class subordinated 
to certificates representing an interest in the same trust.
    J. ``Obligor'' means any person, other than the insurer, that is 
obligated to make payments with respect to any obligation or receivable 
included in the trust. Where a trust contains qualified motor vehicle 
leases or qualified equipment notes secured by leases, ``obligor'' 
shall also include any owner of property subject to any lease included 
in the trust, or subject to any lease securing an obligation included 
in the trust.
    K. ``Excluded Plan'' means any plan with respect to which any 
member of the Restricted Group is a ``plan sponsor'' within the meaning 
of section 3(16)(B) of the Act.
    L. ``Restricted Group'' with respect to a class of certificates 
means:
    (1) each underwriter;
    (2) each insurer;
    (3) the sponsor;
    (4) the trustee;
    (5) each servicer;
    (6) any obligor with respect to obligations or receivables included 
in the trust constituting more than 5 percent of the aggregate 
unamortized principal balance of the assets in the trust, determined on 
the date of the initial issuance of certificates by the trust; or
    (7) any affiliate of a person described in (1)-(6) above.
    M. ``Affiliate'' of another person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), a brother, a sister, or a spouse of a 
brother or sister of such other person; and
    (3) Any corporation or partnership of which such other person is an 
officer, director or partner.
    N. ``Control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    O. A person will be ``independent'' of another person only if:
    (1) such person is not an affiliate of that other person; and
    (2) the other person, or an affiliate thereof, is not a fiduciary 
who has investment management authority or renders investment advice 
with respect to any assets of such person.
    P. ``Sale'' includes the entrance into a forward delivery 
commitment (as defined in section Q below), provided:
    (1) The terms of the forward delivery commitment (including any fee 
paid to the investing plan) are no less favorable to the plan than they 
would be in an arm's length transaction with an unrelated party;
    (2) The prospectus or private placement memorandum is provided to 
an investing plan prior to the time the plan enters into the forward 
delivery commitment; and
    (3) At the time of the delivery, all conditions of this exemption 
applicable to sales are met.
    Q. ``Forward delivery commitment'' means a contract for the 
purchase or sale of one or more certificates to be delivered at an 
agreed future settlement date. The term includes both mandatory 
contracts (which contemplate obligatory delivery and acceptance of the 
certificates) and optional contracts (which give one party the right 
but not the obligation to deliver certificates to, or demand delivery 
of certificates from, the other party).
    R. ``Reasonable compensation'' has the same meaning as that term is 
defined in 29 CFR 2550.408c-2.
    S. ``Qualified Administrative Fee'' means a fee which meets the 
following criteria:
    (1) the fee is triggered by an act or failure to act by the obligor 
other than the normal timely payment of amounts owing in respect of the 
obligations;
    (2) the servicer may not charge the fee absent the act or failure 
to act referred to in (1);
    (3) the ability to charge the fee, the circumstances in which the 
fee may be charged, and an explanation of how the fee is calculated are 
set forth in the pooling and servicing agreement; and
    (4) the amount paid to investors in the trust will not be reduced 
by the amount of any such fee waived by the servicer.
    T. ``Qualified Equipment Note Secured By A Lease'' means an 
equipment note:
    (1) which is secured by equipment which is leased;
    (2) which is secured by the obligation of the lessee to pay rent 
under the equipment lease; and
    (3) with respect to which the trust's security interest in the 
equipment is at least as protective of the rights of the trust as would 
be the case if the equipment note were secured only by the equipment 
and not the lease.
    U. ``Qualified Motor Vehicle Lease'' means a lease of a motor 
vehicle where:
    (1) the trust holds a security interest in the lease;
    (2) the trust holds a security interest in the leased motor 
vehicle; and
    (3) the trust's security interest in the leased motor vehicle is at 
least as protective of the trust's rights as would be the case if the 
trust consisted of motor vehicle installment loan contracts.
    V. ``Pooling and Servicing Agreement'' means the agreement or 

[[Page 35941]]
    agreements among a sponsor, a servicer and the trustee establishing a 
trust. In the case of certificates which are denominated as debt 
instruments, ``Pooling and Servicing Agreement'' also includes the 
indenture entered into by the trustee of the trust issuing such 
certificates and the indenture trustee.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on May 22, 1995 at 60 FR 
27132.
    The Department notes that this exemption is included within the 
meaning of the term ``Underwriter Exemption'' as it is defined in 
section V(h) of the grant of the Class Exemption for Certain 
Transactions Involving Insurance Company General Accounts, for which 
the notice of proposed exemption was published on August 22, 1994 at 59 
FR 43134.

FOR FURTHER INFORMATION CONTACT: Gary Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemptions does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application are true and complete and accurately describe all material 
terms of the transaction which is the subject of the exemption. In the 
case of continuing exemption transactions, if any of the material facts 
or representations described in the application change after the 
exemption is granted, the exemption will cease to apply as of the date 
of such change. In the event of any such change, application for a new 
exemption may be made to the Department.

    Signed at Washington, D.C., this 7th day of July, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-17075 Filed 7-11-95; 8:45 am]
BILLING CODE 4510-29-P