[Federal Register Volume 74, Number 219 (Monday, November 16, 2009)]
[Notices]
[Pages 58987-59000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-27404]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Application Nos. and Proposed Exemptions; D-11491, JPMorgan Chase 
Bank, N.A. (JPMCB or the Applicant); D-11492, Ivy Asset Management 
Corporation; and D-11571, The Bank of New York (BNY Mellon or the 
Applicant), et al.

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. ----, stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or FAX. Any such 
comments or requests should be sent either by e-mail to: 
[email protected], or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

JPMorgan Chase Bank, N.A. (JPMCB or the Applicant), Located in New 
York, New York
    [Application No. D-11491]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990).

Section I--Transactions

    If the exemption is granted, the restrictions of sections 406(a), 
406(b)(1) and (b)(2) of the Act, and the sanctions

[[Page 58988]]

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, 
effective July 1, 2004, to the continued and future provision by JPMCB 
or by its current or future affiliates of letters of credit to 
guarantee the commercial lease obligations of unrelated third-party 
tenants in connection with commercial properties owned by a Fund (as 
defined below in Section III) or commercial properties for which a Fund 
has a security interest, where JPMCB is the manager and trustee 
(Trustee) of such Funds that hold the assets of certain employee 
benefit plans (the Plans), provided that the conditions set forth below 
in Section II are satisfied.

Section II--Conditions

    A. With respect to existing or future letters of credit, each of 
the Funds is represented by an independent fiduciary to perform the 
following functions:
    (1) Monitor monthly reports of rental payments of tenants utilizing 
such letters of credit issued by JPMCB, or any current or future 
affiliate of JPMCB, to guarantee their lease payments;
    (2) Confirm whether an event has occurred that calls for a letter 
of credit to be drawn upon; and
    (3) Represent each of the Funds and the Plans as an independent 
fiduciary in any circumstances with respect to a letter of credit which 
would present a conflict of interest for the Trustee or otherwise 
violate section 406(b), including but not limited to: the need to 
enforce a remedy against JPMCB or a current or future affiliate with 
respect to its obligations under a letter of credit.
    B. With respect to future letters of credit issued by JPMCB, or any 
current or future affiliate of JPMCB, the following additional 
conditions are met:
    (1) JPMCB, or any current or future affiliate of JPMCB, as the 
issuer of a letter of credit, has at least an ``A'' credit rating by at 
least one nationally recognized statistical rating service at the time 
of the issuance of the letter of credit;
    (2) The letter of credit has objective market drawing conditions 
and states precisely the documents against which payment is to be made;
    (3) JPMCB and its affiliates do not ``steer'' the Funds' tenants to 
JPMCB or its affiliates in order to obtain a letter of credit;
    (4) Letters of credit are issued only to third-party tenants which 
are unrelated to JPMCB; and
    (5) The terms of any future letters of credit are not more 
favorable to the tenants than the terms generally available in 
transactions with other similarly situated unrelated third-party 
commercial clients of JPMCB or of its current or future affiliates.
    C. JPMCB or its affiliates maintain, or cause to be maintained, for 
a period of six (6) years from the date of any transactions involving 
letters of credit described in Section I above such records as are 
necessary to enable the persons, described below in Section II(D), to 
determine whether the conditions of this exemption have been met, 
except that--
    (1) No party in interest with respect to a Plan whose assets are 
involved in letter of credit transactions described in Section I above, 
other than JPMCB or its affiliates, shall be subject to a civil penalty 
under section 502(i) of the Act or the taxes imposed by section 4975(a) 
and (b) of the Code, if such records are not maintained, or not 
available for examination, as required below by Section II(D); and
    (2) A separate prohibited transaction shall not be considered to 
have occurred if, due to circumstances beyond the control of JPMCB or 
its affiliates, such records are lost or destroyed prior to the end of 
the six-year period.
    D. (1) Except as provided below in Section II(D)(2), and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to above in Section II(C) are 
unconditionally available at their customary location for examination 
during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, the Securities and Exchange 
Commission (SEC), and any U.S. banking regulatory agency;
    (ii) Any fiduciary of any Plan whose assets are involved in the 
letter of credit transactions described in Section I above, or any duly 
authorized employee or representative of such fiduciary; or
    (iii) Any employer of participants and beneficiaries and any 
employee organization whose members are covered by a Plan whose assets 
are involved in the letter of credit transactions described in Section 
I above, or any authorized employee or representative of these 
entities; or
    (iv) Any participant or beneficiary of a Plan whose assets are 
involved in the letter of credit transactions described in Section I 
above, or duly authorized employee or representative of such 
participant or beneficiary;
    (2) None of the persons described above in Section II(D)(1)(ii)-
(iv) shall be authorized to examine trade secrets of JPMCB or its 
affiliates, or commercial or financial information which is privileged 
or confidential; and
    (3) Should JPMCB or its affiliates refuse to disclose information 
on the basis that such information is exempt from disclosure, pursuant 
to Section II(D)(2) above, JPMCB or its affiliates shall, by the close 
of the thirtieth (30th) day following the request, provide a written 
notice advising that person of the reasons for the refusal and that the 
Department may request such information.

Section III--Definitions

    A. The term ``independent fiduciary'' means Fiduciary Counselors 
Inc. (Fiduciary Counselors) or any successor Independent Fiduciary, 
provided that Fiduciary Counselors or its successor is: (1) Independent 
of, and unrelated to, JPMCB and its affiliates, and (2) appointed to 
act on behalf of each Fund for the purposes described in Section II.A 
and II.B above. For purposes of this proposed exemption, a fiduciary 
will not be deemed to be independent of, and unrelated to, JPMCB if: 
(i) Such fiduciary directly or indirectly, controls, is controlled by, 
or is under common control with JPMCB; (ii) such fiduciary directly or 
indirectly receives any compensation or other consideration in 
connection with any transaction described in this proposed exemption, 
except that it may receive compensation for acting as an independent 
fiduciary from JPMCB in connection with the transactions described 
herein, if the amount or payment of such compensation is not contingent 
upon, or in any way affected by such fiduciary's decision; and (iii) 
more than 5 percent of such fiduciary's annual gross revenue in its 
prior tax year will be paid by JPMCB and its affiliates in the 
fiduciary's current tax year with respect to any particular 12-month 
tax period.
    B. The term ``affiliate'' means: (1) Any person, directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such person; (2) any officer, 
director, or partner, employee, or relative (as defined in section 
3(15) of the Act) of such person; and (3) any corporation or 
partnership of which such person is an officer, director, or partner or 
employee. For purposes of this definition, the term ``control'' means 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual.
    C. The term ``Fund'' or ``Funds'' means ``collective investment 
funds,'' of JPMCB and its current or future affiliates, within the 
meaning of Prohibited Transaction Class Exemption 91-38 (PTE 91-38) and 
``investment funds,'' of JCMCB and its current or

[[Page 58989]]

future affiliates, within the meaning of Prohibited Transaction Class 
Exemption (PTE 84-14) and encompasses the following Funds: (i) the 
Commingled Pension Trust Fund/Strategic Property Fund of JPMorgan Chase 
Bank, N.A. (the Strategic Property Fund); (ii) the Commingled Pension 
Trust Fund/Special Situation Property Fund of JPMorgan Chase Bank, N.A. 
(the Special Situation Property Fund); and (iii) the Commingled Pension 
Trust Fund/Mortgage Private Placement Fund of JPMorgan Chase Bank, N.A. 
(the Mortgage Fund).
    Effective Date: The exemption is effective as of July 1, 2004.

Summary of Facts and Representations

Background

    1. JPMorgan Chase & Co. (JPMCC), the parent company of JPMorgan 
Chase Bank, N.A. (JPMCB), is headquartered in New York. JPMCC had 
assets of approximately $2.2 trillion as of January 15, 2009. JPMCC has 
operations in more than 50 countries, and is a leader in investment 
banking, financial services for consumers and businesses, financial 
transaction processing, asset and wealth management, and private 
equity.
    On January 14, 2004, JPMCC and Bank One Corporation (Bank One), 
headquartered in Chicago, Illinois, announced that they had agreed to 
merge in a strategic business combination that established the second 
largest banking franchise in the United States, based on core deposits. 
Completion of the merger (the Bank One Merger) occurred on July 1, 
2004, and the merged company is still known as JPMorgan Chase & Co. 
(i.e., JPMCC). The Bank One Merger created an enterprise with a 
combined market capitalization of approximately $130 billion. The 
common stock of JPMCC trades on the New York Stock Exchange under the 
trading symbol ``JPM.''
    Following the Bank One Merger, JPMCC announced the merger of its 
three lead banks, JPMorgan Chase Bank, N.A., Bank One, N.A. (Chicago 
Illinois), and Bank One, N.A. (Columbus Ohio), effective as of November 
13, 2004. Immediately prior to such merger, JPMorgan Chase Bank 
converted its charter to a national bank. The name of the surviving 
entity in the bank merger is JPMorgan Chase Bank, N.A. (hereinafter 
referred to as JPMCB or the Applicant).
    JPMCB is internally organized for management reporting purposes 
into six major business groups: (i) Asset & Wealth Management; (ii) 
Card Services; (iii) Commercial Banking; (iv) Investment Banking; (v) 
Retail Financial Services; and (vi) Treasury & Securities Services. 
According to the Applicant, only the first business group, Asset & 
Wealth Management, is relevant to this exemption request.
    2. The Applicant represents that JPMCB serves as trustee of various 
funds, which are ``collective investment funds'' within the meaning of 
PTE 91-38, and ``investment funds'' within the meaning of PTE 84-14 
(collectively the Funds). According to the Applicant, JPMCB, which 
meets (as did its predecessor, Morgan Guaranty Trust Company) the 
definition of a qualified professional asset manager (QPAM) within the 
meaning of PTE 84-14 and which is a bank maintaining a bank collective 
investment fund within the meaning of PTE 91-38, has ordinarily relied 
upon these class exemptions to conduct the activities of various Funds 
including the Strategic Property Fund, the Special Situation Property 
Fund, and the Mortgage Fund.
    3. As of December 31, 2008, the Strategic Property Fund had net 
assets of approximately $13.7 billion, which were invested in 152 
developed real estate properties, primarily office buildings, 
industrial parks, residential properties, retail properties, and 
hotels. As of December 31, 2008, the Special Situation Property Fund 
had net assets of approximately $2.5 billion, which were invested in 
real estate properties, primarily office buildings, industrial parks, 
residential properties, and retail properties. As of December 31, 2008, 
the Mortgage Fund had net assets of approximately $5.4 billion, which 
were invested primarily in whole loans collateralized by commercial, 
residential and cooperative properties, GNMA Project Loans, and 
residential mortgage-backed securities.
    As of December 31, 2008, there were approximately 290 employee 
benefit plans participating in the Strategic Property Fund, 125 
employee benefit plans participating in the Special Situation Property 
Fund, and 355 employee benefit plans participating in the Mortgage 
Fund. Collectively, these participating plans were comprised of both 
employee benefit plans subject to Title I of the Act (hereinafter the 
Plans), as well as employee benefit plans not subject to the Act, such 
as government-sponsored plans within the meaning of section 3(32) of 
the Act.
    4. The Department previously provided individual exemptive relief 
in PTE 2003-10 (68 FR 28031, May 22, 2003) with respect to prohibited 
transactions involving certain leases and letters of credit that arose 
from the December 31, 2000 merger of J.P. Morgan & Company, Inc. and 
the Chase Manhattan Corporation (the Chase Merger), which adversely 
affected JPMCB's ability to rely on the administrative relief provided 
under PTE 84-14 and PTE 91-38. Specifically, entities that may have 
been parties in interest with respect to certain Plans whose assets 
were invested in the Strategic Property Fund and that were involved in 
certain leases and letters of credit transactions became affiliates of 
JPMCB. In accordance with the requirements of PTE 2003-10, JPMCB 
retained an independent fiduciary to act on behalf of the Strategic 
Property Fund and the participating employee benefit plans with respect 
to the oversight, negotiation, and approval of certain leases and 
letters of credit described in PTE 2003-10.
    5. The Applicant represents that, just as the Chase Merger affected 
JPMCB's ability to rely on PTE 84-14 and PTE 91-38, the Bank One Merger 
also may adversely affect JPMCB's ability to rely on those class 
exemptions with respect to substantially similar transactions involving 
letters of credit. Specifically, entities that may be parties in 
interest with respect to the Plans and involved in the subject letters 
of credit (as described below) became affiliates of JPMCB as a result 
of the Bank One Merger. Consequently, one of the conditions of each 
class exemption, that the party in interest involved in a transaction 
may not be related to the QPAM of the investment fund (in the case of 
PTE 84-14) or to the trustee of the bank collective investment fund (in 
the case of PTE 91-38), is no longer satisfied (except to the extent 
that the grandfather provisions of Part V(i) of PTE 84-14 and Section 
IV(h) of PTE 91-38, respectively, of the exemptions are otherwise 
applicable). In addition, the Applicant also states that there may be 
issues that will arise under sections 406(b)(1) and 406(b)(2) of the 
Act if it needs to enforce a remedy on behalf of the Funds against 
itself or its affiliate regarding the Applicant's obligations under the 
Bank One letters of Credit. Accordingly, the Applicant seeks exemptive 
relief with respect to certain prohibited transactions involving Bank 
One-issued letters of credit that arose from the Bank One Merger.

The Bank One Letters of Credit

    6. The Applicant represents that a series of letters of credit were 
issued by Bank One, prior to the Bank One Merger, to guarantee payment 
obligations of unrelated third-party tenants to pay rent for space 
leased in properties owned by the Funds. The tenants were not 
affiliates of JPMCB or Bank One prior to the Bank One Merger

[[Page 58990]]

and are not now affiliates of JPMCB. However, once a Bank One letter of 
credit is drawn upon by a lessor subsequent to the merger, the 
affiliation or identity between the Applicant and a JPMCB affiliate 
issuing the letter of credit would give rise to a prohibited 
transaction.\1\
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    \1\ As a result of the Bank One Merger, JPMCB (the Applicant) 
will technically also be the issuer of the Bank One letters of 
credit.
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    The Applicant represents that a letter of credit is an instrument 
issued by a bank or other lending institution, whose function is 
similar to that of a guaranty and is used in commercial leasing 
transactions as a substitute for a security deposit. The Applicant 
further represents that the lending institution, upon issuing a letter 
of credit, promises that if actions of the tenant trigger certain 
default events set forth in the lease, such as bankruptcy of the 
tenant, it will make such lease payments directly to the applicable 
Fund up to the face amount of the letter of credit. The beneficiary of 
the letter of credit, one of the Funds, is issued a redeemable 
instrument that it may take directly to the issuing lending institution 
and demand payment merely by stating that payment is due pursuant to 
the terms of the lease. The bank that issued the letter of credit is 
obligated to pay without further inquiry and without any requirement on 
the banks part to verify the accuracy of the information provided. In 
general, the bank cannot be sued by the tenant for having paid under 
the letter of credit, absent fraud on its part. The Applicant 
represents that the Fund is not required to have any further 
involvement with the tenant in order to receive payment under the 
letter of credit from the bank that issued the letter of credit. The 
Bank One letters of credit automatically renew annually until their 
final stated expiration date, and are either cash collateralized by the 
tenants or, in the case of particularly creditworthy tenants, the 
tenants enter into a reimbursement agreement with the bank. The 
Applicant represents that the existing Bank One letters of credit are 
cash collateralized. The Applicant further represents that the terms of 
the Bank One letters of credit are governed by the 1993 Uniform Customs 
and Practice for Documentary Credits and contain standard provisions 
widely accepted in the banking industry promulgated by the 
International Chamber of Commerce Commission on Banking Technique and 
Practice, which most banking institutions incorporate by reference in 
their letters of credit. According to the Applicant, the previously 
referred to standard industry-wide provisions and terms provide 
certainty in execution, interpretation, and remedies with respect to 
the letters of credit.
    The applicant also represents that it is difficult for the tenants 
to obtain a letter of credit if they do not otherwise have a business 
banking relationship with a particular bank. Therefore, if JPMCB or its 
affiliate is the tenant's commercial bank, then the Applicant, 
according to its own representations, may be that tenant's only source 
to obtain a letter of credit. In addition, given the increasing number 
of bank mergers, there are fewer banks available from which to purchase 
a letter of credit. Accordingly, in the absence of an individual 
exemption, the Applicant represents that the disqualification of JPMCB 
or its affiliates from the available pool of letters of credit 
providers would be highly disadvantageous to the Funds and the Plans.
    7. The chart below shows the outstanding letters of credit that had 
been issued by various Bank One entities at the time of the Bank One 
Merger:

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                                                                                                     Original
             Fund interest                    Property name             Bank One entity name         letter of
                                                                                                   credit amount
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Strategic Property Fund (33.3%).......  Century Plaza Towers.....  Bank One.....................         $98,952
Special Situation Property Fund (50%).  IDI--Valwood West D (IPF   Bank One, N.A. 1717 Main              375,000
                                         2, LP)--IPA--DUPLIUM.      Street, 11th Floor, Dallas,
                                                                    TX 75201 (1-888-525-9395).
Special Situation Property Fund (50%).  IDI--Corporate Crossing V  Bank One, N.A. Global Trade           500,000
                                         (IPF 1, LP)--IPA--         Services, One Bank One
                                         Fairington                 Plaza, Mail Code IL1-0236
                                         Transportation, Inc.       Chicago, IL 60670-0236 (312-
                                                                    954-1969) (f/k/a--American
                                                                    National Bank).
Strategic Property Fund (100%)........  Woodfield Corporate        American National Bank.......          89,000
                                         Center.
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Future Letters of Credit

    8. The future letters of credit for which the applicant has 
requested exemptive relief include: (i) Any letters of credit issued by 
JPMCB or its affiliates on or after the effective date of the Bank One 
Merger with respect to third-party tenants unrelated to the Applicant 
in Fund-owned properties or in properties with respect to which a Fund 
has a security interest; and (ii) Any letters of credit issued by an 
entity that is not an affiliate of JPMCB at the time the letter of 
credit is issued but that later becomes an affiliate of JPMCB pursuant 
to a future merger, with respect to third-party tenants in Fund-owned 
properties or in properties with respect to which a Fund has a security 
interest. The Applicant represents that the terms of any future letter 
of credit will not be more favorable to tenants than the terms 
generally available in similar transactions with other similarly 
situated unrelated third-party commercial clients of JPMCB or its 
affiliates. The Applicant further represents that an independent 
fiduciary will review and approve the extension of Bank One letters of 
credit as well as any other letters of credit that are issued by the 
Applicant or an affiliate (or an entity that later becomes an 
affiliate) to a third party tenant of a property held by a Fund or in 
which a Fund has a security interest.

The Independent Fiduciary

    9. JPMCB has retained Fiduciary Counselors Inc. (Fiduciary 
Counselors) of Washington, DC as an independent fiduciary to determine 
on behalf of all of the Funds and Plans, among other things, whether it 
is appropriate to draw on any currently outstanding Bank One letters of 
credit or on any future letters of credit previously described herein. 
Fiduciary Counselors also will monitor monthly reports of rental 
payments by tenants so that it can confirm whether such letters of 
credit should be called.

[[Page 58991]]

In addition, Fiduciary Counselors will act in place of JPMCB in any 
situation where the Funds' rights need to be asserted against JPMCB as 
the issuer of the existing Bank One letters of credit or against JPMCB 
or its affiliates with respect to any future letters of credit.
    The Applicant represents that Fiduciary Counselors is a registered 
investment adviser registered under the Investment Advisers Act of 
1940, and acts primarily as an independent fiduciary for large pension 
plans. Since its formation in 1999, Fiduciary Counselors has acted as 
independent fiduciary in transactions involving plan assets totaling 
more than $4 billion. The Applicant also represents that Fiduciary 
Counselors has been involved in a variety of transactions requiring an 
independent fiduciary, such as certain prohibited transaction 
exemptions granted by the Department, conversion of common and 
collective mutual funds, mergers of mutual funds, and ESOP 
transactions. Fiduciary Counselors has acknowledged its duties, 
responsibilities and obligations as a fiduciary under ERISA to act for 
the exclusive benefit of the Funds and the Funds' participating plans.
    Ms. Nell Hennessy is the president of Fiduciary Counselors, and 
will lead the project on behalf of the firm with respect to the 
transactions for which exemptive relief from the Department is sought. 
The Applicant represents that neither Fiduciary Counselors nor its 
affiliates are ``affiliates'' of either JPMCB or its affiliates or any 
of the Plans' sponsors within the meaning of 29 CFR 2570.31(a). The 
Applicant further represents that no more than five (5) percent of 
Fiduciary Counselors' annual gross revenue in its prior tax year will 
be paid by JPMCB and its affiliates in the fiduciary's current tax 
year. The Applicant represents that, in the event that Fiduciary 
Counselors terminates its services as the Independent Fiduciary for 
purposes of overseeing transactions involving the Bank One letters of 
credit and/or future letters of credit, JPMCB will notify the 
Department of such termination. In this connection, the Applicant 
represents that any successor Independent Fiduciary shall be 
independent of JPMCB and its affiliates, shall possess fiduciary 
experience comparable to that of Fiduciary Counselors, and shall assume 
all of the fiduciary responsibilities described above with respect to 
the oversight of current and future letters of credit described herein.
    10. The Applicant represents that the proposed exemption would be 
administratively feasible because the Bank One and JPMCB letters of 
credit are, or would be, almost completely self-executing because there 
is essentially no discretion on the part of the issuing bank with 
respect to the letters of credit, and any conflict of interest 
situations would be handled by an independent fiduciary. The Applicant 
also represents that the continuance and/or future availability of the 
Bank One or JPMCB letters of credit would be in the interest of the 
Funds, the Plans, and their beneficiaries because the availability of 
these letters of credit mitigates the risk of loss of payment to the 
Funds if the applicable tenants default on their rent. The Applicant 
further represents that the Bank One and JPMCB letters of credit are 
and would be protective of the rights of the Funds' Plan participants 
and beneficiaries because they allow the Funds to recover some or all 
of lost rental income despite a default by the tenant, and because they 
incorporate standard industry-wide terms that provide certainty in 
execution, interpretation, and remedies.

Existing Commercial Leases and the Bank One Merger

    11. Although the Applicant withdrew its request for individual 
exemptive relief with respect to two Bank One leases involving the 
Strategic Property Fund that were in effect as of the date of the Bank 
One Merger, the Applicant has made the following representations 
regarding such leases and their renewals. The Applicant represents 
that, prior to the Bank One Merger, Bank One Arizona, N.A., an 
affiliate of Bank One, leased commercial office space in Vodaphone 
Plaza, a Class A office building in Walnut Creek, California, a 
property wholly owned by the Strategic Property Fund. The Vodafone 
Plaza property represented approximately 0.39% of the net asset value 
of the Strategic Property Fund. Bank One Arizona, N.A. occupied 3,811 
square feet, or 1.9%, of the property under a lease (the Original 
Lease) that originally commenced on May 9, 1997 and that expired, by 
its terms, on May 8, 2005.\2\ The Applicant represents that the 
original terms of the 1997 Bank One lease executed between Bank One, as 
tenant, and the Strategic Property Fund, as landlord, was negotiated 
and entered into between the parties when they were unrelated and when 
JPMCB was acting on behalf of the Funds as a fiduciary. The Applicant 
represents that JPMCB met the definition of a QPAM at the time that the 
Original Lease was entered into between the Strategic Property Fund and 
Bank One Arizona, N.A. The Applicant further represents that, because 
the Original Lease that was executed in 1997 continued to be in effect 
at the time of the 2004 Bank One Merger, the Vodaphone Plaza lease 
transaction met the requirements of Part I (the General Exemption) of 
PTE 84-14 between July 1, 2004 and the expiration of the Original 
Lease.\3\
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    \2\ The Applicant represents that the Original Lease was 
modified on February 22, 2000, prior to the Bank One Merger, to 
increase the amount of space occupied by Bank One Arizona, N.A. in 
the Vodaphone Plaza office building to 3,811 square feet. The lease 
was amended on May 5, 2005 (i.e., the date upon which the 
negotiations were finalized).
    \3\ The Department has expressed the view that the relief from 
the restrictions of section 406(a) of the Act that is provided under 
Part I of PTE 84-14 would be generally available for a continuing 
transaction (e.g., a loan or lease), provided that all the 
conditions of the exemption are satisfied on the date on which the 
transaction is entered into, notwithstanding the subsequent failure 
to satisfy one or more of the conditions of the class exemption 
(such as the requirement of Part I of PTE 84-14 that the subject 
transaction not occur with a party ``related to'' the QPAM). See 
Preamble to Proposed Amendment to PTE 84-14, 68 FR 52423 (September 
3, 2003).
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    12. The Applicant also represents that Fiduciary Counselors Inc., 
acting as an independent fiduciary, negotiated a renewal of the lease 
of the Vodaphone Plaza property on behalf of the Strategic Property 
Fund in March of 2005, and the lease renewal became effective in May of 
2005.\4\ On September 12, 2007, the Vodafone Plaza property was sold by 
the Strategic Property Fund to an unrelated third party, SVF Oak Road 
Walnut Creek Corporation (SVC), a subsidiary of a fund managed by 
American Realty Advisors.
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    \4\ The Department expresses no opinion herein as to whether the 
2005 renewal of the Vodafone Plaza lease by the Fund may have 
violated any of the provisions of Part 4 of Title I of the Act.
---------------------------------------------------------------------------

    The Applicant further represents that, between the lease renewal 
and September 12, 2007, the Vodaphone Plaza lease met the conditions of 
Part III (the Specific Lease Exemption) of PTE 84-14 for the leasing of 
office or commercial space by an investment fund managed by a QPAM or 
its affiliate to the QPAM, and therefore an individual exemption is not 
necessary to cover the lease renewal. Specifically, the Applicant 
represents that the requirements of Part III of PTE 84-14 were 
satisfied during the renewal period because: (1) The Vodaphone Plaza 
lease was for office space; (2) JPMCB is both a QPAM with respect to 
the Strategic Property Fund (which wholly owned the property that was 
the subject of the Vodaphone Plaza lease), and is also an affiliate of 
Bank One Arizona, N.A., the lessee; (3) The unit of space subject to 
the lease was suitable for use by different tenants; (4) At the time 
the transaction was entered into (and at the

[[Page 58992]]

time of any subsequent renewal or modification that required the 
consent of the Trustee as QPAM), the terms of the transaction were not 
more favorable to the lessee, Bank One Arizona, N.A., than the terms 
generally available in an arm's length transaction between unrelated 
parties; \5\ (5) No commission or other fee was paid by the Strategic 
Property Fund in connection with the Vodaphone Plaza lease to the QPAM, 
nor was any commission or fee paid to any person or entity (or any 
affiliate) who made the decision to have, or had the direct authority 
to direct, any Plan to invest in the Strategic Property Fund; and (6) 
The amount of space covered by the lease (i.e., 3,811 square feet, or 
1.9% of the rentable area of the Vodaphone Plaza property) did not 
exceed the greater of 7,500 square feet or one percent (1%) of the 
available space of the Vodaphone Plaza property.\6\
---------------------------------------------------------------------------

    \5\ This ``arm's length'' determination was addressed by 
Fiduciary Counselors in its report dated April 13, 2009, based upon 
material compiled by CB Richard Ellis on January 21, 2005.
    \6\ The Department is not providing any views in this proposed 
exemption as to whether the conditions of PTE 84-14 were met in 
connection with the Vodaphone Plaza lease transactions.
---------------------------------------------------------------------------

    13. The Applicant also represents that, prior to the Bank One 
Merger, the Banc One Trust Company, an affiliate of Bank One, leased 
commercial office space in the Dugan Texas--Texas Plaza I, an 
industrial building located in Irving, Texas. The Strategic Property 
Fund has a 50% ownership interest in this property. Banc One Trust 
Company occupies 54,146 square feet, or 46.7% of the net rentable area, 
of the Texas Plaza I property under a lease which commenced on July 15, 
1999 and which was renewed upon its expiration on August 14, 2006. 
Prior to the renewal of the lease, Banc One Trust Company paid rent in 
the amount of $10.25 per square foot per year for the Texas Plaza I 
property.\7\ The Applicant represents that JPMCB, in its capacity as 
trustee of the Strategic Property Fund, was not involved in the lease 
renewal decision-making process; rather, the other 50% owner of the 
Texas Plaza I property (i.e., Duke-Weeks Realty Limited Partnership, 
now doing business as Duke Realty Limited Partnership and hereinafter 
referred to as ``Duke Weeks'') made the lease renewal decision without 
consulting the Strategic Property Fund in any manner.
---------------------------------------------------------------------------

    \7\ The Applicant represents that the Texas Plaza I lease 
executed between Banc One Trust Company, as tenant, and the 
Strategic Property Fund, as landlord, was originally negotiated and 
entered into between the contracting parties when they were 
completely unrelated and when JPMCB was acting on behalf of the 
Strategic Property Fund as an independent ERISA fiduciary.
---------------------------------------------------------------------------

    The Applicant further represents that, on December 28, 2000, 
pursuant to a 50/50 joint venture by Dugan Texas Acquisition LLC (of 
which the Strategic Property Fund is the sole member) and Duke Weeks, a 
real estate operating company known as Dugan Texas LLC was formed. The 
Applicant represents that Dugan Texas LLC was established to operate 
and manage thirteen commercial real estate properties (including the 
Texas Plaza I property) that were initially contributed to it by Duke 
Weeks on December 28, 2000. The Applicant represents that, since its 
establishment on December 28, 2000, Dugan Texas LLC has operated so as 
to qualify as a real estate operating company (REOC), within the 
meaning of the Department's ``plan asset regulation'' at 29 CFR 2510.3-
101.\8\
---------------------------------------------------------------------------

    \8\ The Department is not providing any opinion in this proposed 
exemption as to whether Dugan Texas LLC, which manages the Texas 
Plaza I lease, qualifies as a REOC, within the meaning of 29 CFR 
2510.3-101(e), and therefore is not expressing any opinion as to 
whether the Texas Plaza I lease arrangement constitutes a prohibited 
transaction pursuant to section 406 of the Act or section 4975 of 
the Code. In this connection, the Department has noted in 29 CFR 
2509.75-2(c) (Interpretive Bulletin 75-2, or IB 75-2) and subsequent 
opinions interpreting IB 75-2 that, although a transaction between a 
party in interest and a corporate entity in which the assets of a 
plan are invested does not generally give rise to a prohibited 
transaction, a violation of section 406 of the Act or section 4975 
of the Code may occur in instances where a plan invests in a 
corporation as part of an arrangement or understanding under which 
it is expected that the corporation will engage in a transaction 
with a party in interest. See Advisory Opinion 2006-01A (January 6, 
2006).
---------------------------------------------------------------------------

    14. In summary, the transactions for which exemptive relief is 
sought meet the statutory criteria of section 408(a) of the Act 
because: (A) With respect to existing or future letters of credit 
described herein, each of the Funds is represented by an independent 
fiduciary to perform the following functions: (1) Monitor monthly 
reports of rental payments of tenants utilizing such letters of credit 
issued by JPMCB, or any current or future affiliate of JPMCB, to 
guarantee their lease payments; (2) Confirm whether an event has 
occurred that calls for a letter of credit to be drawn upon; and (3) 
Represent each of the Funds and the Plans as an independent fiduciary 
in any circumstances with respect to a letter of credit which would 
present a conflict of interest for the Trustee or otherwise violate 
section 406(b), including but not limited to: The need to enforce a 
remedy against itself or a current or future affiliate with respect to 
its obligations under a letter of credit; (B) The issuance of future 
letters of credit by JPMCB, or any current or future affiliate of 
JPMCB, are subject to the following additional conditions: (1) JPMCB, 
or any current or future affiliate of JPMCB, as the issuer of a letter 
of credit, has at least an ``A'' credit rating by at least one 
nationally recognized statistical rating service at the time of the 
issuance of the letter of credit; (2) The letter of credit has 
objective market drawing conditions and states precisely the documents 
against which payment is to be made; (3) JPMCB and its affiliates do 
not ``steer'' the Funds' tenants to JPMCB or its affiliates in order to 
obtain a letter of credit; (4) Letters of credit are issued only to 
third-party tenants which are unrelated to JPMCB; and (5) The terms of 
any future letters of credit are not more favorable to the tenants than 
the terms generally available in transactions with other similarly 
situated unrelated third-party commercial clients of JPMCB or of its 
current or future affiliates; and (C) JPMCB or its affiliates will 
maintain records that are sufficient for regulatory authorities and 
independent third parties to determine whether the conditions of this 
proposed exemption have been met.
    Notice to Interested Persons: Notice of the proposed exemption 
shall be given to all interested persons in the manner agreed upon by 
the Applicant and the Department within 15 days of the date of 
publication in the Federal Register. Comments and requests for a 
hearing are due forty-five (45) days after publication of the notice in 
the Federal Register.
    For Further Information Contact: Mr. Mark Judge of the Department 
at (202) 693-8550. (This is not a toll-free number).

The Bank of New York Mellon (BNY Mellon or the Applicant) Located in 
New York, NY
    [Application No. D-11571]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If granted, the 
restrictions of sections 406(a) and 406(b)(1) and 406(b)(2) of the Act 
(or ERISA) 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 as of February 20, 2009, to the cash sale of 
certain floating rate securities (the Securities) issued by Lehman 
Brothers Holdings, Inc. or its affiliates (together, Lehman) for an 
aggregate purchase price of $235,737,419.05 by the EB Temporary 
Investment Fund--Lehman (Liquidating

[[Page 58993]]

Fund), the EB SMAM Short Term Investment Fund--Lehman (Liquidating 
Fund), the DF Temporary Investment Fund--Lehman (Liquidating Fund) and 
the Pooled Employee Daily Liquidity Fund--Lehman (Liquidating Fund) 
(collectively, the ``Liquidating Funds'') to the Bank of New York 
Mellon Corporation (BNYMC), a party in interest with respect to 
employee benefit plans (the Plans) invested, directly or indirectly, in 
the Liquidating Funds, provided that the following conditions are met:
    (a) The sale was a one-time transaction for cash;
    (b) The Liquidating Funds received an amount for the sale of the 
Securities, which was equal to the sum of (1) the par value of the 
Securities plus (2) accrued but unpaid interest through September 12, 
2008, determined at the contract rate, plus (3) accrued and unpaid 
interest from September 15, 2008 through the earlier of (i) the date of 
sale or (ii) the maturity date of the Securities, determined at the 
investment earnings rate of the collective fund (the Collective Fund) 
from which the Securities were transferred to the Liquidating Fund for 
the period from September 15, 2008 to the earlier of the maturity date 
of the Security or February 20, 2009;
    (c) The Liquidating Funds did not bear any commissions, fees, 
transaction costs or other expenses in connection with the sale of the 
Securities;
    (d) BNY Mellon, as trustee of the Liquidating Funds, determined 
that the sale of the Securities was appropriate for and in the best 
interests of the Liquidating Funds, and the Plans invested, directly or 
indirectly, in the Liquidating Funds, at the time of the transaction;
    (e) BNY Mellon took all appropriate actions necessary to safeguard 
the interests of the Liquidating Funds, and the Plans invested, 
directly or indirectly, in the Liquidating Funds, in connection with 
the transaction;
    (f) If the exercise of any of BNYMC's rights, claims or causes of 
action in connection with its ownership of the Securities results in 
BNYMC recovering from Lehman, the issuer of the Securities, or from any 
third party, an aggregate amount that is more than the sum of:
    (1) The purchase price paid for the Securities by BNYMC; and
    (2) interest on the par value of the Securities from and after the 
date BNYMC purchased the Securities from the Liquidating Funds, 
determined at the last-published interest rate on the Securities 
preceding the Lehman's bankruptcy filing, BNYMC refunds such excess 
amount promptly to the Liquidating Funds (after deducting all 
reasonable expenses incurred in connection with the recovery);
    (g) BNY Mellon and its affiliates, as applicable, maintain, or 
cause to be maintained, for a period of six (6) years from the date of 
any covered transaction such records as are necessary to enable the 
person described below in paragraph (h)(1), to determine whether the 
conditions of this exemption have been met, except that--
    (1) No party in interest with respect to a Plan which engages in 
the covered transaction, other than BNY Mellon and its affiliates, as 
applicable, shall be subject to a civil penalty under section 502(i) of 
the Act or the taxes imposed by section 4975(a) and (b) of the Code, if 
such records are not maintained, or not available for examination, as 
required, below, by paragraph (h)(1);
    (2) A separate prohibited transaction shall not be considered to 
have occurred solely because due to circumstances beyond the control of 
BNY Mellon or its affiliates, as applicable, such records are lost or 
destroyed prior to the end of the six-year period.
    (h)(1) Except as provided, below, in paragraph (h)(2), and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to, above, in paragraph (g) are 
unconditionally available at their customary location for examination 
during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the Securities and 
Exchange Commission; or
    (B) Any fiduciary of any Plan that engages in the covered 
transaction, or any duly authorized employee or representative of such 
fiduciary; or
    (C) Any employer of participants and beneficiaries and any employee 
organization whose members are covered by a Plan that engages in the 
covered transaction, or any authorized employee or representative of 
these entities; or
    (D) Any participant or beneficiary of a Plan that engages in the 
covered transaction, or duly authorized employee or representative of 
such participant or beneficiary;
    (2) None of the persons described, above, in paragraph (h)(1)(B)-
(D) shall be authorized to examine trade secrets of BNY Mellon or its 
affiliates, or commercial or financial information which is privileged 
or confidential; and
    (3) Should BNY Mellon refuse to disclose information on the basis 
that such information is exempt from disclosure, BNY Mellon shall, by 
the close of the thirtieth (30th) day following the request, provide a 
written notice advising that person of the reasons for the refusal and 
that the Department may request such information.
    Effective Date: If granted, this proposed exemption will be 
effective as of February 20, 2009.

Summary of Facts and Representations

    1. BNY Mellon is a state bank subject to regulation by the State of 
New York. As of December 31, 2008, BNY Mellon managed assets in excess 
of $210 billion, a substantial part of which consisted of Plans subject 
to the Act. BNY Mellon is a subsidiary of BNYMC.
    2. BNYMC is the parent of BNY Mellon by reason of its 100% 
ownership of BNY Mellon. BNYMC has a number of subsidiaries and 
affiliates. It is a Delaware financial services company that provides a 
wide range of banking and fiduciary services to a broad array of 
clients, including employee benefit plans subject to the Act and 
section 4975 of the Code. As of December 31, 2008, BNYMC had total 
assets of $237.5 billion.
    3. The EB Temporary Investment Fund, the EB SMAM Short Term 
Investment Fund, the DF Temporary Investment Fund and the Pooled 
Employee Daily Liquidity Fund are either collective investment funds or 
common trust funds trusteed and managed by BNY Mellon. BNY Mellon 
serves as a discretionary trustee for each of the Collective Funds. 
Three of the Collective Funds are group trusts that are exempt from 
federal income tax pursuant to Rev. Rul. 81-100. Accordingly, all of 
the investors in these Collective Funds, including three BNY Mellon/
BNYMC in-house Plans,\9\ are either qualified plans or eligible 
government plans. There are no individual retirement accounts in any of 
these Collective Funds.
---------------------------------------------------------------------------

    \9\ According to the Applicant, the in-house Plans' investments 
in the Collective Funds range from 0% for the DF Temporary 
Investment Fund to less than 4% of the EB Temporary Investment Fund.
---------------------------------------------------------------------------

    The DF Temporary Investment Fund is a common trust fund that is 
exempt from federal income tax pursuant to section 584 of the Code. The 
investors in this Collective Fund as to which BNY Mellon or one of its 
affiliates is the trustee include trusts for individuals, nuclear 
decommissioning trusts, trusts for endowments, private foundations and 
other tax exempt institutional investors, and certain employee benefit 
trusts subject to the Act (e.g., VEBA trusts).
    Each of the Collective Funds is a short-term investment fund that 
values

[[Page 58994]]

its assets based on their amortized cost and seeks to maintain a 
constant unit value equal to $1.00. The Collective Funds invest in a 
variety of fixed income instruments. As of September 15, 2008, the 
value of the Collective Funds' aggregate portfolios was 
$19,961,181,990.59.\10\ As of September 15, 2008 there were in excess 
of 700 investors in the Collective Funds, a substantial number of which 
were Plans subject to the Act. The other investors included government 
plans.
---------------------------------------------------------------------------

    \10\ It is represented that section 408(b)(8) of the Act would 
apply to the investment by the ERISA-covered plans in the Collective 
Funds. Section 408(b)(8) of the Act provides a statutory exemption 
for any transactions between a plan and a common or collective trust 
fund maintained by a party in interest which is a bank or trust 
company supervised by a State or Federal agency if certain 
requirements are met.
---------------------------------------------------------------------------

    4. The Collective Funds purchased the Securities, which were 
floating rate securities issued by Lehman, an unrelated party, between 
2005 and 2007 for acquisition prices ranging from $7,250,000 to 
$102,000,000, and for a total investment of $233,250,000. The 
acquisition prices represented the amortized cost of the Securities. 
The Securities paid interest on a quarterly basis, with the result that 
each Collective Fund collected interest from the purchase date through 
either June 23, 2008 or July 22, 2008. The interest payments ranged 
from $759,804.42 to $6,860,087.55 for a total payment of 
$15,459,605.43. No interest was paid subsequent to September 15, 2008.
    As of September 15, 2008, the approximate net asset value of each 
Collective Fund was as follows:
    The EB Temporary Investment Fund ($4,527,000); the EB SMAM Short 
Term Investment Fund ($2,070,000); the Pooled Employee Daily Liquidity 
Fund ($12,423,000,000); and the DF Temporary Investment Fund 
($706,000,000).
    Set forth below is a table showing each Collective Fund's 
investment in the Securities prior to Lehman's bankruptcy:

 
----------------------------------------------------------------------------------------------------------------
                               Security name,                                  Last published    Total interest
          Fund name              CUSIP and       Acquisition    Purchase date   interest rate  received prior to
                               maturity date    and par price                     (percent)         9/15/08
----------------------------------------------------------------------------------------------------------------
EB Temp. Inv. Fund..........  Lehman Fltr.        $50,000,000         3/22/07         7.413        $3,362,788.21
                               52517PW31; 3/
                               23/09.
EB SMAM Short Term Inv. Fund  Lehman Fltr.         74,000,000         3/22/07         7.413         4,976,925.25
                               52517PW31; 3/
                               23/09.
Pooled Employee Daily Liquid  Lehman Fltr.        102,000,000         3/22/07         7.413         6,860,087.55
 Fund.                         52517PW31; 3/
                               23/09.
DF Temp. Inv. Fund..........  Lehman Fltr.          7,250,000        10/24/05         8.00175         759,804.42
                               52517PC58; 10/
                               22/08.
                                              ------------------------------------------------------------------
    Totals:.................  ...............     233,250,000  ..............  ..............     $15,959,605.43
----------------------------------------------------------------------------------------------------------------

    5. The decision to invest in the Securities was made by BNY Mellon. 
Prior to the investment, BNY Mellon conducted an investigation of the 
potential investment by examining and considering the economic and 
other terms of the Securities. BNY Mellon represents that the 
investment in the Securities was consistent with the applicable 
investment policies and objectives of the respective Collective Fund. 
At the time the Securities were acquired, they were rated ``A1'' by 
Moody's and ``A+'' by S&P rating agencies. Based on its consideration 
of the relevant facts and circumstances, BNY Mellon states that it was 
prudent and appropriate to acquire the Securities on behalf of the 
Collective Funds.\11\
---------------------------------------------------------------------------

    \11\ The Department is expressing no opinion in this proposed 
exemption on whether the acquisition and holding of the Securities 
by the Collective Funds violated any of the fiduciary responsibility 
provisions of Part 4 of Title I of the Act. In this regard, the 
Department notes that section 404(a) of the Act requires, among 
other things, that a fiduciary of a plan act prudently, solely in 
the interest of the plan's participants and beneficiaries, and for 
the exclusive purpose of providing benefits to participants and 
beneficiaries when making investment decisions on behalf of a plan. 
Section 404(a) of the Act also states that a plan fiduciary should 
diversify the investments of a plan so as to minimize the risk of 
large losses, unless under the circumstances it is clearly prudent 
not to do so.
---------------------------------------------------------------------------

    6. As stated above, on September 15, 2008, Lehman filed for Chapter 
11 bankruptcy protection. BNY Mellon represents that following the 
Issuers' bankruptcy, BNY Mellon determined that it would be in the best 
interest of the Collective Funds to segregate the Securities from the 
other assets of the Collective Funds. Therefore, BNY Mellon established 
the Liquidating Funds to hold the Securities as of such date in the 
following Liquidating Funds: The EB Temporary Investment Fund--Lehman 
(Liquidating Fund), the EB SMAM Short Term Investment Fund--Lehman 
(Liquidating Fund), the DF Temporary Investment Fund--Lehman 
(Liquidating Fund) and the Pooled Employee Daily Liquidity Fund--Lehman 
(Liquidating Fund). BNY Mellon also served as the trustee and the 
manager of each Liquidating Fund. The Applicant represents that BNY 
Mellon intended to hold the Securities in the Liquidating Funds pending 
the disposition of the Securities on the market. BNY Mellon further 
represents that each Collective Fund held 100 percent of the interests 
of its corresponding Liquidating Fund, and, in turn, the account of 
each direct investor in such Collective Fund as of September 15, 2008, 
was credited with units of the applicable Liquidating Fund in lieu of 
its interests in the Securities.
    7. The Applicant represents that on September 30, 2008, the 
Liquidating Funds entered into guarantees with BNY Mellon pursuant to 
which BNY Mellon agreed to provide financial support to the Liquidating 
Funds for an amount up to the par value of the Securities and the 
accrued and unpaid interest on the Securities through September 12, 
2008.\12\ The purpose of these guarantees was to enable BNY Mellon and 
the Collective Funds' investors to value the units of the Liquidating 
Funds at one dollar per unit.\13\
---------------------------------------------------------------------------

    \12\ Because September 12 fell on a Friday, the accrued interest 
on such date included the interest for September 13 and September 
14.
    \13\ The Applicant represents that the guarantees are extensions 
of credit eligible for exemption under Prohibited Transaction 
Exemption (PTE) 80-26, 66 FR 54541 (Oct. 29, 2001). PTE 80-26, a 
class exemption, permits parties in interest to employee benefit 
plans to make certain interest free loans to such plans provided 
certain conditions are met. The Department expresses no opinion 
herein on whether the guarantees satisfy the requirements of PTE 80-
26.

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

[[Page 58995]]

    8. BNY Mellon represents that following the date of the Lehman's 
bankruptcy filing, the market value of the Securities decreased 
substantially. BNY Mellon further states that on February 20, 2009, it 
obtained pricing information from two independent broker-dealers, 
Barclays and Morgan Stanley, who confirmed in e-mail messages that the 
market for the Securities was in extreme distress and that prices for 
actual trades were substantially lower than the sum of the par value 
for the Securities plus accrued and unpaid interest thereon. The 
broker-dealers did not provide written analyses of their findings.
    9. In view of the foregoing, BNY Mellon determined that it would be 
appropriate and in the best interest of the Liquidating Funds if the 
Securities were sold by the Liquidating Funds to BNYMC at a price equal 
to the sum of (x) their par value and (y) any accrued but unpaid 
interest, as doing so would protect the Funds and the investors having 
an interest in the Liquidating Funds from potential investment losses 
with respect to the Securities. BNY Mellon also determined that the 
purchase of the Securities by BNYMC would be permissible under 
applicable banking law.
    10. Shortly before the consummation of the transaction on February 
19, 2009, BNY Mellon sent written notice to the designated 
representative of each of the investors having a direct interest in the 
Liquidating Funds of BNY Mellon's intent to cause the Liquidating Funds 
to sell the Securities to BNYMC on February 20, 2009. For purposes of 
the transaction, the notice stated that the purchase price would be 
distributed to the unit holders. Such amount would also include an 
interest component based on the period after September 12, 2008. As a 
result, the notice further explained that the investor's account would 
no longer hold units in a Liquidating Fund. While the notice did not 
require any response, the Applicant represents that it did not receive 
any negative reaction from any of the recipients thereof.
    11. On February 20, 2009, BNYMC purchased the Securities from the 
Liquidating Funds for an aggregate lump sum payment of $235,737,419.05. 
This amount represented the sum of the par value of the Securities 
($233,250,000) plus the accrued but unpaid interest on the Securities 
(x) through September 12, 2008 ($1,546,011.97) at the contract rate 
(which also included accrued interest for September 13th and 14th), and 
(y) interest from September 15, 2008 through the earlier of February 
20, 2009 or the maturity date of the applicable Security at the 
investment earning rate achieved by the corresponding Collective Fund 
during such period ($941,407.08).\14\ BNY Mellon notes that, in 
determining the amount of accrued interest subsequent to the date of 
Lehman's bankruptcy filing, BNY Mellon utilized the investment earnings 
interest rate earned by the corresponding Collective Fund during such 
period. On April 21, 2009, the Liquidating Funds were formally 
terminated.
---------------------------------------------------------------------------

    \14\ The last published interest rate for each of the Securities 
at the contract rate in effect immediately preceding Lehman's 
bankruptcy is set forth herein in the table. The investment earnings 
rate for each Collective Fund for the relevant period on and after 
September 15, 2008 is as follows: the EB Temporary Investment Fund 
(1.28707%), the EB SMAM Short Term Investment Fund (0.68443%), the 
Pooled Employee Daily Liquidating Fund (0.96503%), and the DF 
Temporary Investment Fund (2.383131%).
---------------------------------------------------------------------------

    12. BNY Mellon, as trustee of the Liquidating Funds, believed that 
the sale of the Securities to BNYMC was in the best interests of the 
Liquidating Funds, and the Plans invested, directly or indirectly, in 
the Liquidating Funds, at the time of the transaction. BNY Mellon 
states that any sale of the Securities on the open market would have 
produced significant losses for the Liquidating Funds and for the 
participating investors in the Funds.
    13. BNY Mellon represents that the sale of the Securities by the 
Liquidating Funds to BNYMC benefited the investors in the Liquidating 
Funds because the purchase price paid by BNYMC for the Securities 
substantially exceeded the aggregate fair market value of the 
Securities. In addition, BNY Mellon states that the transaction was a 
one-time sale for cash in connection with which the Liquidating Funds 
did not bear any brokerage commissions, fees, or other expenses. BNY 
Mellon represents that it took all appropriate actions necessary to 
safeguard the interests of the Liquidating Funds and their 
participating investors in connection with the sale of the Securities.
    Accordingly, BNY Mellon has requested an administrative exemption 
from the Department with respect to the sale of the Securities by the 
Liquidating Funds to BNYMC. If granted, the exemption would be 
effective as of February 20, 2009.
    14. BNY Mellon states that the sale of the Securities by the 
Liquidating Funds to BNYMC resulted in an assignment of all of the 
Liquidating Funds' rights, claims, and causes of action against Lehman 
or any third party arising in connection with or out of the issuance of 
the Securities or the acquisition of the Securities by the Funds. BNY 
Mellon states further that if the exercise of any of the foregoing 
rights, claims or causes of action results in BNYMC recovering from 
Lehman or any third party an aggregate amount that is more than the sum 
of (a) the purchase price paid for the Securities by BNYMC; and (b) 
interest on the par value of the Securities from and after the date 
BNYMC purchased the Securities from the Liquidating Funds, determined 
at the last-published rate on the Securities preceding Lehman's 
bankruptcy filing, BNYMC will refund such excess amount promptly to the 
Funds (after deducting all reasonable expenses incurred in connection 
with the recovery).
    15. In summary, the Applicant represents that the transaction 
satisfied or will satisfy the statutory criteria for an exemption under 
section 408(a) of the Act because:
    (a) The sale was a one-time transaction for cash;
    (b) The Liquidating Funds received an amount for the sale of the 
Securities, which was equal to the sum of (1) the par value of the 
Securities plus (2) accrued but unpaid interest through September 12, 
2008, determined at the contract rate, plus (3) accrued and unpaid 
interest from September 15, 2008 through the earlier of (i) the date of 
sale or (ii) the maturity date of the Securities, determined at the 
investment earnings rate of the Collective Fund from which the 
Securities were transferred to the Liquidating Fund for the period from 
September 15, 2008 to the earlier of the maturity date of the Security 
or February 20, 2009;
    (c) The Liquidating Funds did not bear any commissions, fees, 
transaction costs or other expenses in connection with the sale;
    (d) BNY Mellon, as trustee of the Liquidating Funds, determined 
that the sale of the Securities was appropriate for and in the best 
interests of the Liquidating Funds, and the Plans invested, directly or 
indirectly, in the Liquidating Funds, at the time of the transaction;
    (e) BNY Mellon took all appropriate actions necessary to safeguard 
the interests of the Liquidating Funds, and the employee benefit plans 
invested, directly or indirectly, in the Liquidating Funds, in 
connection with the transaction;
    (f) If the exercise of any of BNYMC's rights, claims or causes of 
action in connection with its ownership of the Securities results in 
BNYMC recovering from Lehman, or any third party, an

[[Page 58996]]

aggregate amount that is more than the sum of:
    (1) The purchase price paid for the Securities by BNYMC; and
    (2) interest on the par value of the Securities from and after the 
date BNYMC purchased the Securities from the Liquidating Funds, 
determined at the last-published interest rate on the Securities 
preceding Lehman's bankruptcy filing, BNYMC will refund such excess 
amount promptly to the Liquidating Funds (after deducting all 
reasonable expenses incurred in connection with the recovery);
    (g) BNY Mellon and its affiliates, as applicable, have maintained, 
or will cause to be maintained, for a period of six (6) years from the 
date of any covered transaction such records as are necessary to enable 
persons such as, employers or representatives of the Department, plan 
fiduciaries or plan participants, to determine whether the conditions 
of this exemption have been met.
    For Further Information Contact: Anh-Viet Ly of the Department, 
telephone (202) 693-8648. (This is not a toll-free number).

Ivy Asset Management Corporation
    Located in Jericho, NY
    [Application No. D-11492]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990).

Section I: Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A) through (D), 406(b)(1) 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) through (E) of the Code,\15\ shall 
not apply, effective December 31, 2008, to:
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    \15\ For purposes of this proposed exemption, references to 
specific provisions of Title I of the Act, unless otherwise 
specified, refer also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (a) The sale for cash of certain equity interests (the Shares) in 
hedge funds organized outside the United States,\16\ which Shares are 
held in the Ivy Enhanced Income Fund (the Fund), a sub-fund established 
under the Alternative Investment-Master Group Trust (the Group Trust), 
to Ivy Asset Management Corporation (Ivy), a party in interest with 
respect to certain employee benefit plans, including a defined benefit 
plan (the Retirement Plan) sponsored by Ivy's parent corporation, The 
Bank of New York Mellon Corporation,\17\ (collectively, the Plan(s)), 
and certain individual retirement accounts (the IRA(s)), where such 
Plans and IRAs have interests in the Fund; provided that at the time 
the Shares were sold, the conditions set forth, below, in section 
I(b)(1)-(6) of this proposed exemption, and the general conditions, set 
forth, below, in section II, of this proposed exemption, were 
satisfied; and
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    \16\ It is represented that to the extent that, prior to the 
effective date of the final exemption, the Fund had received 
distributions from the hedge funds in connection with interests in 
such hedge funds held by the Fund, those proceeds would have been 
distributed by the Fund to each holder of units in the Fund in 
proportion to each such holder's interest in the Fund; and 
accordingly, would not have been purchased by Ivy or by any 
affiliate of Ivy, pursuant to this proposed exemption.
    \17\ The Bank of New York Mellon Corporation is hereinafter 
referred to as BNYMC.
---------------------------------------------------------------------------

    (b) The sale for cash of certain restricted shares (the Restricted 
Shares) of the D. E. Shaw Composite International Fund, Ltd. (the DE 
Shaw Fund), a hedge fund organized outside the United States, to Ivy 
Holding Cayman, LTS, an affiliate of Ivy (the Affiliate) which is also 
organized outside of the United States, and which is a party in 
interest with respect to the Plans and the IRAs, where such Plans and 
IRAs have interests in the Fund; provided that at the time the 
Restricted Shares were sold to the Affiliate, the conditions set forth, 
below, in section I(b)(1)-(6) of this proposed exemption, and the 
general conditions, set forth, below, in section II of this proposed 
exemption, were satisfied:
    (1) The sale of the Shares to Ivy and the sale of the Restricted 
Shares to the Affiliate were each one-time transactions for cash;
    (2) The purchase price paid by Ivy for the Shares and the purchase 
price paid by the Affiliate for the Restricted Shares was equal to the 
value of such shares, as reported to the Fund by investment managers of 
the hedge funds (the Manager(s)), who are independent of and unrelated 
to Ivy and any of its affiliates, as set forth on the most recent 
statement issued to the Fund immediately prior to the effective date of 
this proposed exemption;
    (3) The Fund did not incur any commissions or transaction costs 
with respect to the sale of the Shares to Ivy and with respect to the 
sale of the Restricted Shares to the Affiliate;
    (4) On January 29, 2008, Ivy solicited and received from each of 
the Plans and IRAs which have an interest in the Fund (the Unit 
Holder(s)) an affirmative consent to the sale by the Fund of the Shares 
and of the Restricted Shares;
    (5) On January 29, 2008, Ivy solicited and received from each Unit 
Holder in the Fund an affirmative consent to the entry into a 
promissory note (the Promissory Note(s)), and as of the effective date 
of this proposed exemption Ivy entered into such Promissory Notes; and
    (6) Pursuant to the terms of each of the Promissory Notes entered 
into between Ivy and each Unit Holder, in the event that Ivy receives 
redemption proceeds in excess of the purchase price paid by Ivy to the 
Fund for the Shares, and/or in the event the Affiliate receives 
redemption proceeds in excess of the purchase price paid by the 
Affiliate to the Fund for the Restricted Shares, Ivy will pay, as soon 
as practicable after receipt of such amounts by Ivy and/or by the 
Affiliate, the entirety of such excess in cash to each Unit Holder in 
proportion to each such Unit Holder's investment in the Fund; and Ivy 
will absorb the loss, if the aggregate redemption proceeds are less 
than the aggregate purchase price from the sale of the Shares and the 
sale of the Restricted Shares.

Section II: General Conditions

    (a) Ivy, as investment manager of the Fund, represents that the 
subject transactions are appropriate for and in the interest of the 
Fund, and each of the Unit Holders which have an interest in the Fund.
    (b) Ivy takes all appropriate actions necessary to safeguard the 
interests of the Fund, and the interests of the Unit Holders in the 
Fund, in connection with the subject transactions;
    (c) The decision by a Unit Holder as to whether to engage in the 
subject transactions was made, in the case of a Plan by the trustee of 
each such Plan, in the case of an IRA, by the IRA holder, and in the 
case of the Retirement Plan by the Benefits Investment Committee (the 
Committee), which serves as the named fiduciary of the Retirement Plan.
    (d) Notwithstanding affirmative consent given by each of the Unit 
Holders to the sale by the Fund of the Shares and of the Restricted 
Shares, and notwithstanding the entry into the Promissory Notes between 
Ivy and each Unit Holder:
    (i) The Plans and IRAs have not waived or released and do not waive 
or release any claims, demands, and/or causes of action which such 
Plans and IRAs may have against BNYMC and/or Ivy in connection with the 
acquisition and retention of the Shares and the acquisition and 
retention of the Restricted Shares; and

[[Page 58997]]

    (ii) The Plans and IRAs have not waived or released and do not 
waive or release any claims, demands, and/or causes of action which 
such Plans and IRAs may have against BNYMC and/or Ivy in connection 
with the sale of the Shares to Ivy and the sale of the Restricted 
Shares to the Affiliate;
    (e) Ivy will maintain, or cause to be maintained, for a period of 
six (6) years from the date of any of the subject transactions such 
records as are necessary to enable the persons described, below, in 
section II(f)(1) of this proposed exemption, to determine whether the 
conditions of this proposed exemption have been met, except that--
    (1) No party in interest with respect to a Plan or to an IRA which 
engaged in the subject transactions, other than Ivy and the Affiliate, 
shall be subject to a civil penalty under section 502(i) of the Act or 
the taxes imposed by section 4975(a) and (b) of the Code, if such 
records are not maintained, or not available for examination, as 
required, below, by section II(f)(1) of this proposed exemption; and
    (2) A separate prohibited transaction shall not be considered to 
have occurred solely because, due to circumstances beyond the control 
of Ivy, such records are lost or destroyed prior to the end of the six-
year period.
    (f)(1) Except as provided, below, in section II(f)(2) of this 
proposed exemption, and notwithstanding any provisions of subsections 
(a)(2) and (b) of section 504 of the Act, the records referred to, 
above, in section II(e) of this proposed exemption, are unconditionally 
available at their customary location for examination during normal 
business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the Securities and 
Exchange Commission; or
    (B) Any fiduciary of any Plan or any IRA that engaged in the 
subject transactions, or any duly authorized employee or representative 
of such fiduciary; or
    (C) Any employer of participants and beneficiaries and any employee 
organization whose members are covered by a Plan or an IRA that engaged 
in the subject transactions, or any authorized employee or 
representative of these entities; or
    (D) Any participant or beneficiary of a Plan or an IRA that engaged 
in the subject transactions, or duly authorized employee or 
representative of such participant or beneficiary;
    (2) None of the persons described, above, in section II(f)(1)(B)-
(D) of this proposed exemption, shall be authorized to examine trade 
secrets of Ivy, or commercial or financial information which is 
privileged or confidential; and
    (3) Should Ivy refuse to disclose information on the basis that 
such information is exempt from disclosure, Ivy shall, by the close of 
the thirtieth (30th) day following the request, provide a written 
notice advising that person of the reasons for the refusal and that the 
Department may request such information.
    Effective Date: This proposed exemption, if granted, will be 
effective, December 31, 2008.

Summary of Facts and Representations

    1. The applicant for this proposed exemption is Ivy, a Delaware 
corporation. On January 1, 2009, Ivy converted to a Delaware limited 
liability corporation and changed its name to Ivy Asset Management LLC. 
Ivy is a registered investment adviser under the laws of Delaware, 
having its principal place of business in Garden City, New York.
    2. The Group Trust qualifies as a group trust, pursuant to Revenue 
Ruling 81-100. The Group Trust is exempt from taxation under section 
501(a) of the Code. Ivy is the investment manager of the Group Trust. 
Custodial Trust Company, a wholly-owned subsidiary of Bear Stearns 
Companies, Inc., was the trustee of the Group Trust until July 31, 
2007. Wells Fargo and Company, a diversified financial services 
company, became the trustee of the Group Trust on August 1, 2007.
    3. The Fund is an Investment Fund established under the Group 
Trust, as set forth in Section 4.01 of the Group Trust Agreement. As 
required under Revenue Ruling 81-100, participation in the Fund is 
limited to certain investors which are themselves exempt from Federal 
income taxes. In this regard, each of the Unit Holders in the Fund is 
either a Plan or an IRA. As of August 6, 2008, there were eight (8) 
Plans and four (4) IRAs each of which had an interest in the Fund. The 
Fund does not put a limit on the number of units that may be issued to 
the Unit Holders.\18\
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    \18\ The Department is expressing no opinion in this proposed 
exemption regarding whether the acquisition and holding of interests 
by the Plans and IRAs in the Group Trust and in the Fund violated 
any of the fiduciary responsibility provisions of Part 4 of Title I 
of the Act.
---------------------------------------------------------------------------

    The Fund has issued three (3) classes of units, Class C units, 
Class D units, and Class E units. The holders of Class C units paid a 
management fee of 1.5% and paid no performance fees. The minimum 
investment for the holders of Class C units was $1 million. The Class D 
units had a tiered management fee and paid a performance fee. The 
minimum investment for the holders of Class D units was $500,000. In 
all other material respects the Class C units and the Class D units 
were the same.
    The Retirement Fund is the only holder of Class E units. The 
Retirement Fund invested $25 million in Class E units in the Fund in 
1996 and over time has received in excess of $33,503,000 in 
distributions. Ivy does not receive any fees with respect to the Class 
E units.
    The net asset value (NAV) of the Fund is determined at the end of 
each calendar quarter and at such other times as determined by the 
investment manager. The NAV is equal to the total value of the Fund's 
assets minus the total value of its liabilities. The value of each unit 
equals the capital attributable to each unit class of the Fund divided 
by the outstanding units for each unit class on such valuation date. 
All outstanding Class C units, Class D units, and Class E units were 
redeemed.
    The Fund is a Section 3(c)(1) fund, as defined in the Investment 
Company Act of 1940. The Fund is not a registered open-ended investment 
company. Rather, it is a privately offered fund of funds that invests 
in private investment vehicles commonly referred to as hedge funds. The 
Fund is a fund of hedge funds. All of the holdings in the Fund are 
equity interests in hedge funds which are sponsored by investment 
Managers unrelated to Ivy and to any of its affiliates.
    The Fund is operated pursuant to Commodity Futures Trading 
Commission (CFTC) exemption Regulation 4.13(a)(4). As such, the 
investment manager of the Fund is not required to register with the 
CFTC as a commodity pool operator. In this regard, the investment 
manager is not required to deliver a CFTC disclosure document and a 
certified annual report to participants in the pool.
    The Fund is subject to tax on the unrelated business taxable income 
which is generated from income from debt financed investments. It is 
represented that such tax is paid by the Group Trust, not directly by 
the participants in the Fund.
    As Ivy, the investment manager of the Fund, is a subsidiary of 
BNYMC, a United States bank holding company, the Fund is subject to the 
Bank Holding Company Act (the BHCA). Due to BNYMC's regulatory 
elections, the Fund is subject to the provisions of the BHCA governing 
merchant banking activities and to the provisions of the Federal 
Reserve Board's Merchant Banking Regulations. Under such regulations, 
the

[[Page 58998]]

duration of an investment may be limited to 10 years.
    Ivy, as the investment manager of the Fund, makes all investment 
decisions for the Fund. As of June 30, 2008, the approximate fair 
market value of the Fund's portfolio was $2,425,200.
    4. As investment manager for the Fund, Ivy has received a quarterly 
management fee from the Fund. Ivy maintains in accordance with the 
provisions of section 408(b)(2) of the Act, it is entitled to payment 
of its fees from the holders of Class C and Class D units (which are 
fully disclosed in the Offering Memorandum and accompanying Adoption 
Agreement through which the investors purchased units of the Fund). 
Further, Ivy maintains that the payment of these fully disclosed fees 
is not subject to section 406(b) of the Act, because Ivy did not 
exercise any of the power that makes it a fiduciary to cause the Fund 
to pay it additional fees other than the fully disclosed fees which 
were approved by each investor at the time such investor made its 
investment in the Fund. It is represented that the holder of the Class 
E units, the Retirement Plan, paid no fees.
    In addition, Ivy under certain circumstances has received 
performance fees from the Fund. Only holders of Class D units paid 
performance fees. Ivy maintains that the payment of performance fees to 
Ivy in connection with the Class D units is entirely consistent with 
the Department's advisory opinions with respect to the payment of 
incentive compensation. In this regard, Ivy represents that its 
performance fee was based on the amount by which the annualized return 
of the Class D units exceeded the average six (6) month U.S. Treasury 
rate. The annualized return of the Class D units is determined based on 
net asset value of each of the underlying hedge funds, as determined by 
the managers of those funds, each of whom was unrelated to Ivy and its 
affiliates. It is represented that Ivy took no part in the 
determination of the net asset values by the managers of the underlying 
hedge funds, and thus, Ivy did not determine the amount of its own 
compensation, which was set by external sources. It is further 
represented that Ivy, as part of its continuing duty as a fiduciary 
under the Act, routinely reviewed the valuation practices of those 
managers.
    Ivy also has received reimbursement for research, accounting, and 
operating services provided to the Fund. It is represented that the 
fact that Ivy charged and received research, accounting, and operating 
services fees, along with all of its other fees, were fully disclosed 
in the Offering Memorandum for the class of units purchased by the 
investors and were approved by the fiduciaries of the plans and IRA 
holders as part of the investment process. The fee is variable although 
it is capped at 60 basis points. It is Ivy's view that this particular 
arrangement has been specifically approved by the Department in 
footnote 11 in the Notice of Proposed Exemption which ultimately became 
Prohibited Transaction Exemption 99-13.\19\ Ivy maintains that the 
footnote, sets forth the Department's position that there is no 
prohibited transaction where a plan fiduciary charges less than or 
waives a particular fee that has been disclosed in writing to an 
independent plan fiduciary and approved by such fiduciary, and then 
later charges the full fee. As a holder of Class E units, the 
Retirement Plan does not pay any research, accounting, and operating 
services fees to Ivy.
---------------------------------------------------------------------------

    \19\ 64 FR 4131, January 27, 1999.
---------------------------------------------------------------------------

    It is represented that the Fund is no longer paying any fees to 
Ivy, because, as discussed more fully below, the Fund has been 
terminated.\20\
---------------------------------------------------------------------------

    \20\ The Department, herein, is providing no relief from the 
prohibitions, as set forth in section 406 of the Act, for the 
receipt of fees by Ivy from the Fund, nor is the Department offering 
a view, as to whether the provision of services rendered by Ivy to 
the Fund is covered by the statutory exemption provided in section 
408(b)(2) of the Act and the Department's regulations, thereunder, 
pursuant to 29 CFR 2550.408b-2.
     Further, the Department does not concur with Ivy's conclusion 
that this particular fee arrangement was specifically approved by 
the Department in footnote 11 of the proposed exemption later 
finalized as PTE 99-13. Footnote 11 was limited to the need for 
additional disclosure where the initial disclosure noted that the 
fees were capped at a maximum number of basis points, but that such 
fees had initially been set at a lower amount, subject to later 
increase.
---------------------------------------------------------------------------

    5. As an investment manager with discretion over the assets of the 
Plans and the assets of the IRAs that have interests in the Fund, Ivy 
is a fiduciary, pursuant to section 3(14)(A) of the Act. Ivy is also a 
party in interest and service provider, pursuant to section 3(14)(B) of 
the Act.
    The Affiliate, as a wholly-owned subsidiary of Ivy, is a party in 
interest with respect to the Plans and the IRAs that have interests in 
the Fund, pursuant to section 3(14)(G) of the Act.
    6. In view of the small size of the Fund, Ivy determined that it 
was in the best interest of the Unit Holders to terminate the Fund. In 
connection with the decision to terminate the Fund, the Fund sent a 
notice to each Unit Holder on October 2, 2007, informing all such Unit 
Holders of the termination of the Fund and of the mandatory redemption 
date, December 31, 2007. On December 31, 2007, the Fund was terminated.
    On January 29, 2008, the Fund sent another notice to Unit Holders 
reiterating that Ivy had terminated the Fund, effective as of December 
31, 2007, and stating that the Fund was in liquidation and that all 
Unit Holders were to be partially redeemed. In this regard, all Unit 
Holders were informed that the Fund was unable to distribute the full 
value of each Unit Holder's interest in the Fund, because of 
undistributed amounts, as described below in paragraphs 9 and 10, which 
are retained by the six (6) hedge funds (the Underlying Funds) in which 
the Fund had an interest.
    The January 2008 notice further informed the Unit Holders of the 
intention of the Fund to sell its interest in the Shares and the 
Restricted Shares, provided the Department were to grant a final 
exemption to permit such transactions. As of the same date, the Unit 
Holders were also informed of Ivy's intention to enter into the 
Promissory Notes with each of the Unit Holders.
    In addition, in the January 2008 notice, Ivy solicited and received 
from each Unit Holder an affirmative consent to the proposed sale of 
the Shares and the sale of the Restricted Shares by the Fund and to the 
proposed entry into the Promissory Notes between Ivy and each Unit 
Holder.
    7. On August 6, 2008, Ivy submitted to the Department an 
application for an individual exemption. In this regard, Ivy has 
requested relief from the provisions of section 406(a)(1)(A) through 
(D), 406(b)(1), and 406(b)(2) of the Act: (i) For the cash sale of the 
Shares by the Fund to Ivy, and (ii) for the cash sale of the Restricted 
Shares by the Fund to the Affiliate.
    The sale of Shares by the Fund to Ivy and the sale of the 
Restricted Shares by the Fund to the Affiliate constitute violations of 
section 406(a)(1)(A). The subject transactions also constitute a 
transfer to, or use by or for the benefit of a party in interest of any 
assets of a plan, in violation of section 406(a)(1)(D) of the Act. The 
subject transactions also raise issues under the self-dealing and 
conflicts of interest provisions of section 406(b)(1) and 406(b)(2) of 
the Act, by Ivy, as a fiduciary of the assets of the Plans and the 
assets of the IRAs invested in the Fund.
    8. Ivy has requested that the exemption be made retroactive to 
December 31, 2008. It is represented that on December 31, 2008, Ivy 
did, in fact, purchase the Shares. However, on December 31, 2008, Ivy 
was informed by the DE Shaw Fund that, because the DE Shaw Fund is an 
offshore fund, such

[[Page 58999]]

fund would not consent to the sale of the Restricted Shares to Ivy, as 
Ivy is a Delaware entity. Instead, effective January 1, 2009, the 
Affiliate purchased from the Fund the Restricted Shares of the DE Shaw 
Fund. Ivy engaged in the subject transactions prior to obtaining an 
exemption, because it believes that in view of the current economic 
conditions, it was in the best interest of the Unit Holders in the Fund 
that such Unit Holders received the cash proceeds from the sale of the 
Shares and the sale of the Restricted Shares, as soon as possible.
    9. In connection with the decision to terminate the Fund, Ivy 
submitted redemption requests to each of the hedge funds in which the 
Fund was invested. As a result, the Fund began receiving redemption 
payments from such hedge funds in accordance with the private placement 
memorandum and other governing documents of such hedge funds. In this 
regard, it is represented that typically hedge funds pay redemption 
proceeds to a redeeming investor depending on the type of investments 
held by such hedge funds and the terms of the governing documents of 
such hedge funds. It is represented that the pace at which hedge funds 
pay redemption proceeds to a redeeming investor depends, for example, 
on whether the assets of such hedge funds are illiquid or held in a 
side pocket.\21\ Further, during the period when the assets of such 
hedge funds are illiquid or held in a side pocket, such hedge funds 
still owe redemption proceeds to a redeeming investor. The amount due 
to a redeeming investor will fluctuate as a result of any market gains 
and losses on the assets of such hedge funds.
---------------------------------------------------------------------------

    \21\ It is represented that particular investments made by a 
hedge fund which the manager of such hedge fund has determined are 
either difficult to value on an on-going basis or should be held 
until the resolution of a special event or circumstance are commonly 
referred to as in a ``side pocket.''
---------------------------------------------------------------------------

    10. It is represented that for a variety of reasons the Underlying 
Funds in which the Fund, as of December 31, 2008, had an interest have 
not fully paid out redemption proceeds. In this regard, one of the 
Underlying Funds is undergoing liquidation, and another is subject to 
an extended redemption payment schedule. Two of the Underlying Funds 
have established a litigation or regulatory reserve, and another has 
suspended redemptions with the intention of making periodic cash 
distributions to investors on a pro rata basis, subject to anticipated 
reserves. The Fund's interests in these Underlying Funds constitute the 
Shares and the Restricted Shares which are the subject of this proposed 
exemption.
    11. Accordingly, effective December 31, 2008, Ivy purchased the 
Shares from the Fund for cash, and the Affiliate purchased the 
Restricted Shares from the Fund for cash, so that the Fund could fully 
pay out its Unit Holders without requiring such Unit Holders to wait 
for each of the Underlying Funds to pay to the Fund the full redemption 
proceeds. The purchase price paid to the Fund by Ivy for the Shares 
equaled the value of such Shares, and the purchase price paid to the 
Fund by the Affiliate for the Restricted Shares equaled the value of 
such Restricted Shares, as reported to Fund by the Managers of the 
Underlying Funds, who are independent of and unrelated to Ivy and its 
affiliates, and as set forth on the most recent statement issued to the 
Fund immediately prior to the effective date of this proposed 
exemption. The proposed sale by the Fund of the Shares to Ivy and the 
proposed sale by the Fund of the Restricted Shares to the Affiliate are 
evidenced by purchase agreements.
    12. As a result of the sale by the Fund of the Shares to Ivy and as 
a result of the sale by the Fund of the Restricted Shares to the 
Affiliate, Ivy and the Affiliate became shareholders in or creditors of 
the respective Underlying Funds and will receive the redemption 
proceeds from such Underlying Funds at such time as the redemption 
proceeds are paid out by such Underlying Funds. With regard to the 
payment of redemption proceeds by the Underlying Funds to Ivy and to 
the Affiliate, it is represented that Ivy entered into a Promissory 
Note with each of the Unit Holders of the Fund. Under the terms of each 
of the Promissory Notes, in the event Ivy receives with respect to the 
Shares, or the Affiliate receives with respect to the Restricted Shares 
redemption proceeds from the Underlying Funds in excess of the purchase 
price paid to the Fund by Ivy for the Shares and the purchase price 
paid by the Affiliate for the Restricted Shares, Ivy will pay, as soon 
as practicable after the receipt of such amounts by Ivy and the 
Affiliate, respectively, the entirety of such excess in cash to each 
Unit Holder in proportion to each such Unit Holder's investment in the 
Fund. It is represented that if Ivy or if the Affiliate receives 
redemption proceeds that are less than the purchase price paid by Ivy 
or by the Affiliate to the Fund, Ivy will absorb the loss.
    13. It is represented that the sales transactions were in the 
interest of the Fund, and the Plans and IRAs which had interests in the 
Fund. In this regard, the Unit Holders received from the Fund a 
purchase price, which equaled the aggregate value of the Shares and the 
Restricted Shares, respectively, as reported to the Fund by the 
Managers of the Underlying Funds who were independent of and unrelated 
to Ivy and its affiliates. Further, the Unit Holders did not have to 
wait for the Underlying Funds to fully pay out redemption proceeds to 
the Fund. In this regard, the sale of the Shares to Ivy and the sale of 
the Restricted Shares to the Affiliate converted a potential stream of 
payments from the Fund to the Unit Holders into one-time payments in 
cash.
    In addition, if the Unit Holders had had to wait until the 
Underlying Funds fully paid out, the redemption proceeds received by 
the Fund would have been subject to various administrative expenses 
(such as audit fees and trustee fees) applicable to any on-going pooled 
investment fund. Further, Unit Holders would have had to bear the 
market risk that the value of the assets held in the Underlying Fund, 
some of which are illiquid or held in a side pocket of the Underlying 
Funds, may have declined in value during 2009 and thereafter.
    It is represented further that the entry into the Promissory Notes 
is in the interest of Unit Holders, because, such Promissory Notes 
provide that if Ivy or the Affiliate receives redemption proceeds in 
excess of the purchase price paid, respectively, by such parties for 
the Shares and the Restricted Shares, the Unit holders will receive a 
proportionate share of such excess. On the other hand, it is 
represented that if Ivy or the Affiliate receives redemption proceeds 
that are less than the purchase price paid, respectively, by such 
parties for the Shares and the Restricted Shares, Ivy will absorb the 
loss.
    14. It is represented that the proposed sale transactions are 
feasible in that each such sale was a one-time transaction for cash. 
Further, in connection with the sale of the Shares to Ivy and the sale 
the Restricted Shares to the Affiliate, the Fund did not bear any 
commissions or transaction costs. In addition, Ivy is responsible for 
the costs of the exemption application and the cost of notifying 
interested persons.
    15. It is represented that the proposed transactions are protective 
of the Unit Holders, because the purchase price paid by Ivy and by the 
Affiliate, respectively, for the Shares and the Restricted Shares, 
equaled the value of such Shares and Restricted Shares, as reported to 
the Fund by the Managers of each of the Underlying Funds, each of whom 
is independent of and unrelated to Ivy and its affiliates. Further, it 
is

[[Page 59000]]

represented that the decision by a Unit Holder as to whether to engage 
in the proposed transactions was made: (a) In the case of a Plan, by 
the trustee of each such Plan; (b) in the case of an IRA, by the IRA 
holder, and (c) in the case of the Retirement Plan, by the Committee 
which serves as the named fiduciary on behalf of the Retirement Plan 
for investment matters. It is represented that although, a majority of 
the members of the Committee are officers of BNYMC, none of the members 
of the Committee are employed by Ivy.
    16. In summary, the applicant represents that the proposed 
transactions satisfy the statutory criteria of section 408(a) of the 
Act and section 4975 of the Code because:
    (a) The sale of the Shares to Ivy and the sale of the Restricted 
Shares to the Affiliate were one-time transactions for cash;
    (b) The purchase price paid by Ivy for the Shares, and the purchase 
price paid by the Affiliate for the Restricted Shares was equal to the 
value of such Shares and Restricted Shares, as reported to the Fund by 
the Managers of each of the Underlying Funds, who are independent of 
and unrelated to Ivy and its affiliates, and as set forth on the most 
recent statement issued to the Fund immediately prior to the effective 
date of this proposed exemption;
    (c) The Fund did not incur any commissions or transaction costs 
with respect to the sale of the Shares to Ivy or the sale of the 
Restricted Shares to the Affiliate;
    (d) The decision by a Unit Holder as to whether to engage in the 
subject transactions was made, in the case of a Plan by the trustee of 
each such Plan, in the case of an IRA, by the IRA holder, and in the 
case of the Retirement Plan by the Committee which serves as the named 
fiduciary on behalf of the Retirement Plan;
    (e) Ivy solicited and received from each Unit Holder an affirmative 
consent to the sale of the Shares and the Restricted Shares by the Fund 
and to the entry into the Promissory Notes;
    (f) Pursuant to the terms of the Promissory Notes, in the event 
that Ivy or the Affiliate receives redemption proceeds with respect to 
the Shares and the Restricted Shares in excess of the purchase price 
paid to the Fund by Ivy for such Shares or the purchase price paid by 
the Affiliate for such Restricted Shares, Ivy will pay, as soon as 
practicable after receipt of such amounts, the entirety of such excess 
in cash to each Unit Holder in proportion to each such Unit Holder's 
investment in the Fund, and Ivy will absorb the loss, if the aggregate 
redemption proceeds are less than the purchase price paid for the 
Shares and the Restricted Shares;
    (g) Ivy, as the investment manager of the Fund, represents that the 
subject transactions are appropriate for and in the interest of the 
Fund, and the Unit Holders which have interests in the Fund;
    (h) Ivy took all appropriate actions necessary to safeguard the 
interests of the Fund, and the Unit Holders in the Fund, in connection 
with the subject transactions;
    (i) Ivy will maintain, or cause to be maintained, for a period of 
six (6) years from the date of any of the subject transactions such 
records as are necessary to determine whether the conditions of this 
exemption have been met.

Notice to Interested Persons

    The persons who may be interested in the publication in the Federal 
Register of the Notice of Proposed Exemption (the Notice) include the 
trustees of each of the Unit Holders that is a Plan, the custodian of 
each IRA, and each of the IRA holders, and the Committee which serves 
as the named fiduciary for the Retirement Plan. The Applicant has not 
proposed providing notice to each of the participants in the Plans, 
because each Unit Holder has already consented to the sale to Ivy, and 
these are the same persons who made the decision to invest in the first 
place.
    It is represented that each of these classes of interested persons 
will be notified of the publication of the Notice by mail, within 
fifteen (15) calendar days of publication of the Notice in the Federal 
Register. Such mailing will contain a copy of the Notice, as it appears 
in the Federal Register on the date of publication, plus a copy of the 
Supplemental Statement, as required, pursuant to 29 CFR 2570.43(b)(2), 
which will advise all interested persons of their right to comment and 
to request a hearing.
    A11 written comments and/or requests for a hearing must be received 
by the Department from interested persons within 45 days of the 
publication of this proposed exemption in the Federal Register.
    For Further Information Contact: Ms. Angelena C. Le Blanc of the 
Department, telephone (202) 693-8540. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(b) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 10th day of November 2009.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. E9-27404 Filed 11-13-09; 8:45 am]
BILLING CODE 4510-29-P