[Federal Register Volume 79, Number 222 (Tuesday, November 18, 2014)]
[Notices]
[Pages 68716-68726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27172]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2014-11; Application No. D-11819]


Notice of Exemption Involving Credit Suisse AG (Hereinafter, 
Either CSAG or the Applicant) Located in Zurich, Switzerland

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

ACTION: Notice of Temporary Exemption.

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SUMMARY: This document contains a notice of temporary 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 exemption 
would affect the ability of certain entities with specified 
relationships to CSAG to continue to rely upon the relief provided by 
Prohibited Transaction Class Exemption 84-14 for a period of one year 
from the date of publication of this notice.

DATES: Effective Date: This temporary exemption will be effective as of 
the date a judgment of conviction against

[[Page 68717]]

CSAG 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 and will expire one year 
from the date of publication in the Federal Register.

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: On September 3, 2014, the Department of 
Labor (the Department) published a notice of proposed exemption in the 
Federal Register at 79 FR 52365, proposing that certain entities with 
specified relationships to CSAG could continue to rely upon the relief 
provided by Prohibited Transaction Class Exemption (PTE) 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 
CSAG 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 described a set of additional conditions, designed to protect 
ERISA-covered plans and IRAs, that the entities with specified 
relationships to CSAG must satisfy in order to rely upon the relief in 
PTE 84-14. The exemption was requested by CSAG pursuant to section 
408(a) of ERISA 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.

Written Comments

    The Department invited all interested persons to submit written 
comments and/or requests for a public hearing with respect to the 
notice of proposed exemption published in the Federal Register on 
September 3, 2014, at 79 FR 52365 on or before October 10, 2014. During 
the comment period, the Department received no telephone inquiries and 
ten written comments on the proposed exemption. The commenters include 
eight members of the general public, members of the U.S. House of 
Representatives (the Representatives), and the Applicant. Other than 
the Applicant, the commenters generally opposed granting an exemption 
to CSAG because of its pending criminal conviction or raised issues 
outside the scope of the exemption. The comment from the Applicant 
requested certain changes to the operative language of the exemption 
and provided additional information in support of the requested 
changes.
    The Department also received four hearing requests during the 
comment period from individuals, including the Representatives. The 
Department has decided to hold a hearing, consistent with its authority 
under 29 CFR 2570.47, in order to more fully explore the issues raised 
by the commenters. A separate notice of hearing will be published 
elsewhere in this issue of the Federal Register.
    A discussion of the comments, the Applicants' responses, and the 
Applicant's comment follows below. Any capitalized terms used herein 
that are not otherwise defined have the meanings ascribed to them in 
the Summary of Facts and Representations in the notice of proposed 
exemption published in the Federal Register on September 3, 2014 at 79 
FR 52365.

Public Comments and Applicant's Response

1. Rollins, Lang, Rose, Johnson, and Blixseth Letters
    The Rollins Letter expressed concern that grant of the proposed 
exemption would undermine the public interest in enforcing criminal 
sanctions for corporate misconduct and deterring future wrongdoing. The 
Lang letter asserted that fines alone were inadequate sanctions for the 
Applicant's misconduct and, accordingly, that the Department should 
deny the exemption. The Rose letter suggested that grant of an 
exemption would warrant presidential impeachment. The Johnson letter 
commented that approval of the exemption would send a message that 
large or politically powerful banks could ignore federal laws. The 
Johnson Letter also stressed that the federal government has an 
obligation to ensure the integrity of all companies dealing with 
pension funds. According to the letter, the cost to pension plans of 
moving funds away from asset managers affiliated with CSAG would be 
negligible if pension plans were given 30 days to relocate their 
accounts. The letter also suggested that grant of an exemption would 
prevent CSAG's criminal conviction from having its intended deterrent 
effect. Finally, the Blixseth letter described various business 
practices and controversies, which it asserted had resulted in past 
fines and settlements against CSAG and related entities, and argued for 
denial of the exemption application.
    The Applicant noted the commenters' view that the exemption should 
be denied as a means of holding CSAG accountable and deterring other 
banks from criminal misconduct, but asserted that the Applicant 
nevertheless meets the standards under section 408(a) of ERISA for 
grant of an exemption. The Applicant disputed that there was any basis 
for denying an exemption to all of CSAG's affiliates and related 
entities based on the misconduct of a single entity. According to the 
Applicant, the arguments for denial of the exemption are inconsistent 
with section 411 of ERISA, which authorizes the Department to debar a 
fiduciary convicted of a felony, but not its affiliates.
    The Applicant asserts that the need to hold CSAG accountable for 
criminal misconduct and the propriety of the Department of Justice's 
Plea Agreement are not at issue in the exemption process. Additionally, 
the Applicant suggests that the proposed exemption would hold CSAG 
accountable, in any event, because the relief would only be available 
to affiliated managers (not CSAG) and only if they follow fourteen 
stringent new conditions, in addition to the seven conditions in Part I 
of PTE 84-14 (including its integrity condition, Part I(g), as modified 
by the proposed exemption). The Applicant also states that CSAG already 
faces significant sanctions for criminal misconduct, as evidenced by 
its agreement to pay $2.8 billion to the Justice Department, Securities 
and Exchange Commission, Internal Revenue Service, New York State 
Department of Financial Services, and the Federal Reserve.
2. Spalding Letter
    The Spalding letter commented that the proposed exemption was 
insufficiently detailed with respect to the investment strategies 
utilized by affected asset managers and with respect to the proposed 
audit requirements of the exemption. The letter also suggested that the 
Department should take an active role in preventing systemic flaws that 
are tied to market making consortiums.
    The Applicant noted Mr. Spalding's objections to the exemption and 
his

[[Page 68718]]

concerns with respect to derivatives and other investment strategies 
that asset manager affiliates of CSAG could pursue, but argued that the 
propriety of these strategies should properly be left to the named 
fiduciaries or IRA owners who hire asset managers to pursue such 
strategies. The Applicant further argued that such concerns were 
irrelevant to the proposed exemption, which, did not address or concern 
specific investment strategies.
3. Representatives Waters, Lynch & Miller (the Representatives) Letter
    The Representatives suggest that the American public has grown 
increasingly frustrated about a lack of accountability in our financial 
system, both with regard to conduct contributing to the financial 
crisis and to scandals that have occurred since then. While they note 
that law enforcement has obtained record monetary settlements in 
response to financial misconduct, the Representatives remain concerned 
that regulators are failing to use the full arsenal of tools available 
to them to protect the public and retirees from bad actors and to 
ensure that criminal behavior is appropriately deterred. The 
Representatives suggest that the beneficial status of ``qualified 
professional asset manager'' should be reserved for institutions that 
have shown a commitment to maintaining a high standard of integrity via 
compliance with the law and that the Department's process for 
evaluating exemption requests like the Applicant's may not be 
sufficiently robust to maintain this standard.
    The Applicant asserts that the Department should not base its 
decision on the goals of deterrence and accountability for the same 
reasons set forth in its responses to the Rollins, Lang, Rose, Johnson, 
and Blixseth Letters, above. In addition, the Applicant states that 
conduct of other financial institutions in connection with the 
financial crisis and the question of whether those institutions have 
been appropriately punished are irrelevant to determining whether the 
Department should grant an exemption providing relief to affiliated 
managers of CSAG.
    The Applicant also disputes that the Department's approval of past 
exemption requests relating to a failure of Section I(g) indicates that 
approval is automatic, thereby undermining financial firms' incentives 
to comply with the law and existing exemptions. The Applicant states 
that those exemptions imposed additional conditions appropriate to the 
particular cases at issue and were granted only after notice and 
comment from interested parties. The Applicant asserts that, consistent 
with the requirements of section 408(a) of ERISA, the Department has 
exercised appropriate caution, evaluated the benefits of the exemption 
to plans managed by affiliates of CSAG and fashioned a set of stringent 
additional conditions to ensure that plans' interests are protected.
    In addition, the Applicant notes that CSAG, the entity that entered 
into the Plea Agreement with the Justice Department, is receiving no 
relief under the proposed exemption and will be unable to rely upon PTE 
84-14 for ten years. The Applicant states that, consequently, the only 
entities receiving relief under the proposed exemption are affiliated 
asset managers that are registered U.S. advisers, have their own 
employees, compliance systems and record of legal compliance and that 
were not engaged in the conduct underlying the Plea Agreement. The 
Applicant also states that the exemption does not excuse these managers 
from compliance with Section I(g) of PTE 84-14, which requires that 
neither the manager nor its affiliates have been convicted of certain 
crimes. Under the proposed exemption, Section I(g) will continue to 
apply, with the sole exception of the Conviction resulting from the 
Plea Agreement.
    Finally, the Applicant points to the imposition of fourteen 
additional substantive conditions in the proposed exemption, in 
addition to the seven conditions found in Part I of PTE 84-14, which 
include, among other things, compliance reviews by an independent 
auditor, policies and procedures covering six different substantive 
areas (e.g., independence of QPAM decisions from CSAG, ERISA 
compliance, and prompt reporting of violations), training on those 
policies and procedures, an annual audit, and significant reporting to 
plans and to the Department. The Applicant adds that the new conditions 
also require that no employee who participated in the conduct 
underlying the Plea Agreement be involved in the affiliate's asset 
management decisions, and that the affiliate will not cause plans to 
trade with, or procure services for a fee from CSAG, ensuring 
separation of the affiliates' asset management decisions from the 
influence of CSAG.
4. Public Citizen Letter
    In its letter, Public Citizen stresses the importance of deterring 
criminal activity and expresses its view that grant of the exemption 
would undermine deterrence. In addition, Public Citizen questions 
whether it can be verified that employees of CSAG's affiliates were 
uninvolved in the crime. The Applicant believes that its response to 
the letters from Rollins, Lang, Rose, Johnson, and Blixseth is also 
responsive to Public Citizen's concern about deterrence and corporate 
abuse. The Applicant additionally argues that CSAG engaged in an 
extensive due diligence process to ensure that it could certify the 
truth of its statement that its affiliates' employees were uninvolved 
in CSAG's criminal activities, and that, as a protective safeguard, the 
proposed exemption is expressly conditioned on the fact that no 
employee involved in the crime will participate in the asset management 
decisions of the investment managers.
5. Financial Recovery and Consulting Services Pty Ltd (FRCS) Letter
    The FRCS letter explains that FRCS represents international and 
U.S. former customers of CSAG who were victims of a fraud or 
embezzlement. The letter outlines information that FRCS believes should 
have been, but was not, included in CSAG's application to the 
Department requesting the proposed exemption. FRCS requests that the 
Department only consider granting temporary relief to the Applicant, if 
any relief is to be given. In support of this request, FRCS submitted a 
history of conduct at various Credit Suisse affiliates that FRCS 
considers corrupt. Finally, FRCS suggests that CSAG's application does 
not meet the statutory requirements for an exemption to be issued.
    In response, the Applicant objects to any suggestion that the 
Department deny the exemption as a means to punish CSAG for misconduct, 
and references its response to the similar concerns expressed in the 
Rollins, Lang, Rose, Johnson, and Blixseth Letters. The Applicant also 
disputes FRCS' argument that plan costs could be reduced appropriately 
by granting temporary relief to allow Credit Suisse affiliates to 
liquidate plan accounts over time. Furthermore, the Applicant states 
that the comment failed to take into account the costs that denying the 
exemption would impose on plans that continue to use CSAG affiliates to 
manage their assets. According to CSAG, those plans would lose access 
to the trading and pricing efficiencies that PTE 84-14 affords for a 
period of ten years after the conviction.

Applicant's Comment

    The Applicant's comment generally requests a variety of changes to 
the operative language of the exemption, requests clarification on the 
meaning of certain language, and provides

[[Page 68719]]

additional information in support of any requests for changes or 
clarification.
    1. Section I(b).
    As proposed, Section I(b) of the exemption conditions relief on a 
requirement that the Credit Suisse Affiliated QPAMs, Credit Suisse 
Related QPAMs, and their officers, directors, ``agents,'' and employees 
not have participated in the criminal conduct that is the subject of 
the Conviction. The Applicant requests that the term ``agents'' be 
removed from Section I(b). The Applicant states that, to the best of 
its knowledge after due inquiry, the Credit Suisse Affiliated QPAMs and 
the Credit Suisse Related QPAMs did not participate in the criminal 
conduct nor did their officers, directors, or employees. However, the 
Applicant notes that CSAG, which was involved in the criminal conduct, 
could have previously acted as an agent for a Credit Suisse Affiliated 
QPAM in some capacity that is unconnected to its criminal conduct or 
asset management decisions, such as service of process in a foreign 
country. Therefore, in light of the potentially broad scope of the term 
``agents,'' the Applicant is reluctant to make a representation that 
includes the term ``agents.'' After consideration of the comment, the 
Department has substituted ``agents other than Credit Suisse AG'' for 
the term ``agents.'' Thus, subject to this modification, it remains a 
condition of the exemption that ``[t]he Credit Suisse Affiliated QPAMs 
and the Credit Suisse Related QPAMs (including officers, directors, 
agents other than Credit Suisse AG, and employees of such QPAMs) did 
not participate in the criminal conduct of Credit Suisse AG that is the 
subject of the Conviction.'' Accordingly, the QPAMs, their officers, 
directors, agents (other than CSAG), and employees must not have aided, 
assisted in, procured, counseled, or advised the preparation and 
presentation of false income tax returns and other documents to the 
Internal Revenue Service of the Treasury Department.
    2. Section I(d).
    The Applicant requests clarification that an ``ERISA-covered plan'' 
or ``IRA'' in Section I(d) and throughout the exemption refers only to 
plans subject to Part 4 of Title I of ERISA and section 4975 of the 
Code. That was the Department's intent and it has, therefore, clarified 
that an ``ERISA-covered plan'' or ``IRA'' refers only to such plans by 
substituting ``subject to Part 4 of Title I of ERISA'' for ``described 
in section 3(3) of ERISA'' and ``section 4975 of the Code'' for 
``section 4975(e)(1) of the Code.'' Thus, subject to this modification, 
it remains a condition of the exemption that ``[t]he criminal conduct 
of Credit Suisse AG that is the subject of the Conviction did not 
directly or indirectly involve the assets of any plan subject to Part 4 
of Title I of ERISA (an ERISA-covered plan) or section 4975 of the Code 
(an IRA).
    3. Section I(f).
    As proposed, Section I(f) of the exemption provides that a Credit 
Suisse Affiliated QPAM will not use its authority or influence to 
direct an investment fund managed by the QPAM to enter into any 
transaction with Credit Suisse AG or engage Credit Suisse AG to provide 
additional services for a fee borne by the investment fund.
    The Applicant requests that Section I(f) provide an exception for 
certain subcustody arrangements entered into with CSAG by global 
custodians that are unaffiliated with CSAG. According to the Applicant, 
to the extent that a Credit Suisse Affiliated QPAM invests in a market 
where CSAG is the local subcustodian or effects the transaction in that 
market, CSAG could receive compensation from the global custodian.
    The Department declines to add a specific exception to the language 
in Section I(f) as requested by the Applicant. In this regard, the 
Department is concerned about the potential for self-dealing inasmuch 
as, depending on the facts and circumstances, a Credit Suisse 
Affiliated QPAM might effectively use its ``authority or influence to 
direct'' an investment fund to ``enter into any transaction with'' CSAG 
or ``provide additional services, for a fee borne by'' the investment 
fund. The Department notes, however, that it is not expressing a view 
on whether any particular transaction would constitute a separate 
prohibited transaction under ERISA or the Code.
    The Applicant also requests clarification that if a Credit Suisse 
Affiliated QPAM obtains services from CSAG without cost to an ERISA-
covered plan or IRA (e.g., at the QPAM's own expense), the condition in 
Section I(f) will not be violated. The Department clarifies that 
services provided for no additional cost to an ERISA-covered plan or 
IRA would not fall within the scope of Section I(f). Accordingly, the 
Department has modified the phrase ``provide additional services for a 
fee to the investment fund'' to read, ``provide additional services to 
such investment fund, for a direct or indirect fee borne by such 
investment fund'' to make the intent of this Section I(f) clear.
    The Applicant additionally requests that Section I(f) provide an 
exception for transactions covered under PTE 75-1, Part III and PTE 
2008-07,\1\ which permit Credit Suisse Affiliated QPAMs to purchase 
securities from third parties in an underwriting syndicate where a 
Credit Suisse Affiliated QPAM's affiliate is a member or manager of the 
underwriting syndicate. The Applicant believes that prohibiting the use 
of such exemptions would harm plans, especially with respect to foreign 
issuers, where CSAG may often be a manager or member of an underwriting 
syndicate. The Department declines to add language that excepts 
transactions covered by PTE 75-1, Part III and PTE 2008-07 from this 
condition because the transactions permitted by these PTEs are not 
within the scope of transactions prohibited under Section I(f).
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    \1\ For PTE 75-1, see 40 FR 50845 (October 31, 1975), as amended 
at 69 FR 23216 (April 28, 2004), 71 FR 5883 (February 3, 2006), and 
78 FR 37572 (June 21, 2013); for PTE 2008-07, see 73 FR 27565 (May 
13, 2008).
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    4. Section I(g).
    Section I(g) of the proposed exemption provides that Credit Suisse 
AG and each Credit Suisse Affiliated QPAM 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. The 
Applicant requests that the reference to ``Credit Suisse AG'' be 
removed from this section since CSAG is the convicted entity and the 
Credit Suisse Affiliated QPAMs are in the best position to ensure 
compliance with the requirements of the condition provided in Section 
I(g). Additionally, the Applicant represents that CSAG lacks the 
authority to monitor all of the Credit Suisse Affiliated QPAMs or to 
dictate hiring decisions because CSAG may not have operational control 
of certain Credit Suisse Affiliated QPAMs despite having ``control'' 
(as that term is defined in Section VI(e) of PTE 84-14) \2\ over such 
entities. The Department concurs that the responsibility for complying 
with this condition should be imposed upon the Credit Suisse Affiliated 
QPAMs, and has removed the reference to ``Credit Suisse AG'' in Section 
I(g) and also added ``Each'' to the beginning of this section to 
clarify that the condition is imposed upon each individual Credit 
Suisse Affiliated QPAM and that each such Credit Suisse Affiliated QPAM 
is responsible only for maintaining its own compliance, rather than the 
compliance of all other Credit Suisse Affiliated QPAMs. Furthermore, 
the phrase ``subject to ERISA'' has been

[[Page 68720]]

added to Section I(g) after the reference to ``investment fund'' to 
provide additional clarification that Section I(g) only applies to 
investment funds for which relief under PTE 84-14 is used.
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    \2\ 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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    Additionally, the Applicant requests clarification that a Credit 
Suisse Affiliated QPAM's failure to comply with this condition will 
prevent only that particular QPAM from relying on this exemption rather 
than disqualifying all of the other Credit Suisse Affiliated QPAMs. The 
Department believes that the changes noted above, combined with changes 
made to Section I(n), discussed below, provide the necessary 
clarification to this section and address the Applicant's concerns.
    Finally, the Applicant requests that the term ``agent'' be removed 
from this section because of its breadth. The Department declines to 
remove the term ``agent'' because it could permit the Credit Suisse 
Affiliated QPAMs to use individuals involved in CSAG's criminal 
activities as their agents. Accordingly, Section I(g) provides that 
each Credit Suisse Affiliated QPAM is obligated to ensure that none of 
its employee or agents, if any, that were involved in the criminal 
conduct that underlies the Conviction will engage in transactions on 
behalf of the investment funds it manages.
    5. Section I(h).
    Section I(h) of the proposed Exemption requires the Applicant to 
adopt and adhere to specified policies and procedures (the Policies). 
The Applicant requests that the scope of Section I(h) be clarified to 
make clear that the requirements of Section I(h) apply to the Credit 
Suisse Affiliated QPAMs' ERISA-covered plan and IRA clients. The 
Applicant notes that, in its original form, this section could be 
interpreted to apply to the assets of other individuals and entities 
that are not subject to ERISA or the Code. The Applicant also asks the 
Department to provide clarification on the scope of laws covered by 
Section I(h)'s requirement of compliance with various state and federal 
laws, including whether such compliance specifically relates to the 
asset management activities of the QPAMs with respect to their ERISA-
covered plans and IRAs.
    The Department notes that Section I(h) only applies to ERISA-
covered plans and IRAs since the relief in PTE 84-14 only applies to 
such plans and IRAS. However, the Department agrees that additional 
language could clarify this intent. Therefore, the Department has added 
qualifying language, where appropriate, to indicate that the 
requirements of Section I(h) apply to ERISA-covered plans and IRAs, and 
with respect to compliance with the requirements of ERISA and the Code.
    The Applicant also requests that the term ``follow'' be removed 
from the prefatory clause of Section I(h), which requires the Credit 
Suisse Affiliated QPAMs to follow and adhere to the mandated Policies. 
The Applicant objects that if ``follow'' is interpreted strictly, it 
could result in a failure by a Credit Suisse Affiliated QPAM to meet 
the condition in this section if a Credit Suisse Affiliated QPAM does 
not perfectly adhere to the Policies and avoid all mistakes, including 
inadvertent, technical, or good faith errors. Alternatively, the 
Applicant asks for clarification that the term ``follow'' means only 
that a Credit Suisse Affiliated QPAM must promptly follow the Policies' 
correction and reporting mechanisms when it knows or should know of a 
violation of such Policies.
    The Department declines to remove the term ``follow'' from the 
prefatory clause of Section I(h), inasmuch as it intends for the Credit 
Suisse Affiliated QPAMs not only to adopt the mandated Policies, but 
also to adhere to them. The Department agrees, however, that the Credit 
Suisse Affiliated QPAMs--and the plans they serve--should not run the 
risk of losing the exemption based on inadvertent, good faith, or de 
minimis compliance errors. Accordingly, the Department has amended 
Subsection I(h)(vii) of the exemption to provide that they will not be 
treated as having failed to develop, implement, maintain or follow the 
Policies, provided that they correct any instances of noncompliance 
promptly when discovered or when they reasonably should have known of 
the noncompliance (whichever is earlier), and provided that they adhere 
to the reporting requirements for violations that are not promptly 
corrected.
    The Applicant also requests that the reference to ``asset 
management operations'' be removed from Subsection I(h)(1)(i). The 
Applicant explains that ``asset management decisions'' fully 
encompasses fiduciary decision-making by Credit Suisse Affiliated 
QPAMs. In contrast, ``asset management operations'' could include 
unrelated business activities, such as information technology security, 
employee non-discrimination, and workplace, safety, and health issues, 
matters in which CSAG may, in fact, be involved, but which have no 
impact on the independence of asset management decisions. Based on this 
additional information provided by the Applicant, the Department 
concurs and has removed the phrase ``and asset management operations'' 
from this subsection.
    Furthermore, the Applicant requests that references to ``Credit 
Suisse AG'' be removed from Subsection I(h)(1)(ii)-(vii) because CSAG 
does not act as a fiduciary for ERISA-covered plans or IRAs in reliance 
on PTE 84-14. Additionally, the Applicant suggests that imposing these 
requirements on CSAG would potentially impact branches in non-U.S. 
markets that do not have any ERISA-covered plan or IRA clients. The 
Department concurs that this condition should only apply to each Credit 
Suisse Affiliated QPAM that relies upon PTE 84-14. Therefore, 
consistent with other sections where the phrase ``Credit Suisse AG'' 
has been removed, it has also been removed from these subsections.
    The Applicant also requests that the filing requirements in 
Subsections I(h)(1)(iv) and (v) be modified to clarify that they apply 
only to filings with regulators of ERISA-covered plans and IRAS, 
including the Department of Labor, Department of the Treasury, 
Department of Justice, and the Pension Benefit Guaranty Corporation. 
The Department generally concurs with this modification, but notes that 
the regulators identified in the operative language are listed solely 
as examples. To the extent that Credit Suisse Affiliated QPAMs engage 
in filings on behalf of ERISA-covered plans and IRAs with other 
regulators, those filings would also be covered by these subsections. 
Therefore, the Department has modified the phrase ``any filings or 
statements made to federal, state, or local government are accurate and 
complete'' in Subsection I(h)(1)(iv) to read, ``any filings or 
statements made by the Credit Suisse Affiliated QPAMs to regulators, 
including but not limited to, the Department of Labor, the Department 
of the Treasury, the Department of Justice, and the Pension Benefit 
Guaranty Corporation, on behalf of ERISA-covered plans or IRAs are 
materially accurate and complete, to the best of such QPAM's knowledge 
at that time.'' Additionally, the Department has modified the phrase 
``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'' in Subsection I(h)(1)(v) to read, ``the Credit Suisse 
Affiliated QPAM does not make material misrepresentations or omit 
material information in its communications with such regulators with 
respect to ERISA-covered plans or IRAs, or make material 
misrepresentations or omit material

[[Page 68721]]

information in its communications with ERISA-covered plan and IRA 
clients.''
    The Applicant requests that the condition in Subsection 
I(h)(1)(vii) requiring reporting of violations to specified persons 
apply only when a Credit Suisse Affiliated QPAM fails to follow the 
correction and reporting mechanisms built into the Policies, and not in 
every instance. The Applicant suggests that reporting every error, even 
those that are generally considered correctable in accordance with 
ERISA or the Code, may overwhelm the reports' recipients and provide 
little protection to ERISA-covered plans and IRAs. The Department 
agrees with the Applicant and has modified the phrase ``any violations 
of or failure to comply with items (ii) through (vi) are promptly 
reported in writing'' in Subsection I(h)(1)(vii) to read, ``any 
violations of or failure to comply with items (ii) through (vi) are 
corrected promptly upon discovery and any such violations or compliance 
failures not promptly corrected are reported, upon discovering the 
failure to promptly correct, in writing . . .''
    The Department notes, however, that as part of the auditor's review 
of the operational compliance of each Credit Suisse Affiliated QPAM (as 
noted in Subsection I(i)(3)), each Credit Suisse Affiliated QPAM should 
provide documentation to the auditor that reflects any appropriate 
corrections made as outlined in the Policies. The Department notes 
further that the documentation of the errors is a means by which the 
auditor may test operational compliance with the Policies and 
demonstrate a QPAM's ERISA and Code compliance.
    The Applicant requests additional clarification with respect to 
Subsection I(h)(1)(vii). First, the Applicant requests that each Credit 
Suisse Affiliated QPAM be required to report to its own General Counsel 
for Asset Management and head of Compliance, positions which currently 
exist at each Credit Suisse Affiliated QPAM. Second, the Applicant 
requests that the Department clarify that a ``non-QPAM fiduciary'' in 
the context of this subsection is a fiduciary for any affected ERISA-
covered plan or IRA who is independent of the Applicant and its 
affiliates, regardless of whether such fiduciary also happens to be a 
QPAM, but that such fiduciary need not be independent when dealing with 
one of its affiliates' own plans or the IRAs of their employees. The 
Department concurs that clarification is appropriate and has thus 
changed ``the head of U.S. Asset Management Compliance'' and ``the 
General Counsel for Asset Management'' to ``the head of Compliance'' 
and ``the General Counsel of the relevant Credit Suisse Affiliated 
QPAM.'' The Department has also modified ``non-QPAM fiduciary of any 
affected ERISA-covered Plan or IRA'' to read, ``a fiduciary of any 
affected ERISA-covered plan or IRA where such fiduciary is independent 
of Credit Suisse AG; however, with respect to any ERISA-covered plans 
or IRAs sponsored by an affiliate (as defined in Section VI(d) of PTE 
84-14) of Credit Suisse AG or beneficially owned by an employee of 
Credit Suisse AG or its affiliates, such fiduciary does not need to be 
independent of Credit Suisse AG.''
    The Applicant also requests that Subsections I(h)(1) and I(h)(2), 
with respect to reporting violations, only apply to violations with 
respect to the development and implementation of the Policies and 
Training. The Department disagrees that such a limitation is 
appropriate because those subsections simply outline what should be 
included in the Policies and Training. Additionally, the Department 
notes the other changes made to Subsection I(h)(1) significantly 
clarify the nature of violations and compliance failures that must be 
reported. Finally, the Department notes that the Credit Suisse 
Affiliated QPAMs, as fiduciaries, may have additional notification 
responsibilities and duties outside the scope of this exemption.
    6. Section I(i).
    The Applicant requests that references to ``Credit Suisse AG'' be 
removed from Section I(i) since only the Credit Suisse Affiliated QPAMs 
will have Policies and Training in place. The Department concurs with 
this change and has removed all references to ``Credit Suisse AG'' from 
Subsection I(i) except in Subsection I(i)(4), which requires that CSAG, 
the parent company of the Credit Suisse Affiliated QPAMs, also receive 
the Audit Reports. It is the Department's view that CSAG should 
generally be on notice of the legal compliance efforts of its 
subsidiary-affiliates.
    The Applicant additionally requests clarification that the audit 
requirement will apply to a Credit Suisse Affiliated QPAM only at such 
time as it has ERISA-covered plan clients or IRA clients for which it 
relies upon PTE 84-14. The Department notes that any current and future 
affiliates that are not currently relying on PTE 84-14 for transactions 
need not submit to an audit (and therefore need not have Policies and 
Training in place) until such time as they begin relying on the relief 
in PTE 84-14.
    Furthermore, the Applicant requests that the compliance review, 
determination, and testing contemplated in Subsections I(i)(1), (2), 
and (3) should be limited to the development, maintenance, and 
implementation of the Policies and Training. The Department believes 
that based on modifications already made to Section I(h), limiting this 
condition as requested by the Applicant is unnecessary. Section I(h) 
has already been modified to apply to ERISA-covered plans and IRAs and 
compliance with laws applicable to such plans and IRAs. Additionally, 
the Department believes operational compliance is an important aspect 
of protecting ERISA-covered plan and IRA clients of the Credit Suisse 
Affiliated QPAMs. Therefore, the Department declines to limit 
Subsections I(i)(1), (2), and (3) in the requested manner.
    The Applicant requests confirmation that, with respect to the audit 
requirement in Section I(i) of the exemption, each of the Credit Suisse 
Affiliated QPAMs may be covered by a separate audit and Audit Report. 
The Applicant notes that there are situations where a Credit Suisse 
Affiliated QPAM is not wholly owned by CSAG, and such QPAM might be a 
competitor with another Credit Suisse Affiliated QPAM. The Department 
did not intend to require that all of the Credit Suisse Affiliated 
QPAMs be covered by a single Audit Report and has substituted the 
phrase ``each Credit Suisse Affiliated QPAM'' in place of ``the Credit 
Suisse Affiliated QPAMs,'' where appropriate in Section I(i), to 
reflect the requested confirmation.
    The Applicant also requests that the Department confirm that the 
phrase ``any instances of Credit Suisse AG's or the Credit Suisse 
Affiliated QPAMs' noncompliance with the written Policies and Training 
described in paragraph (h) above,'' In Subsection I(i)(4) refers only 
to failures to develop and implement the Policies and Training. The 
Department notes that this language, now modified to remove the 
reference to ``Credit Suisse AG'' requires that any instances of 
noncompliance which are not corrected in accordance with the Policies 
and which are reported separately to the Auditor under Subsection 
I(h)(1)(vii) should be noted in the Audit Report. The auditor may also 
choose to utilize its discretion under this requirement to include, for 
example, a type of error that occurs frequently despite being properly 
corrected on each occasion, where, in the auditor's independent 
judgment, such repeated errors might rise to a level that the auditor 
determines should be addressed by a particular Credit Suisse Affiliated 
QPAM.

[[Page 68722]]

    The Applicant requests clarification that where the auditor 
identifies an instance of noncompliance while engaging in the audit, 
under Subsection I(i)(5), that such notification only needs to be sent 
to the Credit Suisse Affiliated QPAM to which it applies. The 
Department notes that the Applicant's understanding of Subsection 
I(i)(5) is correct and has modified the phrase ``The auditor shall 
notify Credit Suisse AG and the Credit Suisse Affiliated QPAMs'' in 
Subsection I(i)(5) to read, ``The auditor shall notify the respective 
Credit Suisse Affiliated QPAM'' in order to provide additional 
clarification. Furthermore, the Department has decided to strike the 
sentence, ``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'' from the final temporary exemption because all such 
instances of noncompliance should be included in the Audit Reports, 
which the Department will receive upon completion thereof.
    The Applicant notes that in the last sentence of Subsection 
I(i)(5), the reference to an ``explanation of any corrective actions 
taken by Credit Suisse AG'' should refer to corrective actions taken by 
a Credit Suisse Affiliated QPAM since the Credit Suisse Affiliated 
QPAMs must operate independently of CSAG. The Department concurs and 
has changed that phrase so that it now reads, ``explanation of any 
corrective or remedial actions taken by the respective Credit Suisse 
Affiliated QPAM.''
    Finally, the Applicant requests that the reference to ``Credit 
Suisse AG'' also be removed from Subsection I(i)(6) and that the 
executive officer of each Credit Suisse Affiliated QPAM only be 
responsible for certifying its own Audit Report. The Department concurs 
that the executive of each Credit Suisse Affiliated QPAM officer need 
only certify the Audit Report for the particular QPAM for which he/she 
works. However, the Department believes it is important for CSAG to be 
on notice of the content contained in the Audit Reports. Therefore, the 
Department has modified the language in Subsection I(i)(6) to indicate 
that each Credit Suisse Affiliated QPAM is responsible for certifying 
its own audit and the sufficiency of its Policies and Training, but has 
added new Subsection I(i)(7) that requires an executive officer of CSAG 
to certify in writing that he/she has reviewed the Audit Reports of the 
Credit Suisse Affiliated QPAMs. The former Subsection I(i)(7) has been 
renumbered as I(i)(8).
    7. Section I(k).
    Additionally, the Applicant asserts that the phrase ``or other 
services'' in Section I(k) requiring CSAG and the Credit Suisse 
Affiliated QPAMs to agree to certain undertakings in their agreements 
with their ERISA-covered plan and IRA clients, may be overbroad, 
especially as it applies to one of the Credit Suisse Affiliated QPAMs 
that is a dual-registrant (i.e., both broker-dealer and investment 
adviser). Therefore, the Applicant requests that the phrase ``or other 
services'' in Section I(k) be changed to read, ``or other discretionary 
fiduciary services.'' The Department concurs with the Applicant's 
request to clarify the scope of Section I(k), and has altered Section 
I(k) accordingly.
    The Applicant also notes that, with respect to the undertakings 
required by Section I(k), the Credit Suisse Affiliated QPAMs do not 
have the authority to unilaterally modify their contracts with ERISA-
covered plans and IRAs, and that getting bilateral approval of such a 
change with each client would be time-consuming. Therefore, the 
Applicant proposes that the Department impose a unilateral requirement 
on the Credit Suisse Affiliated QPAMs which would effectively 
incorporate the same protections for ERISA-covered plans and IRAs. The 
Department concurs that this is a sensible modification that will not 
reduce the protections for ERISA-covered plans and IRAs, and, 
accordingly, the exemption has been modified to require that the Credit 
Suisse Affiliated QPAMs send notice to their ERISA-covered plan and IRA 
clients of this unilateral requirement within six months of the date of 
a final granted exemption in the Federal Register. Additionally, the 
Department has added language that clearly makes the undertakings 
required by Section I(k) effective immediately upon publication of this 
final granted temporary exemption, although the Credit Suisse 
Affiliated QPAMs have six months to complete the notification.
    The Applicant requests that ``the Code'' be referenced in 
appropriate places in Section I(k) to clarify the scope of the 
applicability to IRAs. The Department concurs and has modified the 
language in Section I(k) where appropriate.
    The Applicant also requests clarification whether, under Section 
I(k), the Credit Suisse Affiliated QPAMS are prohibited from being 
indemnified for prohibited transactions that are not caused by the 
Credit Suisse Affiliated QPAMs (i.e., where the plan fiduciary or a 
service provider selected by the plan fiduciary and unrelated to CSAG 
or a Credit Suisse Affiliated QPAM causes a prohibited transaction or 
error). The Department confirms that the Credit Suisse Affiliated QPAMs 
are not prohibited from being indemnified in such circumstances, and 
the Department has added the phrase ``except for violations or 
prohibited transactions caused by an error, misrepresentation, or 
misconduct of a plan fiduciary or other party hired by the plan 
fiduciary who is independent of Credit Suisse AG'' to clause (3) of 
Section I(k).
    Finally, the Applicant requests a modification to the requirement 
in Section I(k) that provides that any agreements between CSAG, Credit 
Suisse Affiliated QPAMs, and their ERISA-covered plan and IRA clients 
allow for such clients to terminate or withdraw from their arrangements 
with CSAG or the Credit Suisse Affiliated QPAMs without any fees, 
penalties or other charges. The Applicant requests that such 
requirement only apply to separately managed accounts and only with 
respect to undisclosed or unreasonable fees, penalties, or charges for 
such termination or withdrawal. The Applicant represents that all such 
agreements have reasonable termination provisions, such as 30 days' 
advance notice, and in the case of separately managed accounts, a plan 
fiduciary can remove assets from an asset manager's control 
immediately, in any event. However, the Applicant informs the 
Department that in a pooled fund, depending on the investment strategy, 
a longer withdrawal period may be required to protect other investors 
or address limited liquidity in fund assets, which has been fully 
disclosed and agreed to by plan fiduciaries. Additionally, the 
Applicant adds that there may be redemption fees in a pooled fund, 
which are directed at preventing market timing in order to protect 
other investors in the fund. The Department notes that the language in 
Section I(k) was not intended to prevent reasonable fees which are 
intended to protect other investors or prevent market abuses, but 
rather to cover fees or charges that could otherwise discourage a 
client from moving to a new asset manager. Therefore, the Department 
has added clarifying language at the end of clause (5) of Section I(k) 
that excepts ``reasonable fees, appropriately disclosed in advance, 
that are specifically designed to prevent generally recognized abusive 
investment practices or specifically designed to ensure equitable 
treatment

[[Page 68723]]

of all investors in a pooled fund in the event such withdrawal or 
termination may have adverse consequences for all other investors, 
provided that such fees are applied consistently and in like manner to 
all such investors.''
    8. Section I(m).
    The Applicant requests confirmation that, in accordance with 
Section I(m), notice to interested persons is required to be sent only 
to ERISA-covered plans and IRAs with respect to which PTE 84-14 may be 
used and that were clients as of the date the proposal was published in 
the Federal Register. The Department confirms this understanding.
    9. Section I(n).
    The Applicant asks for clarification in three areas with respect to 
Section I(n). First, the Applicant requests clarification that a Credit 
Suisse Affiliated QPAM will not fail to meet the terms of the exemption 
solely because a different Credit Suisse Affiliated QPAM or a Credit 
Suisse Related QPAM fails to satisfy a condition for relief under this 
exemption. The Department clarifies that a Credit Suisse Affiliated 
QPAM will not fail to meet the terms of the exemption if a Credit 
Suisse Related QPAM fails to satisfy a condition for relief. However, 
as originally drafted, if one Credit Suisse Affiliated QPAM failed to 
meet the terms of the exemption, all other Credit Suisse Affiliated 
QPAMs could be disqualified. After further consideration, the 
Department decided that it is not appropriate to jeopardize the 
transactions of ERISA-covered plans and IRAs that have no relationship 
to the particular Credit Suisse Affiliated QPAM that fails to meet a 
condition. Therefore, the sentence in Section I(n) that reads, ``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'' has 
been modified to read, ``A Credit Suisse Affiliated QPAM will not fail 
to meet the terms of this exemption solely because a Credit Suisse 
Related QPAM or a different Credit Suisse Affiliated QPAM fails to 
satisfy a condition for relief under this exemption.''
    Second, the Applicant requests clarification that if a Credit 
Suisse Affiliated QPAM fails to meet the conditions of the exemption 
for a particular transaction or a particular ERISA-covered plan or IRA, 
such failure only precludes the Credit Suisse Affiliated QPAM's 
reliance on the exemption for such transaction or ERISA-covered plan or 
IRA for the period of non-compliance. The Department confirms the 
Applicant's understanding and clarifies that, to the extent that the 
conditions of PTE 84-14 are incorporated by reference into this 
exemption, failure to satisfy a condition of PTE 84-14 will have the 
same effect as it would if the Applicant was operating only under PTE 
84-14. That is, the relief will not be available for a particular 
transaction, as opposed to an absolute bar to use of the exemptive 
relief for all future transactions. However, the conditions that are 
unique to this individual exemption must be met in their entirety in 
order for Credit Suisse Affiliated QPAMs or Credit Suisse Related QPAMs 
to remain eligible for the relief in this exemption.
    Third, the Applicant requests clarification that the failure of a 
Credit Suisse Related QPAM or CSAG to satisfy a condition of this 
exemption will not cause a Credit Suisse Related QPAM to lose the 
relief herein. The Department clarifies that a Credit Suisse Related 
QPAM will not lose the relief in this exemption due to any failures of 
another Credit Suisse Related QPAM or CSAG. However, if CSAG fails to 
review the Audit Reports, as required by Subsection I(i)(7), CSAG will 
jeopardize the availability of relief under this individual exemption 
for all of the Credit Suisse Affiliated QPAMs.

Conclusion

    After giving full consideration to the entire record, including the 
written comments, subject to the Department's responses thereto, the 
Department has decided to grant a temporary exemption, as modified. The 
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 and expire 
one year from the date of publication in the Federal Register.
    This exemption is granted on a temporary basis to accommodate 
requests for a public hearing on whether to grant longer term relief 
without risking the immediate loss of exemptive relief upon entry of a 
judgment of conviction. This exemption will prevent disruptions in 
retirement plan investments while a final determination is made on the 
Credit Suisse Affiliated QPAM's and the Credit Suisse Related QPAM's 
ability to serve retirement plan clients under PTE 84-14. At the same 
time that the Department is issuing this exemption, it is also 
publishing a proposed exemption for longer term relief and a notice of 
a public hearing on whether to grant such longer term relief to the 
Credit Suisse Affiliated QPAMs and the Credit Suisse Related QPAMs.
    The complete application file is available for public inspection in 
the Public Disclosure Room of the Employee Benefits Security 
Administration, Room N-1515, U.S. Department of Labor, 200 Constitution 
Avenue NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the proposed exemption published in the Federal Register on September 
3, 2014 at 79 FR 52365.

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 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) In accordance with section 408(a) of ERISA and section 
4975(c)(2) of the Code, the Department makes the following 
determinations: The exemption is administratively feasible, the 
exemption is in the interests of the plan and of its participants and 
beneficiaries, and the exemption is protective of the rights of 
participants and beneficiaries of the plan;
    (3) The exemption is supplemental to, and not in derogation of, any 
other provisions of ERISA, 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 availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately

[[Page 68724]]

describe all material terms of the transaction which is the subject of 
the exemption.
    Accordingly, the following exemption is granted under the authority 
of section 408(a) of ERISA 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):

Exemption \3\
---------------------------------------------------------------------------

    \3\ For purposes of this exemption, references to section 406 of 
ERISA should be read to refer as well to the corresponding 
provisions of section 4975 of the Code.
---------------------------------------------------------------------------

Section I: Covered Transactions

    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 \4\ notwithstanding 
the Conviction (as defined in Section II(c)),\5\ provided the following 
conditions are satisfied:
---------------------------------------------------------------------------

    \4\ 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).
    \5\ 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.
---------------------------------------------------------------------------

    (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, agents other than Credit 
Suisse AG, and employees 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 subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or 
section 4975 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) A Credit Suisse Affiliated QPAM will not use its authority or 
influence to direct an ``investment fund'' (as defined in Section VI(b) 
of PTE 84-14) that is subject to ERISA and managed by such Credit 
Suisse Affiliated QPAM to enter into any transaction with Credit Suisse 
AG or engage Credit Suisse AG to provide additional services to such 
investment fund, for a direct or indirect fee borne by such 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) Each Credit Suisse Affiliated QPAM will ensure that none of its 
employees or agents, if any, that were 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) 
subject to ERISA and managed by such Credit Suisse Affiliated QPAMs;
    (h)(1) Each Credit Suisse Affiliated QPAM immediately develops, 
implements, maintains, and follows written policies (the Policies) 
requiring and reasonably designed to ensure that: (i) The asset 
management decisions of the Credit Suisse Affiliated QPAMs are 
conducted independently of Credit Suisse AG's management and business 
activities; (ii) the Credit Suisse Affiliated QPAM fully complies with 
ERISA's fiduciary duties and ERISA and the Code's prohibited 
transaction provisions and does not knowingly participate in any 
violations of these duties and provisions with respect to ERISA-covered 
plans and IRAs; (iii) the Credit Suisse Affiliated QPAM does not 
knowingly participate in any other person's violation of ERISA or the 
Code with respect to ERISA-covered plans and IRAs; (iv) any filings or 
statements made by the Credit Suisse Affiliated QPAM to regulators, 
including but not limited to, the Department of Labor, the Department 
of the Treasury, the Department of Justice, and the Pension Benefit 
Guaranty Corporation, on behalf of ERISA-covered plans or IRAs are 
materially accurate and complete, to the best of such QPAM's knowledge 
at that time; (v) the Credit Suisse Affiliated QPAM does not make 
material misrepresentations or omit material information in its 
communications with such regulators with respect to ERISA-covered plans 
or IRAs, or make material misrepresentations or omit material 
information in its communications with ERISA-covered plan and IRA 
clients; (vi) the Credit Suisse Affiliated QPAM complies with the terms 
of this exemption; and (vii) any violations of or failure to comply 
with items (ii) through (vi) are corrected promptly upon discovery and 
any such violations or compliance failures not promptly corrected are 
reported, upon discovering the failure to promptly correct, in writing 
to appropriate corporate officers, the head of Compliance and the 
General Counsel of the relevant Credit Suisse Affiliated QPAM, the 
independent auditor responsible for reviewing compliance with the 
Policies, and a fiduciary of any affected ERISA-covered plan or IRA 
where such fiduciary is independent of Credit Suisse AG; however, with 
respect to any ERISA-covered plan or IRA sponsored by an ``affiliate'' 
(as defined in Section VI(d) of PTE 84-14) of Credit Suisse AG or 
beneficially owned by an employee of Credit Suisse AG or its 
affiliates, such fiduciary does not need to be independent of Credit 
Suisse AG; Credit Suisse Affiliated QPAMs will not be treated as having 
failed to develop, implement, maintain, or follow the Policies, 
provided that they correct any instances of noncompliance promptly when 
discovered or when they reasonably should have known of the 
noncompliance (whichever is earlier), and provided that they adhere to 
the reporting requirements set forth in this item (vii);
    (2) Each Credit Suisse Affiliated QPAM immediately develops and 
implements a program of training (the Training), conducted at least 
annually for relevant Credit Suisse Affiliated QPAM asset management, 
legal, compliance, and internal audit personnel; the Training shall be 
set forth in the Policies and, at a minimum, covers the Policies, ERISA 
and Code compliance (including applicable fiduciary duties and the 
prohibited transaction provisions) and ethical conduct, the 
consequences for not complying with the conditions of this exemption, 
(including the loss of the exemptive relief provided herein), and 
prompt reporting of wrongdoing;
    (i)(1) Each Credit Suisse Affiliated QPAM submits to an audit by an 
independent auditor, who has been prudently selected and who has 
appropriate technical training and proficiency with ERISA to evaluate 
the adequacy of, and compliance with, the Policies and Training 
required in paragraph (h); the audit requirement must be incorporated 
in the Policies and the first of the audits must be completed no later 
than ten (10) months after the date of Conviction. The audit must cover 
the first six-month period that begins on the date of Conviction; under 
the terms of the Policies, the second audit must cover the following 
corresponding six-month period and be

[[Page 68725]]

completed no later than four (4) months after the period to which the 
audit applies;
    (2) The auditor's engagement shall specifically require the auditor 
to determine whether each Credit Suisse Affiliated QPAM has developed, 
implemented, maintained, and followed Policies in accordance with the 
conditions of this exemption and developed and implemented the 
Training, as required herein;
    (3) The auditor's engagement shall specifically require the auditor 
to test 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 QPAM 
to which the audit applies 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 the respective Credit Suisse Affiliated QPAM's 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 of the respective 
Credit Suisse Affiliated QPAM shall be promptly addressed by such 
Credit Suisse Affiliated QPAM, and any actions taken by such Credit 
Suisse Affiliated QPAM to address such recommendations shall be 
included in an addendum to the Audit Report. Any determinations by the 
auditor that the respective Credit Suisse Affiliated QPAM has 
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 the respective Credit Suisse 
Affiliated QPAM 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. Upon request, the auditor shall provide OED 
with all of the relevant workpapers reflecting any instances of 
noncompliance. The workpapers shall include an explanation of any 
corrective or remedial actions taken by the respective Credit Suisse 
Affiliated QPAM;
    (6) With respect to each Audit Report, an executive officer of the 
Credit Suisse Affiliated QPAM to which the Audit Report applies 
certifies in writing, under penalty of perjury, that the officer has 
reviewed the Audit Report and this exemption; addressed, corrected, or 
remediated 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) An executive officer of Credit Suisse AG reviews the Audit 
Report for each Credit Suisse Affiliated QPAM and certifies in writing, 
under penalty of perjury, that such officer has reviewed each Audit 
Report;
    (8) Each Credit Suisse Affiliated QPAM provides its certified Audit 
Report to the Department's Office of Exemption Determinations (OED), 
Room N-5700, 200 Constitution Avenue NW., Washington, DC 20210, no 
later than 30 days following its completion, and each Credit Suisse 
Affiliated QPAM makes its Audit Report unconditionally available for 
examination by any duly authorized employee or representative of the 
Department, other relevant regulators, and any fiduciary of an ERISA-
covered plan or IRA, the assets of which are managed by such 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) Effective from the date of publication of this exemption in the 
Federal Register, with respect to each ERISA-covered plan or IRA for 
which a Credit Suisse Affiliated QPAM provides asset management or 
other discretionary fiduciary services, each Credit Suisse Affiliated 
QPAM agrees: (1) To comply with ERISA and the Code, as applicable to 
the particular ERISA-covered plan or IRA, and refrain from engaging in 
prohibited transactions; (2) not to waive, limit, or qualify the 
liability of the Credit Suisse Affiliated QPAM for violating ERISA or 
the Code or engaging in prohibited transactions; (3) not to require the 
ERISA-covered plan or IRA (or sponsor of such ERISA-covered plan or 
beneficial owner of such IRA) to indemnify the Credit Suisse Affiliated 
QPAM for violating ERISA or engaging in prohibited transactions, except 
for violations or prohibited transactions caused by an error, 
misrepresentation, or misconduct of a plan fiduciary or other party 
hired by the plan fiduciary who is independent of Credit Suisse AG; (4) 
not to restrict the ability of such ERISA-covered plan or IRA to 
terminate or withdraw from its arrangement with the Credit Suisse 
Affiliated QPAM; and (5) not to impose any fees, penalties, or charges 
for such termination or withdrawal with the exception of reasonable 
fees, appropriately disclosed in advance, that are specifically 
designed to prevent generally recognized abusive investment practices 
or specifically designed to ensure equitable treatment of all investors 
in a pooled fund in the event such withdrawal or termination may have 
adverse consequences for all other investors, provided that such fees 
are applied consistently and in like manner to all such investors. 
Within six (6) months of the date of publication of this exemption in 
the Federal Register, each Credit Suisse Affiliated QPAM will provide a 
notice to such effect to each ERISA-covered plan or IRA for which a 
Credit Suisse Affiliated QPAM provides asset management or other 
discretionary fiduciary services;
    (l) Effective from the date of publication of this exemption in the 
Federal Register, each Credit Suisse Affiliated QPAM will maintain 
records necessary to demonstrate that the conditions of this exemption 
have been met for six (6) years following the date of any transaction 
for which such Credit Suisse Affiliated QPAM relies 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, received a notice of the proposed exemption along with a 
separate summary describing the facts that led to the Conviction, which 
had 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 exemption solely because a Credit Suisse Related QPAM or a 
different Credit Suisse Affiliated 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 exemption solely because Credit

[[Page 68726]]

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) \6\ 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 the parent entity, Credit Suisse AG.
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    \6\ In general terms, a QPAM is an independent fiduciary that is 
a bank, savings and loan association, insurance company, or 
investment adviser that meets certain equity or net worth 
requirements and other licensure requirements and that has 
acknowledged in a written management agreement that it is a 
fiduciary with respect to each plan that has retained the QPAM.
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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.
    Effective Date: This 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 and expire one year from the date of publication in the 
Federal Register.

    Signed at Washington, DC, this 12th day of November, 2014.
Lyssa Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2014-27172 Filed 11-17-14; 8:45 am]
BILLING CODE 4510-29-P