[Federal Register Volume 79, Number 170 (Wednesday, September 3, 2014)]
[Notices]
[Pages 52365-52371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20884]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. D-11819]


Notice of Proposed Exemption involving Credit Suisse AG 
(hereinafter, either Credit Suisse AG or the Applicant) Located in 
Zurich, Switzerland

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Notice of Proposed Exemption

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SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of a proposed individual exemption 
from certain prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974, as amended (ERISA or the Act), 
and the Internal Revenue Code of 1986, as amended (the Code). The 
proposed exemption, if granted, would affect the ability of certain 
entities with specified relationships to Credit Suisse AG to continue 
to rely upon the relief provided by Prohibited Transaction Class 
Exemption 84-14.

DATES: Effective Date: If granted, this proposed exemption will be 
effective as of the date a judgment of conviction against Credit Suisse 
AG for one count of conspiracy to violate section 7206(2) of the 
Internal Revenue Code in violation of Title 18, United States Code, 
Section 371 is entered in the District Court for the Eastern District 
of Virginia in Case Number 1:14-cr-188-RBS.

DATES: Written comments and requests for a public hearing on the 
proposed exemption should be submitted to the Department within 35 days 
from the date of publication of this Federal Register Notice.

ADDRESSES: Comments and requests for a hearing should state: (1) The 
name, address, and telephone number of the person making the comment or 
request, and (2) the nature of the person's interest in the proposed 
exemption and the manner in which the person would be adversely 
affected by the exemption, if granted. A request for a hearing must 
also state the issues to be addressed and include a general description 
of the evidence to be presented at the hearing. All written comments 
and requests for a public hearing concerning the proposed exemption 
should be sent to the Office of Exemption Determinations, Employee 
Benefits Security Administration, Room N-5700, U.S. Department of 
Labor, 200 Constitution Avenue NW., Washington DC 20210, Attention: 
Application No. D-11819. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via email or FAX. Any such 
comments or requests should be sent either by email to: 
[email protected], or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The application for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1515, 200 Constitution Avenue NW., 
Washington, DC 20210. Comments and hearing requests will also be 
available online at www.regulations.gov and www.dol.gov/ebsa, at no 
charge.
    Warning: If you submit written comments or hearing requests, do not 
include any personally identifiable information (such as name, address, 
or other contact information) or confidential business information that 
you do not want publicly disclosed. All comments and hearing requests 
may be posted on the Internet and can be retrieved by most Internet 
search engines.

FOR FURTHER INFORMATION CONTACT: Erin S. Hesse, Office of Exemption 
Determinations, Employee Benefits Security Administration, U.S. 
Department of Labor, telephone (202) 693-8546. (This is not a toll-free 
number).

SUPPLEMENTARY INFORMATION: If the proposed exemption in this document 
is granted, any entity with a specified relationship to Credit Suisse 
AG will not be precluded from relying on the relief provided by 
Prohibited Transaction Class Exemption 84-14 (49 FR 9494 (March 13, 
1984), as corrected at 50 FR 41430 (October 10, 1985), as amended at 70 
FR 49305 (August 23, 2005), and as amended at 75 FR 38837 (July 6, 
2010)), notwithstanding a judgment of conviction against Credit Suisse 
AG for one count of conspiracy to violate section 7206(2) of the 
Internal Revenue Code in violation of Title 18, United States Code, 
Section 371, to be entered in the District Court for the Eastern 
District of Virginia in Case Number 1:14-cr-188-RBS. The proposed 
exemption has been requested by Credit Suisse AG pursuant to 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 (76 FR 
66637, 66644, October 27, 2011). Effective December 31, 1978, section 
102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), 
transferred the authority of the Secretary of the Treasury to issue 
administrative exemptions under section 4975(c)(2) of the Code to the 
Secretary of Labor. Accordingly, this notice of proposed exemption is 
being issued solely by the Department.

Summary of Facts and Representations \1\
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    \1\ The Summary of Facts and Representations is based on the 
Applicant's representations and does not reflect the views of the 
Department, unless indicated otherwise.
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Background

    1. The Applicant represents that Credit Suisse Group AG (Credit 
Suisse Group) is a publicly-traded company organized in Switzerland and 
headquartered in Zurich. As of December 31, 2013, Credit Suisse Group 
had assets of approximately $980.1 billion, including approximately 
$47.3 billion in shareholders' equity. Credit Suisse Group owns a 100% 
interest in Credit Suisse AG (i.e., the Applicant), which operates as a 
bank, with all related banking, finance, consultancy, service, and 
trading activities in Switzerland and abroad.
    2. The Applicant further represents that it has financial 
relationships with a wide range of entities that may act as ``qualified 
professional asset managers'' (QPAMs), in reliance on the exemptive 
relief provided in Prohibited

[[Page 52366]]

Transaction Class Exemption (PTE) 84-14.\2\
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    \2\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
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    PTE 84-14 provides a conditional exemption for certain transactions 
between a party in interest with respect to an employee benefit plan 
and an investment fund (as defined in Section VI(b) of PTE 84-14) in 
which the plan has an interest, where the investment fund is managed by 
a QPAM. One of the conditions for exemptive relief in PTE 84-14, 
Section I(g), precludes an entity that may otherwise meet the 
definition of a QPAM provided in Section VI(a) of PTE 84-14 from 
relying on the relief provided by the class exemption if that entity or 
an affiliate thereof or any owner, direct or indirect, of a 5 percent 
or more interest in the QPAM has, within 10 years immediately preceding 
the transaction, been either convicted or released from imprisonment, 
whichever is later, as a result of certain specified criminal activity 
described in that section. This condition was included in PTE 84-14, in 
part, based on the expectation that a QPAM, and those who may be in a 
position to influence its policies, maintain a high standard of 
integrity.\3\
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    \3\ See 47 FR 56945, 56947 (December 21, 1982).
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    3. The Applicant represents that it is an affiliate (as defined in 
Section VI(d) of PTE 84-14) of Credit Suisse Asset Management LLC, 
Credit Suisse Securities (USA) LLC, CSAM Limited, and a number of other 
entities that act as QPAMs and manage over $2 billion in assets 
(collectively, the Credit Suisse Affiliated QPAMs). The Applicant 
represents that it also owns a five percent or more interest in certain 
other entities (the Credit Suisse Related QPAMs) that may provide 
investment management services to plans in reliance on the exemptive 
relief provided in PTE 84-14, but are not affiliates (as defined in 
Section VI(d) of PTE 84-14) of Credit Suisse AG. As noted above in 
paragraph two, Section I(g) of PTE 84-14 would also preclude the Credit 
Suisse Related QPAMs from relying on the relief provided by PTE 84-14, 
notwithstanding the fact that they are not affiliated with Credit 
Suisse AG.
    4. The Applicant notes that, on May 19, 2014, the Tax Division of 
the United States Department of Justice and the U.S. Attorney's Office 
for the Eastern District of Virginia filed a one-count criminal 
information (the Information) in the District Court for the Eastern 
District of Virginia (the District Court) \4\ charging Credit Suisse AG 
with a conspiracy to violate section 7206(2) of the Code in violation 
of Title 18, United States Code, Section 371.\5\ The Information 
identifies the Applicant and its subsidiaries, Credit Suisse Fides and 
Clariden Leu Ltd., of willfully aiding, assisting in, procuring, 
counseling, and advising the preparation and presentation of false 
income tax returns and other documents to the Internal Revenue Service 
of the Treasury Department (IRS), for decades, prior to and through 
approximately 2009.
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    \4\ United States of America v. Credit Suisse AG, Case Number 
1:14-cr-188-RBS.
    \5\ Section 7206(2) of the Code prohibits willfully aiding, 
assisting, procuring, counseling, or advising the preparation or 
presentation of false income tax returns. Section 371 of Title 18 of 
the United States Code generally prohibits two or more persons from 
conspiring either to commit any offense against the United States or 
to defraud the United States.
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    5. According to the Statement of Facts filed in the criminal case 
(the Statement of Facts), for decades prior to and through 
approximately 2009, Credit Suisse AG operated an illegal cross-border 
banking business that knowingly and willfully aided and assisted 
thousands of U.S. clients in opening and maintaining undeclared 
accounts \6\ concealing their offshore assets and income from the IRS. 
Private bankers employed by Credit Suisse AG (referred to as 
Relationship Managers or RMs) served as the primary contact for U.S. 
clients with undeclared accounts at Credit Suisse AG. Credit Suisse AG 
used a variety of means to assist U.S. clients in concealing their 
undeclared accounts, including by: Assisting clients in using sham 
entities as nominee beneficial owners of the undeclared accounts; 
soliciting IRS forms that falsely stated under penalty of perjury that 
the sham entities beneficially owned the assets in the accounts; 
failing to maintain in the United States records related to the 
accounts; destroying account records sent to the United States for 
client review; using Credit Suisse managers and employees as 
unregistered investment advisors on undeclared accounts; facilitating 
withdrawals of funds from undeclared accounts by either providing hand-
delivered cash in the United States or using Credit Suisse's 
correspondent bank accounts in the United States; structuring transfers 
of funds to evade currency transaction reporting requirements; and 
providing offshore credit and debit cards to repatriate funds in the 
undeclared accounts.
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    \6\ An ``undeclared account'' is a financial account owned by an 
individual subject to U.S. tax and maintained in a foreign country 
that has not been reported by the individual account owner to the 
U.S. government on an income tax return and a Report of Foreign Bank 
and Financial Accounts (FBAR). U.S. citizens, resident aliens, and 
legal permanent residents have an obligation to report all income 
earned from foreign bank accounts on their tax returns and to pay 
the taxes due on that income.
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    6. According to the Statement of Facts, Credit Suisse AG made a 
number of ineffectual attempts to consolidate these U.S. clients' 
accounts in Credit Suisse AG business entities that complied with U.S. 
law. For instance, starting in or about 2009, Credit Suisse AG engaged 
in a flawed process of verifying tax compliance of U.S. accounts in 
order to allow these accounts to remain at Credit Suisse AG. In 
December 2010, the Tax Division of the DOJ informed Credit Suisse AG 
that it had begun a criminal investigation of Credit Suisse AG that had 
uncovered evidence of tax law violations. Although Credit Suisse AG had 
either transferred or terminated the majority of its relationships with 
these U.S. clients by approximately 2010, Credit Suisse AG continued to 
identify U.S. customer accounts for closure until in or about 2013.
    7. On May 19, 2014, pursuant to a plea agreement (the Plea 
Agreement), the Applicant entered a plea of guilty for assisting U.S. 
citizens in federal income tax evasion. The Applicant represents that 
it expects the District Court to enter a judgment of conviction (the 
Conviction) against Credit Suisse AG that will require remedies that 
are materially the same as set forth in the Plea Agreement. The 
Conviction is scheduled to be entered on or after November 1, 2014.

Failure To Comply With Section I(g) of PTE 84-14 and Proposed Relief

    8. As noted above, Section I(g) of PTE 84-14 expressly identifies a 
criminal conviction of a QPAM, an affiliate thereof, or any owner, 
direct or indirect, of a 5 percent or more interest in a QPAM, for 
income tax evasion as precluding the QPAM from relying on the relief 
set forth in the class exemption. Pursuant to that section, once the 
Conviction is entered, the Credit Suisse Affiliated QPAMs and Credit 
Suisse Related QPAMs will no longer be able to rely on PTE 84-14. The 
Applicant is seeking an individual exemption that would permit the 
Credit Suisse Affiliated QPAMs and the Credit Suisse Related QPAMs to 
continue to rely on PTE 84-14, notwithstanding the Conviction, to the 
extent that such QPAMs meet certain additional conditions, as proposed 
herein.

[[Page 52367]]

Statutory Findings--In the Interest of Affected Plans and IRAs

    9. The Applicant submits that the requested exemption would be in 
the interest of affected plans, those described in section 3(3) of 
ERISA (ERISA-covered plans) or section 4975(e)(1) of the Code (IRAs). 
In this regard, the Applicant states that the exemption would allow 
ERISA-covered plans and IRAs managed by the Credit Suisse Affiliated 
QPAMs and Credit Suisse Related QPAMs to avoid the costs or losses that 
would arise if these QPAMs were suddenly unable to rely on the relief 
afforded by PTE 84-14 after the Conviction. The Applicant submits that 
if the Credit Suisse Affiliated QPAMs lose the relief in PTE 84-14, 
three main investment strategies used for ERISA-covered plans and IRAs 
would be impacted. The first strategy, Credit, seeks to invest in long-
term fixed income opportunities by investing in syndicated bank loans, 
high yield bonds, and structured asset backed securities that trade 
over-the-counter in the primary and secondary markets. This strategy 
covers five ERISA-covered plans and pooled funds. About half of the 
strategy involves loans engaged in by Credit Suisse Affiliated QPAMs in 
reliance of the relief provided by PTE 84-14. The second strategy, 
Commodities, seeks to replicate the return of certain commodities 
indices by investing in futures, structured notes, total return swaps, 
and other derivatives. This strategy covers eight ERISA-covered plans 
and pooled funds. The third strategy, Liquid Alternative Beta (LAB), 
seeks to replicate the performance of hedge fund sectors such as long/
short equity, event driven, and managed futures using liquid tradable 
instruments. The LAB strategy invests in ADRs, equity securities, ETFs, 
futures, forwards, and options. This strategy covers four ERISA-covered 
plans.
    10. The Applicant represents that the cost of terminating an 
investment is generally the difference between the bid price and the 
ask price for any particular investment. Furthermore, some investments 
are more liquid than others (e.g., Treasury bonds are more liquid than 
foreign sovereign bonds and equities are more liquid than swaps). 
According to the Applicant, the strategies mentioned above (Credit, 
Commodities, and LAB) tend to be less liquid than certain other 
strategies and, thus, the cost of terminating an investment therein 
would be significantly higher than, for example, liquidating a large 
cap equity portfolio. The Applicant estimates that the cost to ERISA-
covered plans and IRAs of transitioning from Credit Suisse Affiliated 
QPAMs to other unrelated managers in each of the three strategies is as 
follows: LAB--about eleven basis points; Credit--under two basis points 
to liquidate the assets but because of the bid/ask spread, as much as 
fifty basis points to reinvest the assets; and Commodities--three to 
five basis points. Based on the amount of assets in each strategy, the 
Applicant estimates that the total cost of liquidating would be about 
$450,000. However, the Applicant notes that the affected ERISA-covered 
plans and IRAs would need to reinvest in the market, so the real cost 
would potentially be much higher. The Applicant additionally represents 
that the Credit Suisse Affiliated QPAMs do not impose any charges or 
penalties on ERISA-covered plans or IRAs for terminating or withdrawing 
from any agreements for the provision of asset management or other 
services by the Credit Suisse Affiliated QPAMs.
    11. The Applicant states further that the proposed exemption would 
enable ERISA-covered plans and IRAs managed by the Credit Suisse 
Affiliated QPAMs and Credit Suisse Related QPAMs to continue with the 
current investment strategies of their chosen QPAM. The Applicant 
suggests that any ERISA-covered plan or IRA that is forced to move to a 
new investment manager could incur transition costs, including costs 
associated with identifying an appropriate investment manager to act as 
a QPAM.

Statutory Findings--Protective of Affected Plans and IRAs

    12. The Applicant submits that the proposed exemption, if granted, 
would be protective of affected ERISA-covered plans and IRAs. The 
Applicant represents that the criminal conduct of Credit Suisse AG that 
is the subject of the Conviction did not directly or indirectly involve 
the assets of any ERISA-covered plan or IRA. The Applicant also 
represents that neither the Credit Suisse Affiliated QPAMs nor the 
Credit Suisse Related QPAMs (including the officers, directors, 
employees, or agents of such QPAMs) participated in the criminal 
conduct that forms the basis for the Conviction. Additionally, the 
Applicant represents that neither the Credit Suisse Affiliated QPAMs 
nor the Credit Suisse Related QPAMs directly received any compensation 
in connection with such conduct. Finally, the Applicant states that 
Credit Suisse AG, the entity to be convicted, did not provide any 
fiduciary services to ERISA-covered plans or IRAs, except in connection 
with certain securities lending services of the New York Branch of 
Credit Suisse AG, or act as a QPAM for any ERISA-covered plan or IRA.
    Credit Suisse Affiliated QPAMs. The Applicant explains that Credit 
Suisse Affiliated QPAMs are part of the Asset Management business in 
the U.S. and the U.K., whereas the Relationship Managers involved in 
the criminal conduct worked for Credit Suisse AG or other non-U.S. 
affiliates in Switzerland. Furthermore, the Applicant notes that Credit 
Suisse Affiliated QPAMs maintain separate registrations, books and 
records, and accounts from the Relationship Managers in Switzerland. 
Additionally, other than research and other publicly available 
information, which is provided to many investment managers, and which 
Credit Suisse Affiliated QPAMs receive from hundreds of analysts and 
investment banks, asset management decisions and asset management 
operations of Credit Suisse Affiliated QPAMs are independent of (i.e., 
not influenced by) Credit Suisse AG's management and business 
activities. The Applicant represents that the trading decisions and 
investment strategy of Credit Suisse Affiliated QPAMs for their clients 
is not shared with Credit Suisse AG employees outside of the asset 
management division, nor does the asset management division consult 
with other parts of the Credit Suisse AG organization prior to making 
investment decisions on behalf of its clients.
    Credit Suisse Related QPAMs. The Applicant represents that Credit 
Suisse AG's relationships to many of the entities that may be 
considered Credit Suisse Related QPAMs is so minimal that Credit Suisse 
AG does not know if such entities are acting as QPAMs in reliance on 
the relief in PTE 84-14. Furthermore, the Applicant represents that any 
such Credit Suisse Related QPAMs maintain their own information and 
technology infrastructure and do not share office space or employees 
with Credit Suisse AG. According to the Applicant, such Credit Suisse 
Related QPAMs are entirely separate and distinct from Credit Suisse AG. 
Furthermore, the Applicant states that no employee of Credit Suisse AG 
sits on the board of directors of any Credit Suisse Related QPAM. The 
Applicant explains that Credit Suisse AG does not have the power to 
exercise a controlling influence over the management or policies of 
such QPAMs. Additionally, the Applicant's investments in such QPAMs are 
intended to be, and are, passive investments. The Applicant adds that 
Credit Suisse AG does not have the power to exercise a controlling

[[Page 52368]]

influence over the investment management decisions of these managers. 
Therefore, the Applicant maintains that Credit Suisse AG has no 
``control'' over such Credit Suisse Related QPAMs as that term is 
defined in Section VI(e) of PTE 84-14.\7\
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    \7\ Section VI(e) of PTE 84-14 defines the term ``control'' as 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual.
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    13. The Applicant represents that if this proposed exemption is 
granted, Credit Suisse Affiliated QPAMs will not use their authority or 
influence to direct an investment fund (as defined in Section VI(b) of 
PTE 84-14) managed by a Credit Suisse Affiliated QPAM to enter into any 
transaction with Credit Suisse AG or engage Credit Suisse AG to provide 
additional services, for a fee, to the investment fund regardless of 
whether such transactions or services may otherwise be within the scope 
of relief provided by an administrative or statutory exemption. 
Additionally, the Applicant represents that any employee accused of 
engaging in the criminal conduct that underlies the Conviction will not 
transact business on behalf of any investment fund managed by the 
Credit Suisse Affiliated QPAMs.
    14. The Department notes that the proposed exemption, if granted, 
provides additional protection to affected ERISA-covered plans and IRAs 
because it requires a prudently selected, independent auditor, who has 
appropriate technical training and proficiency with Title I of ERISA, 
to evaluate the adequacy of and compliance with the policy and training 
requirements described below. The first of the audits must be completed 
no later than twelve (12) months after a final exemption for the 
covered transactions is granted in the Federal Register and must cover 
the first six-month period that begins on the date a final exemption is 
granted in the Federal Register; all subsequent audits must cover the 
following corresponding twelve-month periods and be completed no later 
than 6 months after the period to which it applies. The auditor shall 
determine whether Credit Suisse AG and the Credit Suisse Affiliated 
QPAMs have developed, implemented, maintained, and followed written 
policies (the Policies) requiring and designed to ensure that: (i) The 
asset management decisions and asset management operations of the 
Credit Suisse Affiliated QPAMs are conducted independently of Credit 
Suisse AG's management and business activities; (ii) Credit Suisse AG 
and the Credit Suisse Affiliated QPAMs fully comply with ERISA's 
fiduciary duties and prohibited transaction provisions, and do not 
knowingly participate in any violations of these duties and provisions; 
(iii) Credit Suisse AG and the Credit Suisse Affiliated QPAMs do not 
knowingly participate in any other person's violation of ERISA, the 
Code, or other federal, state, or local law; (iv) any filings or 
statements made to federal, state, or local government are accurate and 
complete; (v) Credit Suisse AG and the Credit Suisse Affiliated QPAMs 
do not make material misrepresentations or omit material information in 
their communications with federal, state, or local government, or their 
ERISA-covered plan and IRA clients; (vi) Credit Suisse AG and the 
Credit Suisse Affiliated QPAMs comply with the terms of this exemption; 
and (vii) any violations of or failure to comply with items (ii) 
through (vi) are promptly reported in writing to appropriate corporate 
officers, the head of Credit Suisse U.S. Asset Management Compliance, 
the General Counsel for Credit Suisse Asset Management, the independent 
auditor responsible for reviewing compliance with the Policies, and a 
non-QPAM fiduciary of any affected ERISA-covered plan or IRA.
    15. The independent auditor shall also determine whether Credit 
Suisse AG and the Credit Suisse Affiliated QPAMs have developed a 
training program (the Training) for Credit Suisse AG and Credit Suisse 
Affiliated QPAM personnel covering, at a minimum, the Policies, ERISA 
compliance, the consequences for not complying with the conditions of 
this proposed exemption, if granted, (including the loss of the 
exemptive relief provided herein), prompt reporting of wrongdoing, and 
ethical conduct. The auditor shall also determine whether Credit Suisse 
AG and the Credit Suisse Affiliated QPAMs are operationally compliant 
with the Policies and Training.
    16. The auditor shall provide a written report (the Audit Report), 
upon completion of each audit that it conducts, to Credit Suisse AG and 
the Credit Suisse Affiliated QPAMs that describes the auditor's 
determinations as required under this proposed exemption, if granted, 
and the steps performed by the auditor during the course of the 
auditor's examinations. The Report will also include the auditor's 
determinations with regards to the adequacy of the Policies and the 
Training and any recommendations with respect to strengthening the 
Policies and Training, and any instances of Credit Suisse AG's or the 
Credit Suisse Affiliated QPAMs' noncompliance with the written Policies 
and Training described above. Any determinations made by the auditor 
regarding the adequacy of the Policies and Training and the auditor's 
recommendations (if any) with respect to strengthening the Policies and 
Training shall be promptly addressed by Credit Suisse AG and the Credit 
Suisse Affiliated QPAMs, and any actions taken by Credit Suisse AG or 
the Credit Suisse Affiliated QPAMs to address such recommendations 
shall be included in an addendum to the Audit Report.
    17. The auditor shall notify Credit Suisse AG and the Credit Suisse 
Affiliated QPAMs of any instances of noncompliance identified by the 
auditor within five (5) business days after such noncompliance is 
identified by the auditor, regardless of whether the audit has been 
completed as of that date. Credit Suisse AG or a Credit Suisse 
Affiliated QPAM shall provide written notice to the Department's Office 
of Exemption Determinations (OED) of any instances of noncompliance 
reviewed by the auditor within ten (10) business days after such notice 
is received from the auditor. Upon request, the auditor shall provide 
OED with all of the relevant workpapers reflecting any instances of 
noncompliance. The workpapers shall identify whether and to what extent 
the assets of ERISA-covered plans or IRAs were involved in the 
instance(s) of noncompliance and an explanation of any corrective 
actions taken by Credit Suisse AG.
    18. An executive officer of Credit Suisse AG will certify in 
writing, under penalty of perjury, that such officer has reviewed each 
Audit Report and this exemption, addressed any inadequacies identified 
in the Audit Report, and determined that the Policies and Training in 
effect at the time of signing are adequate to ensure compliance with 
the conditions of this exemption and with the applicable provisions of 
ERISA and the Code. Similarly, an executive officer of each Credit 
Suisse Affiliated QPAM will certify in writing, under penalty of 
perjury, that such officer has reviewed each Audit Report and this 
exemption, addressed any inadequacies identified in the Audit Report, 
and determined that the Policies and Training in effect at the time of 
signing are adequate to ensure compliance with the conditions of this 
exemption and with the applicable provisions of ERISA and the Code. 
Finally, the Applicant provides each certified Audit Report to OED no 
later than 30 days following its completion and Credit Suisse AG and 
the Credit Suisse Affiliated QPAMs make the Audit Report 
unconditionally

[[Page 52369]]

available for examination by any duly authorized employee or 
representative of the Department, or other relevant regulators, and any 
fiduciary of an ERISA-covered plan or IRA, the assets of which are 
managed by a Credit Suisse Affiliated QPAM.
    19. The Department notes that the proposed exemption, if granted, 
will also be protective of plans and their participants and 
beneficiaries, because, in any agreements with ERISA-covered plans or 
IRAs for the provision of asset management or other services, Credit 
Suisse AG and the Credit Suisse Affiliated QPAMs will contain 
additional protective covenants described herein. In this regard, in 
such agreements, Credit Suisse AG or a Credit Suisse Affiliated QPAM, 
as applicable, must agree to comply with ERISA and to refrain from 
engaging in prohibited transactions; must not purport to waive, limit, 
or qualify the liability of Credit Suisse AG or the Credit Suisse 
Affiliated QPAMs for violating ERISA or engaging in prohibited 
transactions; must not require the ERISA-covered plans or IRAs (or 
sponsors of such ERISA-covered plans or IRAs) to indemnify Credit 
Suisse AG or the Credit Suisse Affiliated QPAMs for violating ERISA or 
engaging in prohibited transactions; must not restrict the ability of 
such ERISA-covered plans or IRAs to terminate or withdraw from their 
arrangements with Credit Suisse AG or the Credit Suisse Affiliated 
QPAMs; and must not impose any fees, penalties, or charges for such 
termination or withdrawal.
    20. The Department also notes that a Credit Suisse Affiliated QPAM 
will not fail to meet the terms of this proposed exemption, if granted, 
solely because a Credit Suisse Related QPAM fails to satisfy a 
condition for relief under this exemption. Additionally, a Credit 
Suisse Related QPAM will not fail to meet the terms of this proposed 
exemption, if granted, solely because Credit Suisse AG, a Credit Suisse 
Affiliated QPAM, or a different Credit Suisse Related QPAM fails to 
satisfy a condition for relief under this exemption.
    21. The Applicant represents that if a final exemption is granted 
in the Federal Register, Credit Suisse AG and the Credit Suisse 
Affiliated QPAMs will maintain records necessary to demonstrate that 
the conditions of this exemption have been met for six (6) years 
following the date of any transactions for which Credit Suisse 
Affiliated QPAMs rely upon the relief in the exemption.
    22. The Applicant represents further that, if this proposed 
exemption is granted, Credit Suisse AG will provide to (1) each sponsor 
of an ERISA-covered plan and each beneficial owner of an IRA invested 
in an investment fund managed by a Credit Suisse Affiliated QPAM, or 
the sponsor of an investment fund in any case where a Credit Suisse 
Affiliated QPAM acts only as a sub-advisor to the investment fund; (2) 
each entity that may be a Credit Suisse Related QPAM; and (3) each 
ERISA-covered plan for which the New York Branch of Credit Suisse AG 
provides fiduciary securities lending services, a notice of the 
proposed exemption, along with a separate summary of the facts that led 
to the Conviction, which has been submitted to the Department, and a 
prominently displayed statement that the Conviction results in a 
failure to meet a condition in PTE 84-14.
    23. Finally, the Applicant represents that the proposed exemption 
will protect the interests of affected ERISA-covered Plans and IRAs 
because it would allow the Credit Suisse Affiliated QPAMs to engage in 
transactions described in PTE 84-14 only to the extent that all of the 
longstanding conditions set forth in PTE 84-14 (except for Section 
I(g), as a result of the Conviction) are fully met.

Statutory Findings--Administratively Feasible

    24. The Applicant represents that the requested exemption is 
administratively feasible because it does not require any monitoring by 
the Department but relies on an independent auditor to determine that 
Credit Suisse AG's and the Affiliated QPAMs' compliance policies, and 
the conditions for the exemption, are being followed. Furthermore, 
compliance with other sections of PTE 84-14 has been determined to be 
administratively feasible by the Department in many other similar 
cases.

Notice to Interested Persons

    Notice of the proposed exemption (the Notice) will be provided to 
all interested persons within five (5) days of publication of the 
Notice in the Federal Register. The Notice will be provided to all 
interested persons in the manner agreed upon by the Applicant and the 
Department. Such notification will contain a copy of the Notice, as 
published in the Federal Register, and a supplemental statement, as 
required, pursuant to 29 CFR 2570.43(a)(2). The supplemental statement 
will inform all interested persons of their right to comment on and to 
request a hearing with respect to the pending exemption. All written 
comments and/or requests for a hearing must be received by the 
Department within thirty-five (35) days of the publication of the 
Notice in the Federal Register.
    All comments will be made available to the public. Warning: Do not 
include any personally identifiable information (such as name, address, 
or other contact information) or confidential business information that 
you do not want publicly disclosed. All comments may be posted on the 
Internet and can be retrieved by most Internet search engines.

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 exemption, 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 exemption, if granted, will be subject to the 
express condition that the material facts and representations contained 
in the application are true and complete, and that the application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

[[Page 52370]]

Proposed Exemption

    Based on the foregoing facts and representations submitted by the 
Applicant, the Department is considering granting an exemption under 
the authority of section 408(a) of the Employee Retirement Income 
Security Act of 1974, as amended (ERISA), and section 4975(c)(2) of the 
Internal Revenue Code of 1986, as amended (the Code), and in accordance 
with the procedures set forth in 29 CFR Part 2570, Subpart B (76 FR 
66637, 66644, October 27, 2011).\8\
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    \8\ For purposes of this proposed exemption, references to 
section 406 of ERISA should be read to refer as well to the 
corresponding provisions of section 4975 of the Code.
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Section I: Covered Transactions

    If the proposed exemption is granted, the Credit Suisse Affiliated 
QPAMs and the Credit Suisse Related QPAMs shall not be precluded from 
relying on the relief provided by Prohibited Transaction Class 
Exemption (PTE) 84-14 \9\ notwithstanding the Conviction (as defined in 
Section II(c),\10\ provided the following conditions are satisfied:
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    \9\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
    \10\ Section I(g) generally provides that ``[n]either the QPAM 
nor any affiliate thereof . . . nor any owner . . . of a 5 percent 
or more interest in the QPAM is a person who within the 10 years 
immediately preceding the transaction has been either convicted or 
released from imprisonment, whichever is later, as a result of'' 
certain felonies including income tax evasion and conspiracy or 
attempt to commit income tax evasion.
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    (a) Any failure of the Credit Suisse Affiliated QPAMs or the Credit 
Suisse Related QPAMs to satisfy Section I(g) of PTE 84-14 arose solely 
from the Conviction;
    (b) The Credit Suisse Affiliated QPAMs and the Credit Suisse 
Related QPAMs (including officers, directors, employees, and agents of 
such QPAMs) did not participate in the criminal conduct of Credit 
Suisse AG that is the subject of the Conviction;
    (c) The Credit Suisse Affiliated QPAMs and the Credit Suisse 
Related QPAMs did not directly receive compensation in connection with 
the criminal conduct of Credit Suisse AG that is the subject of the 
Conviction;
    (d) The criminal conduct of Credit Suisse AG that is the subject of 
the Conviction did not directly or indirectly involve the assets of any 
plan described in section 3(3) of ERISA (an ERISA-covered plan) or 
section 4975(e)(1) of the Code (an IRA);
    (e) Credit Suisse AG did not provide any fiduciary services to 
ERISA-covered plans or IRAs, except in connection with securities 
lending services of the New York Branch of Credit Suisse AG, or act as 
a QPAM for ERISA-covered plans or IRAs;
    (f) The Credit Suisse Affiliated QPAMs will not use their authority 
or influence to direct an investment fund (as defined in Section VI(b) 
of PTE 84-14) managed by a Credit Suisse Affiliated QPAM to enter into 
any transaction with Credit Suisse AG or engage Credit Suisse AG to 
provide additional services, for a fee, to the investment fund 
regardless of whether such transactions or services may otherwise be 
within the scope of relief provided by an administrative or statutory 
exemption;
    (g) Credit Suisse AG and the Credit Suisse Affiliated QPAMs will 
ensure that no employee or agent involved in the criminal conduct that 
underlies the Conviction will engage in transactions on behalf of any 
investment fund (as defined in Section VI(b) of PTE 84-14) managed by 
the Credit Suisse Affiliated QPAMs;
    (h)(1) Credit Suisse AG and the Credit Suisse Affiliated QPAMs 
immediately develop, implement, maintain, and follow written policies 
(the Policies) requiring and designed to ensure that: (i) The asset 
management decisions and asset management operations of the Credit 
Suisse Affiliated QPAMs are conducted independently of Credit Suisse 
AG's management and business activities; (ii) Credit Suisse AG and the 
Credit Suisse Affiliated QPAMs fully comply with ERISA's fiduciary 
duties and prohibited transaction provisions, and do not knowingly 
participate in any violations of these duties and provisions; (iii) 
Credit Suisse AG and the Credit Suisse Affiliated QPAMs do not 
knowingly participate in any other person's violation of ERISA, the 
Code, or other federal, state, or local law; (iv) any filings or 
statements made to federal, state, or local government are accurate and 
complete; (v) Credit Suisse AG and the Credit Suisse Affiliated QPAMs 
do not make material misrepresentations or omit material information in 
their communications with federal, state, or local government, or their 
ERISA-covered plan and IRA clients; (vi) Credit Suisse AG and the 
Credit Suisse Affiliated QPAMs comply with the terms of this exemption; 
and (vii) any violations of or failure to comply with items (ii) 
through (vi) are promptly reported in writing to appropriate corporate 
officers, the head of U.S. Asset Management Compliance, the General 
Counsel for Asset Management, the independent auditor responsible for 
reviewing compliance with the Policies, and a non-QPAM fiduciary of any 
affected ERISA-covered plan or IRA;
    (2) Credit Suisse AG and the Credit Suisse Affiliated QPAMs also 
immediately develop and implement a program of training (the Training), 
conducted at least annually for Credit Suisse AG and Credit Suisse 
Affiliated QPAM personnel; at a minimum, the training covers the 
Policies, ERISA compliance (including fiduciary duties and the 
prohibited transaction provisions) and ethical conduct, the 
consequences for not complying with the conditions of this proposed 
exemption, if granted, (including the loss of the exemptive relief 
provided herein), prompt reporting of wrongdoing;
    (i)(1) Credit Suisse AG and the Credit Suisse Affiliated QPAMs 
submit to an audit conducted annually by an independent auditor, who 
has been prudently selected and who has appropriate technical training 
and proficiency with ERISA to evaluate the adequacy of the policies and 
training required in paragraph (h), as well as compliance with those 
requirements; the first of the audits must be completed no later than 
twelve (12) months after a final exemption for the covered transactions 
is granted in the Federal Register. The first audit must cover the 
first six-month period that begins on the date a final exemption is 
granted in the Federal Register; all subsequent audits must cover the 
following corresponding twelve-month periods and be completed no later 
than 6 months after the period to which the audit applies;
    (2) The auditor's engagement shall specifically require the auditor 
to determine whether Credit Suisse AG and the Credit Suisse Affiliated 
QPAMs have developed, implemented, maintained, and followed Policies in 
accordance with the conditions of this proposed exemption and developed 
and implemented the Training, as required herein;
    (3) The auditor shall test Credit Suisse AG's and each Credit 
Suisse Affiliated QPAM's operational compliance with the Policies and 
Training;
    (4) For each audit, the auditor shall issue a written report (the 
Audit Report) to Credit Suisse AG and the Credit Suisse Affiliated 
QPAMs that describes the steps performed by the auditor during the 
course of its examination. The Audit Report shall include the auditor's 
specific determinations regarding the adequacy of the Policies and 
Training; the auditor's recommendations (if any) with respect to 
strengthening such Policies and Training; and any instances of Credit 
Suisse AG's or the Credit Suisse

[[Page 52371]]

Affiliated QPAMs' noncompliance with the written Policies and Training 
described in paragraph (h) above. Any determinations made by the 
auditor regarding the adequacy of the Policies and Training and the 
auditor's recommendations (if any) with respect to strengthening the 
Policies and Training shall be promptly addressed by Credit Suisse AG 
and the Credit Suisse Affiliated QPAMs, and any actions taken by Credit 
Suisse AG or the Credit Suisse Affiliated QPAMs to address such 
recommendations shall be included in an addendum to the Audit Report. 
Any determinations by the auditor that Credit Suisse AG and the Credit 
Suisse Affiliated QPAMs have implemented, maintained, and followed 
sufficient Policies and Training, shall not be based solely or in 
substantial part on an absence of evidence indicating noncompliance;
    (5) The auditor shall notify Credit Suisse AG and the Credit Suisse 
Affiliated QPAMs of any instances of noncompliance identified by the 
auditor within five (5) business days after such noncompliance is 
identified by the auditor, regardless of whether the audit has been 
completed as of that date. Credit Suisse AG or a Credit Suisse 
Affiliated QPAM shall provide written notice to the Department's Office 
of Exemption Determinations (OED), Room N-5700, 200 Constitution Avenue 
NW., Washington, DC 20210: Of any instances of noncompliance reviewed 
by the auditor within ten (10) business days after such notice is 
received from the auditor. Upon request, the auditor shall provide OED 
with all of the relevant workpapers reflecting any instances of 
noncompliance. The workpapers shall identify whether and to what extent 
the assets of ERISA-covered plans or IRAs were involved in the 
instance(s) of noncompliance and an explanation of any corrective 
actions taken by Credit Suisse AG;
    (6) With respect to each audit, an executive officer of Credit 
Suisse AG and an executive officer of each Credit Suisse Affiliated 
QPAM certifies in writing, under penalty of perjury, that the 
respective officer has reviewed the Audit Report and this exemption, 
addressed any inadequacies identified in the Audit Report, and 
determined that the Policies and Training in effect at the time of 
signing are adequate to ensure compliance with the conditions of this 
exemption and with the applicable provisions of ERISA and the Code;
    (7) Credit Suisse AG provides each certified Audit Report to OED no 
later than 30 days following its completion and Credit Suisse AG and 
the Credit Suisse Affiliated QPAMs make the Audit Report 
unconditionally available for examination by any duly authorized 
employee or representative of the Department, or other relevant 
regulators, and any fiduciary of an ERISA-covered plan or IRA, the 
assets of which are managed by a Credit Suisse Affiliated QPAM;
    (j) The Credit Suisse Affiliated QPAMs comply with each condition 
of PTE 84-14, as amended, with the sole exception of the violation of 
Section I(g) that is attributable to the Conviction;
    (k) In any agreements with ERISA-covered plans or IRAs for the 
provision of asset management or other services, Credit Suisse AG and 
the Credit Suisse Affiliated QPAMs agree to comply with ERISA and to 
refrain from engaging in prohibited transactions; the agreements do not 
purport to waive, limit, or qualify the liability of Credit Suisse AG 
or the Credit Suisse Affiliated QPAMs for violating ERISA or engaging 
in prohibited transactions; the agreements do not require the ERISA-
covered plans or IRAs (or sponsors of such ERISA-covered plans or IRAs) 
to indemnify Credit Suisse AG or the Credit Suisse Affiliated QPAMs for 
violating ERISA or engaging in prohibited transactions; the agreements 
do not restrict the ability of such ERISA-covered plans or IRAs to 
terminate or withdraw from their arrangements with Credit Suisse AG or 
the Credit Suisse Affiliated QPAMs; and the agreements do not impose 
any fees, penalties, or charges for such termination or withdrawal;
    (l) After a final exemption is granted in the Federal Register, 
Credit Suisse AG and the Credit Suisse Affiliated QPAMs will maintain 
records necessary to demonstrate that the conditions of this exemption 
have been met for six (6) years following the date of any transactions 
for which Credit Suisse Affiliated QPAMs rely upon the relief in the 
exemption;
    (m)(1) Each sponsor of an ERISA-covered plan and each beneficial 
owner of an IRA invested in an investment fund managed by a Credit 
Suisse Affiliated QPAM, or the sponsor of an investment fund in any 
case where a Credit Suisse Affiliated QPAM acts only as a sub-advisor 
to the investment fund; (2) each entity that may be a Credit Suisse 
Related QPAM; and (3) each ERISA-covered plan for which the New York 
Branch of Credit Suisse AG provides fiduciary securities lending 
services, receives this notice of proposed exemption along with a 
separate summary describing the facts that led to the Conviction, which 
has been submitted to the Department, and a prominently displayed 
statement that the Conviction results in a failure to meet a condition 
in PTE 84-14;
    (n) A Credit Suisse Affiliated QPAM will not fail to meet the terms 
of this proposed exemption, if granted, solely because a Credit Suisse 
Related QPAM fails to satisfy a condition for relief under this 
exemption. A Credit Suisse Related QPAM will not fail to meet the terms 
of this proposed exemption, if granted, solely because Credit Suisse 
AG, a Credit Suisse Affiliated QPAM, or a different Credit Suisse 
Related QPAM fails to satisfy a condition for relief under this 
exemption.

Section II: Definitions

    (a) The term ``Credit Suisse Affiliated QPAM'' means a ``qualified 
professional asset manager'' (as defined in section VI(a) \11\ of PTE 
84-14) that relies on the relief provided by PTE 84-14 and with respect 
to which Credit Suisse AG is a current or future ``affiliate'' (as 
defined in section VI(d) of PTE 84-14). The term ``Credit Suisse 
Affiliated QPAM'' excludes Credit Suisse AG.
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    \11\ In general terms, a QPAM is an independent fiduciary that 
is a bank, savings and loan association, insurance company, or 
investment adviser that meets certain equity or net worth 
requirements and other licensure requirements and such bank, savings 
and loan association, insurance company, or investment adviser has 
acknowledged in a written management agreement that it is a 
fiduciary with respect to each plan that has retained the QPAM.
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    (b) The term ``Credit Suisse Related QPAM'' means any current or 
future ``qualified professional asset manager'' (as defined in section 
VI(a) of PTE 84-14) that relies on the relief provided by PTE 84-14, 
and with respect to which Credit Suisse AG owns a direct or indirect 
five percent or more interest, but with respect to which Credit Suisse 
AG is not an ``affiliate'' (as defined in section VI(d) of PTE 84-14).
    (c) The term ``Conviction'' means the judgment of conviction 
against Credit Suisse AG for one count of conspiracy to violate section 
7206(2) of the Internal Revenue Code in violation of Title 18, United 
States Code, Section 371, which is scheduled to be entered in the 
District Court for the Eastern District of Virginia in Case Number 
1:14-cr-188-RBS.

    Signed at Washington, DC, this 28th day of August, 2014.
Lyssa Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2014-20884 Filed 9-2-14; 8:45 am]
BILLING CODE 4510-29-P