[Federal Register Volume 81, Number 209 (Friday, October 28, 2016)]
[Notices]
[Pages 75147-75157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26089]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Exemptions From Certain Prohibited Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). 
This notice includes the following: 2016-10, Royal Bank of Canada, D-
11868; 2016-11, Northern Trust Corporation, D-11875; and, 2016-12, 
Extension of PTE 2015-15 involving Deutsche Bank AG, D-11879.

SUPPLEMENTARY INFORMATION: A notice was published in the Federal 
Register of the pendency before the Department of a proposal to grant 
such exemption. The notice set forth a summary of facts and 
representations contained in the application for exemption and referred 
interested persons to the application for a complete statement of the 
facts and representations. The application has been available for 
public inspection at the Department in Washington, DC. The notice also 
invited interested persons to submit comments on the requested 
exemption to the Department. In addition the notice stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicant has represented that it has 
complied with the requirements of the notification to interested 
persons. No requests for a hearing were received by the Department. 
Public comments were received by the Department as described in the 
granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, effective December 31, 
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type proposed to the Secretary of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR part 
2570, subpart B (76 FR 66637, 66644, October 27, 2011) \1\ and based 
upon the entire record, the Department makes the following findings:
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    \1\ The Department has considered exemption applications 
received prior to December 27, 2011 under the exemption procedures 
set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 
10, 1990).
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    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Royal Bank of Canada (Together With Its Current and Future Affiliates, 
RBC or the Applicant), Located in Toronto, Ontario, Canada

[Prohibited Transaction Exemption 2016-10; Exemption Application No. D-
11868]

Temporary Exemption

Section I--Covered Transactions
    Certain entities with specified relationships to Royal Bank of 
Canada Trust Company (Bahamas) Limited (RBCTC Bahamas) (hereinafter, 
the RBC QPAMs, as further defined in Section II(b)) will not be 
precluded from relying on the exemptive relief provided by Prohibited 
Transaction Exemption (PTE) 84-14,\2\ notwithstanding a judgment of 
conviction against RBCTC Bahamas for aiding and abetting tax fraud, to 
be entered in France in the District Court of Paris (the Conviction, as 
further defined in Section II(a)),\3\ for a period of up to twelve 
months beginning on the date of the Conviction (the Conviction Date), 
provided that the following conditions are satisfied:
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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).
    \3\ Section I(g) of PTE 84-14 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 
aiding and abetting tax evasion.
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    (a) The RBC QPAMs (including their officers, directors, agents 
other than RBC, and employees of such RBC QPAMs) did not know of, have 
reason to know of, or participate in the criminal conduct of RBCTC 
Bahamas that is the subject of the Conviction (for purposes of this 
paragraph (a), ``participate in'' includes the knowing or tacit 
approval of the misconduct underlying the Conviction);
    (b) The RBC QPAMs (including their officers, directors, agents 
other than RBC, and employees of such RBC

[[Page 75148]]

QPAMs) did not receive direct compensation, or knowingly receive 
indirect compensation, in connection with the criminal conduct that is 
the subject of the Conviction;
    (c) The RBC QPAMs will not employ or knowingly engage any of the 
individuals that participated in the criminal conduct that is the 
subject of the Conviction (for purposes of this paragraph (c), 
``participated in'' includes the knowing or tacit approval of the 
misconduct underlying the Conviction);
    (d) An RBC 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 or the Code and managed by such RBC QPAM, to enter 
into any transaction with RBCTC Bahamas or engage RBCTC Bahamas to 
provide any service to such investment fund, for a direct or indirect 
fee borne by such investment fund, regardless of whether such 
transaction or service may otherwise be within the scope of relief 
provided by an administrative or statutory exemption;
    (e) Any failure of the RBC QPAMs to satisfy Section I(g) of PTE 84-
14 arose solely from the Conviction;
    (f) The criminal conduct 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);
    (g) RBCTC Bahamas has not provided nor will provide discretionary 
asset management services to ERISA-covered plans or IRAs, nor will it 
otherwise act as a fiduciary with respect to ERISA-covered plan and IRA 
assets;
    (h)(1) Within four months of the date of the Conviction, each RBC 
QPAM must develop, implement, maintain, and follow written policies 
(the Policies) requiring and reasonably designed to ensure that:
    (i) The asset management decisions of the RBC QPAM are conducted 
independently of the management and business activities of RBCTC 
Bahamas;
    (ii) The RBC QPAM fully complies with ERISA's fiduciary duties and 
with 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 RBC 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 RBC 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 RBC 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 RBC QPAM complies with the terms of this temporary 
exemption; and
    (vii) Any violation of, or failure to comply with, an item in 
subparagraph (ii) through (vi), is corrected promptly upon discovery, 
and any such violation or compliance failure not promptly corrected is 
reported, upon discovering the failure to promptly correct, in writing, 
to appropriate corporate officers, the head of compliance and the 
General Counsel (or their functional equivalent) of the relevant RBC 
QPAM, and an appropriate fiduciary of any affected ERISA-covered plan 
or IRA where such fiduciary is independent of RBC; 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 RBC or beneficially owned 
by an employee of RBC or its affiliates, such fiduciary does not need 
to be independent of RBC. An RBC QPAM will not be treated as having 
failed to develop, implement, maintain, or follow the Policies, 
provided that it corrects any instance of noncompliance promptly when 
discovered or when it reasonably should have known of the noncompliance 
(whichever is earlier), and provided that it adheres to the reporting 
requirements set forth in this subparagraph (vii);
    (2) Within four months of the date of the Conviction, each RBC QPAM 
must develop and implement a program of training (the Training), 
conducted at least annually, for all relevant RBC QPAM asset/portfolio 
management, trading, legal, compliance, and internal audit personnel. 
The Training must be set forth in the Policies and at a minimum, cover 
the Policies, ERISA and Code compliance (including applicable fiduciary 
duties and the prohibited transaction provisions), ethical conduct, the 
consequences for not complying with the conditions of this temporary 
exemption (including any loss of exemptive relief provided herein), and 
prompt reporting of wrongdoing;
    (i) Effective as of the effective date of this temporary exemption, 
with respect to any arrangement, agreement, or contract between an RBC 
QPAM and an ERISA-covered plan or IRA for which an RBC QPAM provides 
asset management or other discretionary fiduciary services, each RBC 
QPAM agrees:
    (1) To comply with ERISA and the Code, as applicable with respect 
to such ERISA-covered plan or IRA; to refrain from engaging in 
prohibited transactions that are not otherwise exempt (and to promptly 
correct any inadvertent prohibited transactions); and to comply with 
the standards of prudence and loyalty set forth in section 404 of ERISA 
with respect to each such ERISA-covered plan and IRA;
    (2) Not to require (or otherwise cause) the ERISA-covered plan or 
IRA to waive, limit, or qualify the liability of the RBC 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 RBC 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 RBC;
    (4) Not to restrict the ability of such ERISA-covered plan or IRA 
to terminate or withdraw from its arrangement with the RBC QPAM 
(including any investment in a separately managed account or pooled 
fund subject to ERISA and managed by such QPAM), with the exception of 
reasonable restrictions, appropriately disclosed in advance, that are 
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 as a result of an actual 
lack of liquidity of the underlying assets, provided that such 
restrictions are applied consistently and in like manner to all such 
investors;
    (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

[[Page 75149]]

investors, provided that such fees are applied consistently and in like 
manner to all such investors;
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the RBC QPAM for a violation of such agreement's 
terms, except for liability caused by an error, misrepresentation, or 
misconduct of a plan fiduciary or other party hired by the plan 
fiduciary who is independent of RBC; and
    (7) To indemnify and hold harmless the ERISA-covered plan or IRA 
for any damages resulting from a violation of applicable laws, a breach 
of contract, or any claim arising out of the failure of such RBC QPAM 
to qualify for the exemptive relief provided by PTE 84-14 as a result 
of a violation of Section I(g) of PTE 84-14 other than the Conviction.
    Within six (6) months of the date of the Conviction, each RBC QPAM 
will: Provide a notice of its obligations under this Section I(i) to 
each ERISA-covered plan and IRA for which an RBC QPAM provides asset 
management or other discretionary fiduciary services;
    (j) The RBC QPAMs comply with each condition of PTE 84-14, as 
amended, with the sole exceptions of the violations of Section I(g) of 
PTE 84-14 that are attributable to the Conviction;
    (k) Each RBC QPAM will maintain records necessary to demonstrate 
that the conditions of this temporary exemption have been met, for six 
(6) years following the date of any transaction for which such RBC QPAM 
relies upon the relief in the temporary exemption;
    (l) During the effective period of this temporary exemption, RBC: 
(1) Immediately discloses to the Department any Deferred Prosecution 
Agreement (a DPA) or Non-Prosecution Agreement (an NPA) that RBC or an 
affiliate enters into with the U.S Department of Justice, to the extent 
such DPA or NPA involves conduct described in Section I(g) of PTE 84-14 
or section 411 of ERISA; and (2) immediately provides the Department 
any information requested by the Department, as permitted by law, 
regarding the agreement and/or the conduct and allegations that led to 
the agreements; and
    (m) An RBC QPAM will not fail to meet the terms of this temporary 
exemption, solely because a different RBC QPAM fails to satisfy a 
condition for relief under this temporary exemption, described in 
Sections I(c), (d), (h), (i), (j), and (k).
Section II--Definitions
    (a) The term ``Conviction'' means the potential judgment of 
conviction against RBCTC Bahamas for aiding and abetting tax fraud to 
be entered in France in the District Court of Paris, French Special 
Prosecutor No. 1120392066, French Investigative Judge No. JIRSIF/11/12;
    (b) The term ``RBC QPAM'' means a ``qualified professional asset 
manager'' (as defined in section VI(a) \4\ of PTE 84-14) that relies on 
the relief provided by PTE 84-14 and with respect to which RBCTC 
Bahamas is a current or future ``affiliate'' (as defined in section 
VI(d) of PTE 84-14);
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    \4\ 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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    (c) The term ``RBCTC Bahamas'' means Royal Bank of Canada Trust 
Company (Bahamas) Limited, a Bahamian ``affiliate'' of RBC (as defined 
in section VI(c) of PTE 84-14);
    (d) The terms ``ERISA-covered plan'' and ``IRA'' mean, 
respectively, a plan subject to Part 4 of Title I of ERISA and a plan 
subject to section 4975 of the Code; and
    (e) The term ``RBC'' means Royal Bank of Canada, together with its 
current and future affiliates.
    Effective Date: This temporary exemption is effective for the 
period beginning on the Conviction Date until the earlier of: The date 
that is twelve months following the Conviction Date; or the effective 
date of a final agency action made by the Department in connection with 
an application for long-term exemptive relief for the covered 
transactions described herein.

Supplementary Information

    On October 12, 2016, the Department of Labor (the Department) 
published a notice of proposed temporary exemption in the Federal 
Register at 81 FR 70562, proposing that certain entities with specified 
relationships to RBCTC Bahamas could continue to rely upon the relief 
provided by 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 RBCTC Bahamas for aiding and abetting 
tax fraud, to be entered in France in the District Court of Paris (the 
Conviction, as further defined in Section II(a)),\5\ for a period of up 
to twelve months beginning on the date of the Conviction.
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    \5\ Section I(g) of PTE 84-14 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 
aiding and abetting tax evasion.
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    The Department is today granting this temporary exemption in order 
to protect ERISA-covered plans and IRAs from certain costs and/or 
investment losses that may arise to the extent entities with a 
corporate relationship to RBCTC Bahamas lose their ability to rely on 
PTE 84-14 as of the Conviction Date, as described in the proposed 
temporary exemption. The Department is considering proposing longer-
term relief for RBC QPAMs to rely on PTE 84-14 notwithstanding the 
Conviction, in Application No. D-11912. The relief in this temporary 
exemption provides the Department more time to consider whether longer-
term relief is warranted.
    No relief from a violation of any other law is provided by this 
temporary exemption, including any criminal conviction described in the 
proposed temporary exemption. Furthermore, the Department cautions that 
the relief in this temporary exemption will terminate immediately if, 
among other things, an entity within the RBC corporate structure is 
convicted of a crime described in Section I(g) of PTE 84-14 (other than 
the Conviction) during the effective period of the temporary exemption. 
While such an entity could apply for a new exemption in that 
circumstance, the Department would not be obligated to grant the 
exemption. The terms of this temporary exemption have been specifically 
designed to permit plans to terminate their relationships in an orderly 
and cost effective fashion in the event of an additional conviction or 
a determination that it is otherwise prudent for a plan to terminate 
its relationship with an entity covered by the temporary exemption.

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 temporary exemption, published on October 12, 2016. 
All comments and requests for hearing were due by October 19, 2016. 
During the comment period, the Department received written comments 
from RBC and from The Clearing House. Although the Department has, for 
the most part, revised the proposed temporary exemption in the manner 
requested by RBC, the Department cautions that it may decline to 
include those revisions in any decision to grant more permanent relief.

[[Page 75150]]

RBC's Comment
    RBC seeks several revisions to the conditions set forth in the 
proposed temporary exemption. First, RBC states that Section I(f) of 
the proposed temporary exemption may be unintentionally broad. As 
proposed, that condition states: ``No entities holding assets that 
constitute 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) were 
involved in the criminal conduct that is the subject of the 
Conviction.'' RBC seeks to revise the condition to read: ``The criminal 
conduct 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).'' The Department has decided to revise the condition in the 
manner requested by RBC.
    Next, RBC notes that Section I(h) of the proposed temporary 
exemption requires that each RBC QPAM ``immediately:'' Develop, 
implement, maintain and follow certain written policies; and develop 
and implement a program of training. RBC seeks a period of up to four 
months following the date of its impending conviction to meet these 
requirements. The Department agrees that four months is a reasonable 
period of time with which to comply with the requirement of Section 
I(h) and has revised the condition accordingly.
    RBC seeks another change to Section I(h)(1)(i), through the 
deletion of the bolded language, ``The asset management decisions of 
the RBC QPAM are conducted independently of the management and business 
activities of RBC, including RBCTC Bahamas. RBC represents that it has 
neither committed, nor been accused of committing, a crime. The 
Department has revised the condition accordingly.
    RBC also seeks to change the start date of the notice requirement 
set forth in Section I(i), such that each RBC must provide such notice 
within six months of the Conviction Date, rather than within six months 
of the date of publication of this granted temporary exemption. The 
Department concurs with this request, and has revised the temporary 
exemption accordingly.
    RBC seeks deletion of the requirement in Section I(i) that requires 
each RBC QPAM to separately warrant in writing its obligations to 
ERISA-Covered Plans and IRAs. While the Department has made such 
revision for purposes of the limited relief herein, the Department re-
emphasizes, as noted above, that it may decide to propose more 
permanent relief that does not contain this revision.
    RBC seeks deletion of requirement set forth in Section I(i)(6) 
that, each RBC QPAM agrees: ``Not to include exculpatory provisions 
disclaiming or otherwise limiting liability of the RBC QPAM for a 
violation of such agreement's terms.'' The Department declines to make 
such deletion, but has revised the condition to read: ``Not to include 
exculpatory provisions disclaiming or otherwise limiting liability of 
the RBC QPAM for a violation of such agreement's terms, except for 
liability caused by an error, misrepresentation, or misconduct of a 
plan fiduciary or other party hired by the plan fiduciary who is 
independent of RBC.''
    RBC notes that, in addition to the asset managers identified in the 
proposed exemption, the following managers are owned in whole or in 
part by RBC: BlueBay Asset Management USA, LLC; City National Bank; 
City National Rochdale, LLC; City National Securities, Inc.; Convergent 
Wealth Advisors, LLC; LMCG Investments, LLC; Mid-Continent Capital, 
L.L.C.; and Symphonic Financial Advisors LLC be added to the list of 
primary U.S. bank and U.S. registered adviser affiliates in which RBC 
owns a significant interest. Three additional managers are owned in 
part but not currently controlled by RBC: Matthews International 
Capital Management, LLC; SKBA Capital Management, LLC; and 
O'Shaughnessy Asset Management, LLC. Further, RBC believes that 
Footnote 16 of the proposed exemption implies that the Hong Kong 
investigation is connected to RBCTC Bahamas' alleged conduct that is 
the subject of the French prosecution described in Section II(a) of the 
proposal. According to RBC, the Hong Kong investigation is entirely 
unrelated to the matter that is the subject of the French prosecution 
described in Section II(a).
    Condition (l) set forth in the proposed exemption provided that 
during the effective period of this temporary exemption, neither RBC 
nor any affiliate enters into a Deferred Prosecution Agreement (a DPA) 
or a Non-Prosecution Agreement (an NPA) with the U.S Department of 
Justice, in connection with conduct described in Section I(g) of PTE 
84-14 or section 411 of ERISA. RBC sought to reserve its right to 
comment on this condition in connection with the Department's 
consideration of more permanent relief. The Department has nonetheless 
revised condition (l) such that it now reads: During the effective 
period of this temporary exemption, RBC: (1) Immediately discloses to 
the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA) that RBC or an affiliate enters into 
with the U.S Department of Justice, to the extent such DPA or NPA 
involves conduct described in Section I(g) of PTE 84-14 or section 411 
of ERISA; and (2) immediately provides the Department any information 
requested by the Department, as permitted by law, regarding the 
agreement and/or the conduct and allegations that led to the 
agreements.
The Clearing House Comment
    The Clearing House Association L.L.C. (TCH) submitted a comment 
that expresses concern regarding condition (l) in Section I of the 
proposed temporary exemption. As noted above, the Department has 
revised that condition. The Department will continue to consider TCH's 
comment in connection with its consideration of more permanent relief 
for RBC.
    After giving full consideration to the record, the Department has 
decided to grant the temporary exemption, as described above. The 
complete application file (Application No. D-11868) 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 temporary exemption, 
refer to the notice of proposed temporary exemption published on 
October 12, 2016 at 81 FR 70562.

FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the 
Department, telephone (202) 693-8565. (This is not a toll-free number.)

Northern Trust Corporation (Together With Its Current and Future 
Affiliates, Northern or the Applicant), Located in Chicago, Illinois

[Prohibited Transaction Exemption 2016-11; Exemption Application No. D-
11875]

Temporary Exemption

Section I--Covered Transactions
    Certain entities with specified relationships to Northern Trust 
Fiduciary Services (Guernsey) ltd. (NTFS) (hereinafter, the Northern 
QPAMs, as further defined in Section II(b)) will not be precluded from 
relying on the exemptive relief provided by Prohibited Transaction 
Exemption 84-

[[Page 75151]]

14 (PTE) 84-14,\6\ notwithstanding a judgment of conviction against 
NTFS for aiding and abetting tax fraud, to be entered in France in the 
District Court of Paris (the Conviction, as further defined in Section 
II(a)),\7\ for a period of up to twelve months beginning on the date of 
the Conviction (the Conviction Date), provided that the following 
conditions are satisfied:
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    \6\ 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).
    \7\ Section I(g) of PTE 84-14 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 
aiding and abetting tax evasion.
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    (a) The Northern QPAMs (including their officers, directors, agents 
other than Northern, and employees of such Northern QPAMs) did not know 
of, have reason to know of, or participate in the criminal conduct of 
NTFS that is the subject of the Conviction (for purposes of this 
paragraph (a), ``participate in'' includes the knowing or tacit 
approval of the misconduct underlying the Conviction);
    (b) The Northern QPAMs (including their officers, directors, agents 
other than Northern, and employees of such Northern QPAMs) did not 
receive direct compensation, or knowingly receive indirect 
compensation, in connection with the criminal conduct that is the 
subject of the Conviction;
    (c) The Northern QPAMs will not employ or knowingly engage any of 
the individuals that participated in the criminal conduct that is the 
subject of the Conviction (for purposes of this paragraph (c), 
``participated in'' includes the knowing or tacit approval of the 
misconduct underlying the Conviction);
    (d) A Northern 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 or the Code and managed by such Northern 
QPAM, to enter into any transaction with NTFS or engage NTFS to provide 
any service to such investment fund, for a direct or indirect fee borne 
by such investment fund, regardless of whether such transaction or 
service may otherwise be within the scope of relief provided by an 
administrative or statutory exemption;
    (e) Any failure of the Northern QPAMs to satisfy Section I(g) of 
PTE 84-14 arose solely from the Conviction;
    (f) No entities holding assets that constitute 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) were involved in the criminal conduct 
that is the subject of the Conviction;
    (g) NTFS has not provided nor will provide discretionary asset 
management services to ERISA-covered plans or IRAs, nor will it 
otherwise act as a fiduciary with respect to ERISA-covered plan and IRA 
assets;
    (h)(1) Within four months of the date of the Conviction, each 
Northern QPAM must develop, implement, maintain, and follow written 
policies (the Policies) requiring and reasonably designed to ensure 
that:
    (i) The asset management decisions of the Northern QPAM are 
conducted independently of the management and business activities of 
NTFS;
    (ii) The Northern QPAM fully complies with ERISA's fiduciary duties 
and with 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 Northern 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 Northern 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 Northern 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 Northern QPAM complies with the terms of this temporary 
exemption; and
    (vii) Any violation of, or failure to comply with, an item in 
subparagraph (ii) through (vi), is corrected promptly upon discovery, 
and any such violation or compliance failure not promptly corrected is 
reported, upon discovering the failure to promptly correct, in writing, 
to appropriate corporate officers, the head of compliance and the 
General Counsel (or their functional equivalent) of the relevant 
Northern QPAM, and an appropriate fiduciary of any affected ERISA-
covered plan or IRA where such fiduciary is independent of Northern; 
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 Northern or 
beneficially owned by an employee of Northern or its affiliates, such 
fiduciary does not need to be independent of Northern. A Northern QPAM 
will not be treated as having failed to develop, implement, maintain, 
or follow the Policies, provided that it corrects any instance of 
noncompliance promptly when discovered or when it reasonably should 
have known of the noncompliance (whichever is earlier), and provided 
that it adheres to the reporting requirements set forth in this 
subparagraph (vii);
    (2) Within four months of the date of the Conviction, Northern QPAM 
must develop and implement a program of training (the Training), 
conducted at least annually, for all relevant Northern QPAM asset/
portfolio management, trading, legal, compliance, and internal audit 
personnel. The Training must be set forth in the Policies and at a 
minimum, cover the Policies, ERISA and Code compliance (including 
applicable fiduciary duties and the prohibited transaction provisions), 
ethical conduct, the consequences for not complying with the conditions 
of this temporary exemption (including any loss of exemptive relief 
provided herein), and prompt reporting of wrongdoing;
    (i) Effective as of the effective date of this temporary exemption, 
with respect to any arrangement, agreement, or contract between a 
Northern QPAM and an ERISA-covered plan or IRA for which a Northern 
QPAM provides asset management or other discretionary fiduciary 
services, each Northern QPAM agrees:
    (1) To comply with ERISA and the Code, as applicable with respect 
to such ERISA-covered plan or IRA; to refrain from engaging in 
prohibited transactions that are not otherwise exempt (and to promptly 
correct any inadvertent prohibited transactions); and to comply with 
the standards of prudence and loyalty set forth in section 404 of ERISA 
with respect to each such ERISA-covered plan and IRA;
    (2) Not to require (or otherwise cause) the ERISA-covered plan or 
IRA to waive, limit, or qualify the liability of the Northern 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

[[Page 75152]]

such IRA) to indemnify the Northern 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 Northern;
    (4) Not to restrict the ability of such ERISA-covered plan or IRA 
to terminate or withdraw from its arrangement with the Northern QPAM 
(including any investment in a separately managed account or pooled 
fund subject to ERISA and managed by such QPAM), with the exception of 
reasonable restrictions, appropriately disclosed in advance, that are 
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 as a result of an actual 
lack of liquidity of the underlying assets, provided that such 
restrictions are applied consistently and in like manner to all such 
investors;
    (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;
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the Northern QPAM for a violation of such 
agreement's terms, except for liability caused by an error, 
misrepresentation, or misconduct of a plan fiduciary or other party 
hired by the plan fiduciary who is independent of Northern Trust; and
    (7) To indemnify and hold harmless the ERISA-covered plan or IRA 
for any damages resulting from a violation of applicable laws, a breach 
of contract, or any claim arising out of the failure of such Northern 
QPAM to qualify for the exemptive relief provided by PTE 84-14 as a 
result of a violation of Section I(g) of PTE 84-14 other than the 
Conviction.
    Within six (6) months of the date of the Conviction, each Northern 
QPAM will: Provide a notice of its obligations under this Section I(i) 
to each ERISA-covered plan and IRA for which a Northern QPAM provides 
asset management or other discretionary fiduciary services;
    (j) The Northern QPAMs comply with each condition of PTE 84-14, as 
amended, with the sole exceptions of the violations of Section I(g) of 
PTE 84-14 that are attributable to the Conviction;
    (k) Each Northern QPAM will maintain records necessary to 
demonstrate that the conditions of this temporary exemption have been 
met, for six (6) years following the date of any transaction for which 
such Northern QPAM relies upon the relief in the temporary exemption;
    (l) During the effective period of this temporary exemption, 
Northern Trust: (1) Immediately discloses to the Department any 
Deferred Prosecution Agreement (a DPA) or Non-Prosecution Agreement (an 
NPA) that Northern Trust enters into with the U.S Department of 
Justice, to the extent such DPA or NPA involves conduct described in 
Section I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately 
provides the Department any information requested by the Department, as 
permitted by law, regarding the agreement and/or the conduct and 
allegations that led to the agreements; and
    (m) A Northern QPAM will not fail to meet the terms of this 
temporary exemption, solely because a different Northern QPAM fails to 
satisfy a condition for relief under this temporary exemption, 
described in Sections I(c), (d), (h), (i), (j), and (k).
Section II--Definitions
    (a) The term ``Conviction'' means the potential judgment of 
conviction against NTFS for aiding and abetting tax fraud to be entered 
in France in the District Court of Paris, French Special Prosecutor No. 
1120392066, French Investigative Judge No. JIRSIF/11/12;
    (b) The term ``Northern QPAM'' means a ``qualified professional 
asset manager'' (as defined in section VI(a) \8\ of PTE 84-14) that 
relies on the relief provided by PTE 84-14 and with respect to which 
NTFS is a current or future ``affiliate'' (as defined in section VI(d) 
of PTE 84-14);
---------------------------------------------------------------------------

    \8\ 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.
---------------------------------------------------------------------------

    (c) The term ``NTFS'' means Northern Trust Fiduciary Services 
(Guernsey) ltd., an affiliate'' of Northern (as defined in section 
VI(c) of PTE 84-14) located in Guernsey;
    (d) The terms ``ERISA-covered plan'' and ``IRA'' mean, 
respectively, a plan subject to Part 4 of Title I of ERISA and a plan 
subject to section 4975 of the Code; and
    (e) The term ``Northern'' means Northern Trust Corporation, 
together with its current and future affiliates.
    Effective Date: This temporary exemption is effective for the 
period beginning on the Conviction Date until the earlier of: The date 
that is twelve months following the Conviction Date; or the effective 
date of a final agency action made by the Department in connection with 
an application for long-term exemptive relief for the covered 
transactions described herein.

Supplementary Information

    On October 12, 2016, the Department of Labor (the Department) 
published a notice of proposed temporary exemption in the Federal 
Register at 81 FR 70562, proposing that certain entities with specified 
relationships to NTFS could continue to rely upon the relief provided 
by 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 NTFS for aiding and abetting tax fraud, to be 
entered in France in the District Court of Paris (the Conviction, as 
further defined in Section II(a)),\9\ for a period of up to twelve 
months beginning on the date of the Conviction.
---------------------------------------------------------------------------

    \9\ Section I(g) of PTE 84-14 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 
aiding and abetting tax evasion.
---------------------------------------------------------------------------

    The Department is today granting this temporary exemption in order 
to protect ERISA-covered plans and IRAs from certain costs and/or 
investment losses that may arise to the extent entities with a 
corporate relationship to NTFS lose their ability to rely on PTE 84-14 
as of the Conviction Date, as described in the proposed temporary 
exemption. The Department is considering proposing longer-term relief 
for Northern QPAMs to rely on PTE 84-14 notwithstanding the Conviction, 
in Application No. D-11911. The relief in this temporary exemption 
provides the Department more time to consider whether longer-term 
relief is warranted.
    No relief from a violation of any other law is provided by this 
temporary exemption, including any criminal conviction described in the 
proposed temporary exemption. Furthermore, the

[[Page 75153]]

Department cautions that the relief in this temporary exemption will 
terminate immediately if, among other things, an entity within the 
Northern corporate structure is convicted of a crime described in 
Section I(g) of PTE 84-14 (other than the Conviction) during the 
effective period of the temporary exemption. While such an entity could 
apply for a new exemption in that circumstance, the Department would 
not be obligated to grant the exemption. The terms of this temporary 
exemption have been specifically designed to permit plans to terminate 
their relationships in an orderly and cost effective fashion in the 
event of an additional conviction or a determination that it is 
otherwise prudent for a plan to terminate its relationship with an 
entity covered by the temporary exemption.

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 temporary exemption, published on October 12, 2016. 
All comments and requests for hearing were due by October 18, 2016. The 
Department received two written comments, one from Northern Trust, the 
other from Clearing House Association L.L.C. (TCH), both of which are 
described below.
    Although the Department has revised, in part, the proposed 
exemption in the manner requested by Northern Trust, the Department 
cautions that it may decline to include such revisions in any decision 
to grant more permanent relief.
Northern Trust Comment
    Northern Trust notes that Section I(h) of the proposed exemption 
requires that each Northern QPAM ``immediately:'' Develop, implement, 
maintain and follow certain written policies; and develop and implement 
a program of training. Northern Trust seeks a period of up to four 
months following the date of its impending conviction to meet these 
requirements. The Department agrees that four months is a reasonable 
period of time with which to comply with the requirement of Section 
I(h) and has revised the condition accordingly.
    Northern Trust seeks another change to Section I(h)(1)(i), through 
the deletion of the bracketed language, ``The asset management 
decisions of the Northern QPAM are conducted independently of the 
management and business activities of [Northern, including] NTFS [and 
Northern's non-asset management affiliates.]'' Northern Trust 
represents that it has neither committed, nor been accused of 
committing, a crime. The Department has revised the condition 
accordingly.
    Northern Trust seeks deletion of the requirement in Section I(i) 
that requires each Northern QPAM to separately warrant in writing its 
obligations to ERISA-Covered Plans and IRAs. While the Department has 
made such revision for purposes of the limited relief herein, the 
Department re-emphasizes, as noted above, that it may decide to propose 
more permanent relief that does not contain this revision.
    Northern Trust seeks deletion of the requirement set forth in 
Section I(i)(6) that, each Northern QPAM agrees: ``Not to include 
exculpatory provisions disclaiming or otherwise limiting liability of 
the Northern QPAM for a violation of such agreement's terms.'' The 
Department declines to make such deletion, but has revised the 
condition to read: ``Not to include exculpatory provisions disclaiming 
or otherwise limiting liability of the Northern QPAM for a violation of 
such agreement's terms, except for liability caused by an error, 
misrepresentation, or misconduct of a plan fiduciary or other party 
hired by the plan fiduciary who is independent of Northern Trust.''
    Condition (l) of the proposed exemption provided that neither 
Northern Trust nor any affiliate could enter into a Deferred 
Prosecution Agreement (a DPA) or a Non-Prosecution Agreement (an NPA) 
with the U.S. Department of Justice, in connection with conduct 
described in Section I(g) of PTE 84-14 or section 411 of ERISA. 
Northern Trust sought to reserve its right to comment on this condition 
in connection with the Department's consideration of more permanent 
relief. The Department has nonetheless determined to revise condition 
(l), to require that, during the effective period of this temporary 
exemption, Northern Trust: (1) Immediately discloses to the Department 
any Deferred Prosecution Agreement (a DPA) or Non-Prosecution Agreement 
(an NPA) that Northern Trust enters into with the U.S. Department of 
Justice, to the extent such DPA or NPA involves conduct described in 
Section I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately 
provides the Department any information requested by the Department, as 
permitted by law, regarding the agreement and/or the conduct and 
allegations that led to the agreements.
The Clearing House Comment
    The Clearing House Association L.L.C. (TCH) submitted a comment 
that expresses concern regarding condition (l) in Section I of the 
proposed temporary exemption. Although the Department has revised 
condition (l) in the manner described above, the Department will 
continue to consider TCH's comment in connection with its consideration 
of more permanent relief for Northern Trust.
    After giving full consideration to the record, the Department has 
decided to grant the temporary exemption, as described above. The 
complete application file (Application No. D-11875) 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 temporary exemption, 
refer to the notice of proposed temporary exemption published on 
October 12, 2016 at 81 FR 70569.

FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the 
Department, telephone (202) 693-8565. (This is not a toll-free number.)

Extension of PTE 2015-15 (the Extension) Involving Deutsche Bank AG 
(Deutsche Bank), Located in Frankfurt, Germany

[Prohibited Transaction Exemption 2016-12; Exemption Application No. D-
11879]

Exemption

Section I--Covered Transactions
    Certain asset managers with specified relationships to Deutsche 
Bank (hereinafter, the DB QPAMs, as further defined in Section II(b)) 
shall not be precluded from relying on the exemptive relief provided by 
Prohibited Transaction Exemption (PTE) 84-14,\10\ notwithstanding a 
judgment of conviction against Deutsche Securities Korea Co., a South 
Korean affiliate of Deutsche Bank (hereinafter, DSK, as further defined 
in Section II(c)), entered on January 25, 2016 (the Korean Conviction, 
as further defined in Section II(a)),\11\ provided that the following 
conditions are satisfied:
---------------------------------------------------------------------------

    \10\ 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).
    \11\ Section I(g) of PTE 84-14 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.

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

[[Page 75154]]

    (a) The DB QPAMs (including their officers, directors, agents other 
than Deutsche Bank, and employees of such DB QPAMs) did not know of, 
have reason to know of, or participate in the criminal conduct of DSK 
that is the subject of the Korean Conviction;
    (b) Any failure of the DB QPAMs to satisfy Section I(g) of PTE 84-
14 arose solely from the Korean Conviction;
    (c) The DB QPAMs (including their officers, directors, agents other 
than Deutsche Bank, and employees of such DB QPAMs) did not receive 
direct compensation, or knowingly receive indirect compensation, in 
connection with the criminal conduct that is the subject of the 
Conviction;
    (d) A DB 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 DB QPAM to enter into any 
transaction with DSK or engage DSK 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;
    (e)(1) Each DB QPAM maintains and follows written policies (the 
Policies) requiring and reasonably designed to ensure that: (i) The 
asset management decisions of the DB QPAM are conducted independently 
of Deutsche Bank's management and business activities; (ii) the DB 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 DB 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 DB 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 DB QPAM's knowledge at that time; (v) the DB 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 DB QPAM complies with the terms of this Extension; 
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 DB QPAM (or their functional equivalent), the 
independent auditor responsible for reviewing compliance with the 
Policies, and an appropriate fiduciary of any affected ERISA-covered 
plan or IRA that is independent of Deutsche Bank; 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 Deutsche Bank or beneficially 
owned by an employee of Deutsche Bank or its affiliates, such fiduciary 
does not need to be independent of Deutsche Bank. DB 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 DB QPAM maintains and follows a program of training (the 
Training), conducted during the effective period of this Extension, for 
relevant DB QPAM asset management, legal, compliance, and internal 
audit personnel (other than personnel who received training in a manner 
that meets the requirements of PTE 2015-15 within the prior 12 months); 
the Training must be set forth in the Policies and, at a minimum, cover 
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 
Extension, (including the loss of the exemptive relief provided 
therein), and prompt reporting of wrongdoing;
    (f)(1) Each DB QPAM submits to an audit conducted by an independent 
auditor, who has been prudently selected and who has appropriate 
technical training and proficiency with ERISA and the Code to evaluate 
the adequacy of, and compliance with, the Policies and Training 
described herein; the audit requirement must be incorporated in the 
Policies. The audit must cover the period of time during which this 
Extension is effective, and must be completed no later than six (6) 
months after the period to which the audit applies;
    (2) To the extent necessary for the auditor, in its sole opinion, 
to complete its audit and comply with the conditions for relief 
described herein, and as permitted by law, each DB QPAM and, if 
applicable, Deutsche Bank, will grant the auditor unconditional access 
to its business, including, but not limited to: its computer systems, 
business records, transactional data, workplace locations, training 
materials, and personnel;
    (3) The auditor's engagement must specifically require the auditor 
to determine whether each DB QPAM has developed, implemented, 
maintained, and followed Policies in accordance with the conditions of 
this Extension and developed and implemented the Training, as required 
herein;
    (4) The auditor's engagement shall specifically require the auditor 
to test each DB QPAM's operational compliance with the Policies and 
Training. In this regard, the auditor must test a sample of the QPAM's 
transactions involving ERISA-covered plans and IRAs sufficient in size 
and nature to afford the auditor a reasonable basis to determine the 
operational compliance with the Policies and Training;
    (5) On or before the end of the period described in Section I(f)(1) 
for completing the audit, the auditor must issue a written report (the 
Audit Report) to Deutsche Bank and the DB QPAM to which the audit 
applies that describes the procedures performed by the auditor during 
the course of its examination. The Audit Report must include the 
auditor's specific determinations regarding the adequacy of, and 
compliance with, the Policies and Training; the auditor's 
recommendations (if any) with respect to strengthening such Policies 
and Training; and any instances of the respective DB QPAM's 
noncompliance with the written Policies and Training described in 
paragraph (e) 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 DB QPAM must be promptly addressed by such 
DB QPAM, and any actions taken by such DB QPAM to address such 
recommendations must be included in an addendum to the Audit Report. 
Any determinations by the auditor that the

[[Page 75155]]

respective DB QPAM has maintained and followed sufficient Policies and 
Training shall not be based solely or in substantial part on an absence 
of evidence indicating noncompliance. In this last regard, any finding 
that the DB QPAM has complied with the requirements under this 
subsection must be based on evidence that demonstrates the DB QPAM has 
actually maintained and followed the Policies and Training required by 
this Extension and not solely on a lack of evidence that the DB QPAM 
has violated ERISA;
    (6) The auditor shall notify the respective DB 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;
    (7) With respect to each Audit Report, the General Counsel or one 
of the three most senior executive officers of the DB QPAM to which the 
Audit Report applies certifies in writing, under penalty of perjury, 
that the officer has reviewed the Audit Report and this Extension; 
addressed, corrected, or remedied 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 Extension and with the applicable provisions of 
ERISA and the Code;
    (8) An executive officer of Deutsche Bank reviews the Audit Report 
for each DB QPAM and certifies in writing, under penalty of perjury, 
that such officer has reviewed each Audit Report;
    (9) Each DB QPAM provides its certified Audit Report to the 
Department's Office of Exemption Determinations (OED), 200 Constitution 
Avenue NW., Suite 400, Washington DC 20210, no later than 45 days 
following its completion, and each DB 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 DB QPAM;
    (10) Each DB QPAM and the auditor will submit to OED (A) any 
engagement agreement(s) entered into pursuant to the engagement of the 
auditor under this Extension, and (B) any engagement agreement entered 
into with any other entities retained in connection with such QPAM's 
compliance with the Training or Policies conditions of this Extension, 
no later than three (3) months after the effective date of the 
Extension (and one month after the execution of any agreement 
thereafter);
    (11) The auditor shall provide OED, upon request, all of the 
workpapers created and utilized in the course of the audit, including, 
but not limited to: the audit plan, audit testing, identification of 
any instances of noncompliance by the relevant DB QPAM, and an 
explanation of any corrective or remedial actions taken by the 
applicable DB QPAM; and
    (12) Deutsche Bank must notify the Department at least 30 days 
prior to any substitution of an auditor, except that no such 
replacement will meet the requirements of this paragraph unless and 
until Deutsche Bank demonstrates to the Department's satisfaction that 
such new auditor is independent of Deutsche Bank, experienced in the 
matters that are the subject of the Extension, and capable of making 
the determinations required of this Extension.
    Notwithstanding the above, this audit requirement will be deemed 
met to the extent the Department issues more permanent relief that 
expressly supersedes this paragraph (f), and the terms of such new 
audit requirement have been met;
    (g) With respect to each ERISA-covered plan or IRA for which a DB 
QPAM provides asset management or other discretionary fiduciary 
services, each DB QPAM agrees: (1) To comply with ERISA and the Code, 
as applicable with respect to such ERISA-covered plan or IRA, and 
refrain from engaging in prohibited transactions that are not otherwise 
exempt; (2) not to waive, limit, or qualify the liability of the DB 
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 DB 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 Deutsche 
Bank; (4) not to restrict the ability of such ERISA-covered plan or IRA 
to terminate or withdraw from its arrangement with the DB QPAM, with 
the exception of reasonable restrictions, appropriately disclosed in 
advance, that are 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 restrictions are applied consistently and in like 
manner to all such investors; 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 two (2) months of the date of 
publication of this notice of Extension in the Federal Register, each 
DB QPAM will provide a notice to such effect to each ERISA-covered plan 
or IRA for which a DB QPAM provides asset management or other 
discretionary fiduciary services in reliance on PTE 84-14, unless such 
notice was previously provided consistent with PTE 2015-15;
    (h) Each DB QPAM will maintain records necessary to demonstrate 
that the conditions of this Extension have been met, for six (6) years 
following the date of any transaction for which such DB QPAM relies 
upon the relief in the Extension;
    (i) The DB 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 Korean Conviction;
    (j) The DB QPAMs will not employ any of the individuals that 
engaged in the spot/futures-linked market manipulation activities that 
led to the Korean Conviction;
    (k) Deutsche Bank disgorged all of its profits generated by the 
spot/futures-linked market manipulation activities of DSK personnel 
that led to the Korean Conviction;
    (l) Deutsche Bank imposes internal procedures, controls, and 
protocols on DSK designed to reduce the likelihood of any recurrence of 
the conduct that is the subject of the Korean Conviction, to the extent 
permitted by local law;
    (m) DSK will not provide fiduciary or QPAM services to ERISA-
covered Plans or IRAs, and will not otherwise exercise discretionary 
control over plan assets;
    (n) No DB QPAM is a subsidiary of DSK, and DSK is not a subsidiary 
of any DB QPAM;
    (o) The criminal conduct of DSK that is the subject of the Korean 
Conviction did not directly or indirectly involve the assets of any 
plan subject to Part 4 of Title I of ERISA or section 4975 of the Code; 
and
    (p) A DB QPAM will not fail to meet the terms of this Extension 
solely because a different DB QPAM fails to satisfy the conditions for 
relief under

[[Page 75156]]

this Extension described in Sections I(d), (e), (f), (g), (h), (i) and 
(j).

Section II--Definitions

    (a) The term ``Korean Conviction'' means the judgment of conviction 
against DSK entered on January 25, 2016, in Seoul Central District 
Court, relating to charges filed against DSK under Articles 176, 443, 
and 448 of South Korea's Financial Investment Services and Capital 
Markets Act for spot/futures-linked market price manipulation;
    (b) The term ``DB QPAM'' means a ``qualified professional asset 
manager'' (as defined in section VI(a) \12\ of PTE 84-14) that relies 
on the relief provided by PTE 84-14 and with respect to which DSK is a 
current or future ``affiliate'' (as defined in section VI(d) of PTE 84-
14). For purposes of this Extension, Deutsche Bank Securities, Inc. 
(DBSI), including all entities over which it exercises control; and 
Deutsche Bank AG, including all of its branches, are excluded from the 
definition of a DB QPAM; and
---------------------------------------------------------------------------

    \12\ 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.
---------------------------------------------------------------------------

    (c) The term ``DSK'' means Deutsche Securities Korea Co., a South 
Korean ``affiliate'' of Deutsche Bank (as the term ``affiliate'' is 
defined in section VI(c) of PTE 84-14).
    Effective Date: This Extension will be effective for the period 
beginning October 24, 2016 and ending on the earlier of: April 23, 2017 
or the effective date of a final agency action made by the Department 
in connection with Exemption Application No. D-11856.\13\
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    \13\ In this regard, as noted below, the Applicant has requested 
substantially similar relief to the relief described herein, but on 
a more permanent basis.
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Supplementary Information

    On October 12, 2016, the Department of Labor (the Department) 
published a notice of proposed extension in the Federal Register at 81 
FR 70577, proposing that certain entities with specified relationships 
to DSK could continue to rely upon the relief provided by 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 the Korean Conviction.
    The Department is today granting this Extension in order to protect 
ERISA-covered plans and IRAs from certain costs and/or investment 
losses that may arise to the extent entities with a corporate 
relationship to DSK lose their ability to rely on PTE 84-14 as of the 
expiration of PTE 2015-15. The relief in this Extension provides the 
Department more time to consider whether more permanent relief is 
warranted.
    No relief from a violation of any other law is provided by this 
Extension, including any criminal conviction described in the proposed 
extension or in PTE 2015-15. Furthermore, the Department cautions that 
the relief in this Extension will terminate immediately if, among other 
things, an entity within the Deutsche Bank corporate family is 
convicted of a crime described in Section I(g) of PTE 84-14 during the 
effective period of the Extension. While such an entity could apply for 
a new exemption in that circumstance, the Department would not be 
obligated to grant that exemption. The terms of this Extension have 
been specifically designed to permit plans to terminate their 
relationships in an orderly and cost effective fashion in the event of 
an additional conviction or a determination that it is otherwise 
prudent for a plan to terminate its relationship with an entity covered 
by the Extension.

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 extension, published on October 12, 2016, at 81 FR 
70577. All comments and requests for hearing were due by October 19, 
2016. Because of the abbreviated comment period, the Department will 
consider comments received within a reasonable period of time after 
October 19, 2016 in connection with its consideration of long-term 
exemptive relief for the DB QPAMs in connection with Exemption 
Application No. D-11908, described above. During the comment period, 
the Department received two written comments, one from the independent 
auditor and one from Deutsche Bank AG, both of which are described 
below. Although the Department has, for the most part, revised the 
proposed exemption in the manner requested by Deutsche Bank AG, the 
Department cautions that it may decline to include those revisions in 
any decision to grant more permanent relief.
Independent Auditor's Comment
    Section I(f)(1) of the proposed extension requires that the audit, 
along with the report, must be completed no later than three months 
after the period to which the audit relates. In its comment, the 
auditor requested that the audit requirement described in Section 
I(f)(1) of the proposed extension be modified to require that the audit 
report must be completed no later than six months after the period to 
which the audit relates. The auditor explains that, during the course 
of its audit, it needs to review an extensive amount of materials, 
relevant systems and training, and digest the information provided in 
response to various requests for information. Furthermore, the auditor 
states that it will take a significant amount of time to develop and 
review follow-up questions based upon its initial analysis of the 
materials and systems; and the report that the auditor provides to the 
Department needs to be robust, comprehensive and detailed.
    The Department views a rigorous, transparent, and comprehensive 
audit as essential to ensuring that the conditions for exemptive relief 
described herein are followed by the DB QPAMs. As such, the Department 
has extended the deadline by which point the audit must be completed 
from three months following the period to which the audit applies to 
six months.
Deutsche Bank's Comment
    Deutsche Bank seeks several changes and/or clarifications to the 
proposed extension. First, Deutsche Bank requests that the Department 
revise the proposed exemption in a manner that would potentially extend 
the duration of this Extension. The Department declines to extend this 
duration of the Extension in the manner requested by Deutsche Bank, but 
notes that it is currently considering proposing more permanent relief 
pursuant to Application Numbers D-11879 and D-11908.
    Regarding the audit, Deutsche Bank seeks to extend the 
certification period set forth in Section I(f)(9) from 30 days to 45 
days. The Department has revised the condition accordingly. Deutsche 
Bank also requests that the timing of the audit be adjusted in the same 
manner sought by the auditor. This adjustment is discussed above.
    Deutsche requests certain changes to the training requirement 
described in Section I(e)(2) of the proposed extension. Deutsche Bank 
seeks to coordinate that condition with the training requirement set 
forth in PTE 2015-15, such that duplicative training is not required 
over a short period of time. The Department has revised Section I(e)(2) 
to exclude training for personnel who received training in a manner 
that meets the requirements of PTE 2015-15 within the prior 12 months.

[[Page 75157]]

    Deutsche Bank also seeks changes to the notice requirement 
described in Section I(g) of the proposed exemption. Deutsche Bank 
seeks to add the following bracketed language, such that Section I(g) 
reads: ``Within two (2) months of the date of publication of this 
notice of Extension in the Federal Register, each DB QPAM will provide 
a notice to such effect to each ERISA-covered plan or IRA for which a 
DB QPAM provides asset management or other discretionary fiduciary 
services [in reliance on PTE 84-14], unless such notice was previously 
provided consistent with PTE 2015-15.'' The Department has revised the 
condition accordingly.
    Deutsche Bank requests an adjustment to certain restrictions the 
proposed exemption places on DSK. In this regard, Deutsche Bank seeks 
to add the following bracketed language, and to delete the following 
italicized language, such that Section I(m) reads: ``DSK has not, and 
will not, provide [discretionary asset management services or other 
discretionary] fiduciary or QPAM services to ERISA-covered Plans or 
IRAs, and will not otherwise exercise discretionary control over plan 
assets.'' The Department declines Deutsche Bank's request, but has 
revised the condition to more clearly require that this condition is 
intended to be met prospectively, not retroactively.
    Deutsche Bank also seeks clarification that for purposes of the 
Extension, the auditor, and not the QPAMs, must provide the relevant 
workpapers to the Department. The Department agrees with that 
interpretation of the condition.
    In its letter to the Department, Deutsche Bank states that 
footnotes 38 and 42, which reference tax-related crimes, are unrelated 
to Deutsche Bank's application and should be deleted. Deutsche Bank 
also requests that the Department note for the record that ``Deutsche 
Bank identified Mr. Ripley both as an employee of DBSI and a subject of 
the Korean case on numerous prior occasions, including as far back as 
2011, as well as more recently.''
    After giving full consideration to the entire record, the 
Department has decided to grant the Extension. The complete application 
file for the Extension (Exemption Application No. D-11879), including 
all supplemental submissions received by the Department, as well as the 
application file for PTE 2015-15 (Exemption Application No. D-11696), 
are 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 Extension, refer to 
the notice of proposed extension, published on October 12, 2016, at 81 
FR 70577.

FOR FURTHER INFORMATION CONTACT: Mr. Scott Ness of the Department, 
telephone (202) 693-8561. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the 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) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 24th day of October, 2016.
Lyssa E. Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2016-26089 Filed 10-27-16; 8:45 am]
 BILLING CODE 4510-29-P