[Federal Register Volume 64, Number 44 (Monday, March 8, 1999)]
[Notices]
[Pages 11045-11051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5573]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-10; Exemption Application No. D-
10630, et al.]
Grant of Individual Exemptions; Genito-Urinary Surgeons, Inc.
Profit Sharing Plan (GUS Plan) Michael J. Rosenberg Money Purchase
Pension Plan (Rosenberg Plan); Robert Savage Qualified Retirement Plan
(Savage Plan), et al.
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemptions.
-----------------------------------------------------------------------
SUMMARY: This document contains exemptions issued by the Department of
Labor (the Department) from certain of
[[Page 11046]]
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.
Genito-Urinary Surgeons, Inc. Profit Sharing Plan (GUS Plan);
Michael J. Rosenberg Money Purchase Pension Plan (Rosenberg Plan);
Robert Savage Qualified Retirement Plan (Savage Plan); Located in
Toledo, Ohio
[Prohibited Transaction Exemption Number 99-10; Application Numbers D-
10630, D-10631 and D-10632, respectively]
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,
do not apply to: (1) the cash sale of certain shares of preferred stock
(the Preferred Stock) issued by TTC Holdings Inc. (TTC) to TTC, by the
individually-directed account of Dr. Gregor Emmert in the GUS Plan, by
the individually-directed account of Mr. Michael J. Rosenberg in the
Rosenberg Plan, and by the individually-directed account of Mr. Robert
Savage in the Savage Plan (collectively, the Accounts); and (2) the
subsequent purchase of certain shares of common stock (the Common
Stock) issued by TTC by Messrs. Emmert, Rosenberg and Savage
(collectively; the Participants), in their own name, from TTC pursuant
to an agreement with TTC that the purchase of the Common Stock was to
occur immediately after the sale of the Preferred Stock by the Plans;
provided that the following conditions were met:
(a) The sale of the Preferred Stock to TTC by the Accounts and the
purchase of the Common Stock from TTC by the Participants, acting in
their individual capacity, were one-time transactions for cash;
(b) The transactions described in (a) above took place on the same
business day;
(c) The amount paid to the Accounts by TTC was the fair market
value of the Preferred Stock, as determined by a qualified independent
appraiser at the time of the sale;
(d) The Participants, in their individual capacity, purchased from
TTC shares of the Common Stock which were equal in number and value to
the shares of Preferred Stock sold by the Accounts to TTC;
(e) A qualified independent fiduciary (the Independent Fiduciary)
determined that the transactions described herein were in the best
interests and protective of the Accounts at the time of the
transactions; and
(f) The Independent Fiduciary supervised the transactions; assured
that the conditions of this proposed exemption were met; and took
whatever actions necessary to protect the interests of the Accounts,
including reviewing amounts paid by TTC for the Preferred Stock.
EFFECTIVE DATE: The effective date of this exemption is December 1,
1998.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, please
refer to the notice of proposed exemption published on January 21,
1999, at 64 FR 3342.
FOR FURTHER INFORMATION CONTACT: James Scott Frazier of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Mellon Financial Markets, Inc. (Mellon); Located in Pittsburgh,
Pennsylvania
[Prohibited Transaction Exemption 99-11; Exemption Application No. D-
10695]
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.\1\
---------------------------------------------------------------------------
\1\ 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).
---------------------------------------------------------------------------
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
[[Page 11047]]
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.\2\ 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;
---------------------------------------------------------------------------
\2\ 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.\3\
---------------------------------------------------------------------------
\3\ 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.
---------------------------------------------------------------------------
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
from a rating agency (as defined in section III.W.) at the time of such
acquisition that is in one of the three highest generic rating
categories;
(4) The trustee is not an affiliate of any other 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;
(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;
and
(7) In the event that the obligations used to fund a trust have not
all been transferred to the trust on the closing date, additional
obligations as specified in subsection III.B.(1) may be transferred to
the trust during the pre-funding period (as defined in section III.BB.)
in exchange for amounts credited to the pre-funding account (as defined
in section III.Z.), provided that:
(a) The pre-funding limit (as defined in section III.AA.) is not
exceeded;
(b) All such additional obligations meet the same terms and
conditions for eligibility as those of the original obligations used to
create the trust corpus (as described in the prospectus or private
placement memorandum and/or pooling and servicing agreement for such
certificates), which terms and conditions have been approved by a
rating agency. Notwithstanding the foregoing, the terms and conditions
for determining the eligibility of an obligation may be changed if such
changes receive prior approval either by a majority of the outstanding
certificateholders or by a rating agency;
[[Page 11048]]
(c) The transfer of such additional obligations to the trust during
the pre-funding period does not result in the certificates receiving a
lower credit rating from a rating agency upon termination of the pre-
funding period than the rating that was obtained at the time of the
initial issuance of the certificates by the trust;
(d) The weighted average annual percentage interest rate (the
average interest rate) for all of the obligations in the trust at the
end of the pre-funding period will not be more than 100 basis points
lower than the average interest rate for the obligations which were
transferred to the trust on the closing date;
(e) In order to ensure that the characteristics of the receivables
actually acquired during the pre-funding period are substantially
similar to those which were acquired as of the closing date, the
characteristics of the additional obligations will either be monitored
by a credit support provider or other insurance provider which is
independent of the sponsor, or an independent accountant retained by
the sponsor will provide the sponsor with a letter (with copies
provided to the rating agency, the underwriter and the trustees)
stating whether or not the characteristics of the additional
obligations conform to the characteristics of such obligations
described in the prospectus, private placement memorandum and/or
pooling and servicing agreement. In preparing such letter, the
independent accountant will use the same type of procedures as were
applicable to the obligations which were transferred as of the closing
date;
(f) The pre-funding period shall be described in the prospectus or
private placement memorandum provided to investing plans; and
(g) The trustee of the trust (or any agent with which the trustee
contracts to provide trust services) will be a substantial financial
institution or trust company experienced in trust activities and
familiar with its duties, responsibilities and liabilities as a
fiduciary under the Act. The trustee, as the legal owner of the
obligations in the trust, will enforce all the rights created in favor
of certificateholders of such trust, including employee benefit plans
subject to the Act.
B. Neither any underwriter, sponsor, trustee, servicer, insurer,
nor 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) or a Financial Asset Securitization
Investment Trust (FASIT) within the meaning of section 860D(a) or
section 860L, respectively, 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 Mellon
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)(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); and/or
(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); and/or
(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); and/or
(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); and/or
(e) ``Guaranteed governmental mortgage pool certificates,'' as
defined in 29 CFR 2510.3-101(i)(2); and/or
(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)(a) Undistributed cash or temporary investments made therewith
maturing no later than the next date on which distributions are to be
made to certificateholders; and/or
(b) Cash or investments made therewith which are credited to an
account to provide payments to certificateholders pursuant to any yield
supplement agreement or similar yield maintenance arrangement to
supplement the interest rates otherwise payable on obligations
described in subsection III.B.(1) held in the trust, provided that such
arrangements do not involve swap agreements or other notional principal
contracts; and/or
(c) Cash transferred to the trust on the closing date and permitted
investments made therewith which:
(i) Are credited to a pre-funding account established to purchase
additional obligations with respect to which the conditions set forth
in clauses (a)-(g) of subsection II.A.(7) are met and/or;
(ii) Are credited to a capitalized interest account (as defined in
section III.X.); and
(iii) Are held in the trust for a period ending no later than the
first distribution date to certificateholders occurring after the end
of the pre-funding period.
For purposes of this clause (c) of subsection III.B.(3), the term
``permitted investments'' means investments which are either: (i)
Direct obligations of, or obligations fully guaranteed as to timely
payment of principal and interest by the United States, or any agency
or instrumentality thereof, provided that such obligations are backed
by the full faith and credit of the United States or (ii) have been
rated (or the obligor has
[[Page 11049]]
been rated) in one of the three highest generic rating categories by a
rating agency; are described in the pooling and servicing agreement;
and are permitted by the rating agency; and
(4) Rights of the trustee under the pooling and servicing
agreement, and rights under any insurance policies, third-party
guarantees, contracts of suretyship, yield supplement agreements
described in clause (b) of subsection III.B.(3) and other credit
support arrangements with respect to any obligations described in
subsection III.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 described in clauses (a) through (f) of subsection
III.B.(1) 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 a
rating agency 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) Mellon;
(2) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
Mellon; or
(3) Any member of an underwriting syndicate or selling group of
which Mellon 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 obligations contained in the
trust, but is not a party to the pooling and servicing agreement.
G. Servicer means any entity which services obligations 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:
[[Page 11050]]
(1) the trust owns or holds a security interest in the lease;
(2) the trust owns or 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
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.
W. Rating Agency means Standard & Poor's Structured Rating Group
(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps
Credit Rating Co. (D & P) or Fitch IBCA, Inc. (Fitch), or their
successors.
X. Capitalized Interest Account means a trust account: (i) which is
established to compensate certificateholders for shortfalls, if any,
between investment earnings on the pre-funding account and the pass-
through rate payable under the certificates; and (ii) which meets the
requirements of clause (c) of subsection III.B.(3).
Y. Closing Date means the date the trust is formed, the
certificates are first issued and the trust's assets (other than those
additional obligations which are to be funded from the pre-funding
account pursuant to subsection II.A.(7)) are transferred to the trust.
Z. Pre-Funding Account means a trust account: (i) which is
established to purchase additional obligations, which obligations meet
the conditions set forth in clauses (a)-(g) of subsection II.A.(7); and
(ii) which meets the requirements of clause (c) of subsection
III.B.(3).
AA. Pre-Funding Limit means a percentage or ratio of the amount
allocated to the pre-funding account, as compared to the total
principal amount of the certificates being offered which is less than
or equal to 25 percent.
BB. Pre-Funding Period means the period commencing on the closing
date and ending no later than the earliest to occur of: (i) the date
the amount on deposit in the pre-funding account is less than the
minimum dollar amount specified in the pooling and servicing agreement;
(ii) the date on which an event of default occurs under the pooling and
servicing agreement; or (iii) the date which is the later of three
months or 90 days after the closing date.
CC. Mellon means Mellon Financial Markets, Inc. and its affiliates.
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 Prohibited Transaction Exemption 95-60 (60 FR 35925,
July 12, 1995), the Class Exemption for Certain Transactions Involving
Insurance Company General Accounts (see 60 FR at 35932).
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 January 21, 1999 at 64 FR
3344.
WRITTEN COMMENTS: The only written comments received by the Department
were submitted by the applicant.
The applicant's first comment relates to Sections III.F. and III.G.
of the proposed exemption, which contain the definition of the terms
``Subservicer'' and ``Servicer'', respectively. Mellon's application,
which was based on prior exemption applications requesting similar
relief for other entities, had used the term ``obligations'' in place
of ``loans'' in these definitions. The applicant's comment states that
the term ``obligations'', which is broader than the term ``loans'', is
more consistent with the framework of the requested exemption. In this
regard, the definition of the term ``Trust'' in Section III.B. of the
exemption, which lists the assets that may be held in a trust of the
type described in the exemption, refers to ``receivables'' and
``obligations'', among other things, but uses the term ``loans'' only
in subparagraph (1)(a) therein as an example of a type of secured
consumer receivable. Therefore, to avoid any implication that the terms
``Subservicer'' and ``Servicer'', as defined in Sections III.F. and
III.G. of the proposed exemption, relate only to a narrow class of loan
assets included within a Trust, the applicant requests that the term
``loans'' in those definitions be replaced by the term ``obligations''
in order to make clearer that the definitions cover a servicer with
respect to any serviced assets held in the trust.
The applicant's second comment related to Section III.U. of the
proposed exemption, which defines the term ``Qualified Motor Vehicle
Lease''. In listing the requirements for such a lease, Subparagraph (1)
of Section III.U. of the proposed exemption requires that the trust
``owns or holds'' the security interest in the lease, whereas
Subparagraph (2) therein requires that the trust only ``hold'' a
security interest in the leased motor vehicle. The applicant's comment
states that the phrase ``owns or holds'' should also be used in
Subparagraph (2) of Section III.U. The applicant notes that this usage
would avoid any implication that the exemption intends to draw a
distinction between the trust's rights in the security interest in the
lease versus the trust's rights in the security interest in the motor
vehicle. Therefore, the applicant requests that the phrase ``owns or
holds'' replace the word ``holds'' in Subparagraph (2) of Section
III.U.
The Department has considered the entire record, including the
comments filed by the applicant, and has determined to grant the
exemption as proposed, with the two modifications requested in the
applicant's comment letter.
FOR FURTHER INFORMATION CONTACT: Gary Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
State Street Bank and Trust Company (State Street) Located in
Boston, Massachusetts
[Prohibited Transaction Exemption 99-12; Exemption Application Number
D-10701]
Exemption
Section I. Transactions
The restrictions of section 406(a)(1)(A) through (D) and section
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 sale (the
Sale) of fractional amounts of certain fixed-income instruments
(Fractional Amounts) to State Street and its affiliates by plans for
which State Street or its affiliates provide fiduciary or other
services (Client Plans), as well as employee benefit plans established
and maintained by State Street or its affiliates (State Street Plans;
collectively, the Plans), provided that the following conditions are
met:
(a) Each Sale involves a one time transaction for cash;
(b) The terms of each Sale are at least as favorable to the Plan as
those terms which would be available in an arm's-length transaction
with an unrelated party;
(c) The Plans receive an amount which is not less than the par
value for each of the Fractional Amounts;
(d) In the case of single Client Plans,
(1) each Sale is subject to the prior consent of an independent
plan fiduciary;
(2) the independent fiduciary of each Plan is furnished with notice
within 90 days of the proposed Sale, providing information necessary
for the
[[Page 11051]]
independent fiduciary to determine whether to approve the Sale
transaction. If the fixed-income instruments are not redenominated
within a year of provision of this notice, additional notice will be
provided to the independent fiduciaries of each Plan each year
notifying them of their right not to participate in this program of
Sales; and
(3) each independent fiduciary who determines to participate in the
Sale receives written confirmation of the decision to participate and
written confirmation of the transaction and its terms.
(e) In the case of Client Plans participating in collective funds
for which State Street serves as trustee or investment manager,
(1) each Sale engaged in by the collective fund is subject to the
prior approval of each independent plan fiduciary of Plans
participating in the fund;
(2) the independent fiduciary of each Plan is furnished notice
within 90 days of the proposed Sale, containing information necessary
for the independent fiduciary to determine whether to approve the Sale
transaction or withdraw from the collective fund prior to the Sale. If
the fixed-income instruments are not redenominated within a year of
provision of this notice, additional notice will be provided to the
independent fiduciaries each year notifying them of their right to
withdraw from the collective fund;
(3) each independent fiduciary of a plan participating in a
collective fund who determines to participate in the Sale receives
written confirmation of the decision to participate and written
confirmation of the transaction and its terms;
(f) In the case of the Plans, State Street must engage in the Sale
within 30 days of the date that the Fractional Amounts are received by
State Street as custodian or trustee for the Plans from the issuers of
the fixed-income security;
(g) The Plans do not incur any commissions or other expenses in
connection with the Sales; and
(h) (1) State Street or an affiliate maintains or causes to be
maintained within the United States, for a period of six years from the
date of such transaction, the records necessary to enable the persons
described in this section to determine whether the conditions of this
exemption have been met; except that a party in interest with respect
to an employee benefit plan, other than State Street or its affiliates,
shall not be subject to a civil penalty under section 502(i) of the Act
or the taxes imposed by section 4975(a) or (b) of the Code, if such
records are not maintained, or are not available for examination, as
required by this section, and a prohibited transaction will not be
deemed to have occurred if, due to circumstances beyond the control of
State Street or its affiliates, such records are lost or destroyed
prior to the end of such six year period;
(2) The records referred to in subsection (1) above are
unconditionally available for examination during normal business hours
by duly authorized employees of (a) the Department, (b) the Internal
Revenue Service, (c) plan participants and beneficiaries, (d) any
employer of plan participants and beneficiaries, and (e) any employee
organization whose members are covered by such plan; except that none
of the persons described in (c) through (e) of this subsection shall be
authorized to examine trade secrets of State Street or its affiliates
or any commercial or financial information which is privileged or
confidential.
Section II. Definitions
(a) The term affiliate of State Street means any other bank or
similar financial institution directly or indirectly controlling,
controlled by, or under common control with State Street.
(b) The term Euro means the single European currency introduced on
January 1, 1999 in eleven Member States of the European Union.
(c) The term Fractional Amount means, with respect to any fixed-
income instrument, an amount less than one Euro.
(d) The term independent plan fiduciary means a plan fiduciary
independent of State Street and any of its affiliates.
(e) The term par value means the face value of the fixed-income
instrument.
(f) The term Plan includes all employee benefit plans to which
State Street or an affiliate acts as a service provider, including a
fiduciary, and all plans established and maintained by State Street and
its affiliates, which have net assets of at least $25,000,000.
EFFECTIVE DATE: This exemption is effective for the period beginning on
January 1, 1999 and ending three years from the date on which each
country joining the European Economic and Monetary Union converts to
the Euro.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, please
refer to the notice of proposed exemption published in the Federal
Register on January 27, 1999 at 64 FR 4144.
FOR FURTHER INFORMATION: Contact James Scott Frazier of the Department,
phone number (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, DC, this 3rd day of March, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 99-5573 Filed 3-5-99; 8:45 am]
BILLING CODE 4510-29-P