[Federal Register Volume 83, Number 34 (Tuesday, February 20, 2018)]
[Notices]
[Pages 7226-7235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03396]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Technical Corrections to Exemptions From Certain Prohibited 
Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of technical corrections.

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SUMMARY: On December 29, 2017 the Department of Labor (the Department) 
published notices of exemptions in the Federal Register granting relief 
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 
technical corrections to those published prohibited transaction 
exemptions (PTEs): PTE 2017-03, JPMorgan Chase & Co., D-11906; PTE 
2017-04, Deutsche Investment Management Americas Inc. (DIMA) and 
Certain Current and Future Asset Management Affiliates of Deutsche Bank 
AG, D-11908; PTE 2017-05, Citigroup Inc., D-11909; PTE 2017-06, 
Barclays Capital Inc., D-11910; PTE 2017-07, UBS Assets Management 
(Americas) Inc.; UBS Realty Investors LLC; UBS Hedge Fund Solutions 
LLC; UBS O'Connor LLC; and Certain Future Affiliates in UBS's Asset 
Management and Wealth Management Americas Divisions, D-11907.

JPMorgan Chase Co. (JPMC or the Applicant) Located in New York, New 
York

[Prohibited Transaction Exemption (PTE) 2017-03; Exemption Application 
No. D-11906].

Discussion

    On December 29, 2017, the Department published PTE 2017-03 in the 
Federal Register at 82 FR 61816. PTE 2017-03 is an administrative 
exemption from the prohibited transaction provisions of the Employee 
Retirement Income Security Act of 1974 (the Act), and the Internal 
Revenue Code of 1986, that permits certain entities with specified 
relationships to JPMC to continue to rely upon the relief provided by 
PTE 84-14 \1\ for a period of five years, notwithstanding JPMC's 
criminal conviction (the Conviction). The Department granted PTE 2017-
03 to ensure that Covered Plans \2\ whose assets are managed by a JPMC 
Affiliated QPAM or a JPMC Related QPAM may continue to benefit from the 
relief provided by PTE 84-14. The exemption is effective from January 
10, 2018 through January 9, 2023.
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    \1\ 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), hereinafter referred to as 
PTE 84-14 or the QPAM Exemption.
    \2\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of 
ERISA (``ERISA-covered plan'') or a plan subject to Section 4975 of 
the Code (``IRA''), with respect to which a JPMC Affiliated QPAM 
relies on PTE 84-14, or with respect to which a JPMC Affiliated QPAM 
(or any JPMC affiliate) has expressly represented that the manager 
qualifies as a QPAM or relies on the QPAM class exemption (PTE 84-
14). A Covered Plan does not include an ERISA-covered Plan or IRA to 
the extent the JPMC Affiliated QPAM has expressly disclaimed 
reliance on QPAM status or PTE 84-14 in entering into its contract, 
arrangement, or agreement with the ERISA covered plan or IRA.
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    The Department has decided to make certain technical and clarifying 
corrections to the exemption, as described below.

Technical Corrections

Sections I(g) and I(m)
    The Department's response to Comment 36 on page 61833 of the 
exemption states: ``Section I(g) requires two specific entities, JPMC 
and the Investment Bank of JPMorgan Chase Bank, to refrain from 
providing investment management services to plans. . . . Thus, with 
respect to Sections I(g) and (m), the obligations imposed extend 
exclusively to JPMC and the Investment Bank of JPMorgan Chase Bank. . . 
. The Department also believes that the potential for disqualification 
of all JPMC Affiliated QPAMs under this agreement will serve as 
additional incentive for JPMC and JPMorgan Chase Bank to comply in 
good-faith with the provisions of Sections I(g) and (m).''
    The Department is revising its response to Comment 36 by removing 
references to ``the Investment Bank of JPMorgan Chase Bank'' because 
Section I(g) and I(m) do not apply to such entity. Similarly, the 
Department is also removing the phrase ``JPMorgan Chase Bank'' from the 
sentence that reads, ``[t]he Department also believes that the 
potential for disqualification of all JPMC Affiliated QPAMs under this 
agreement will serve as additional incentive for JPMC and JPMorgan 
Chase Bank to comply in good-faith with the provisions of Sections I(g) 
and (m).''
Section I(h)(1)(vii)
    The Department is adding the term ``as reasonably possible'' to the 
first sentence of the first full paragraph on page 61821 of the 
preamble to the exemption. As revised, the first sentence of the first 
full paragraph on page 61821 now reads: ``The Department has revised 
the term `corrected promptly' to be consistent with the Department's 
intent that violations or compliance failures be corrected `as soon as 
reasonably possible upon discovery or as soon as reasonably possible 
after the QPAM reasonably should have known of the noncompliance 
(whichever is earlier).' ''
Section I(i)(10)
    Section I(i)(10) of the exemption states: ``(10) Each JPMC 
Affiliated QPAM and the auditor must submit to [the Office of Exemption 
Determinations] OED: Any engagement agreement(s) entered into pursuant 
to the engagement of the auditor under this exemption, no later than 
two (2) months after the execution of any such engagement agreement.''
    The Department is revising Section I(i)(10) of the exemption to 
clarify the timing requirements for submission of the auditor 
agreements. As revised, Section I(i)(10) of the exemption now states: 
``(10) Any engagement agreement with an auditor to perform the audits 
required under the terms of this exemption must be submitted to OED by 
March 9, 2018 if the agreement was executed on or prior to January 10, 
2018. Any engagement agreement(s) entered into subsequent to January 
10, 2018 must be submitted to OED no later than two (2) months after 
the execution of such engagement agreement.''
Section I(j)(7)
    Section I(j)(7) of the exemption states: ``(7) By July 9, 2018, 
each JPMC

[[Page 7227]]

Affiliated QPAM must provide a notice of its obligations under this 
Section I(j) to each Covered Plan. For all other prospective Covered 
Plans, the JPMC Affiliated QPAM will agree to its obligations under 
this Section I(j) in an updated investment management agreement between 
the JPMC Affiliated QPAM and such clients or other written contractual 
agreement.''
    The Department notes that the term ``prospective Covered Plan,'' as 
used in Section I(j)(7), means a Covered Plan that enters into a 
written asset or investment management agreement with a JPMC Affiliated 
QPAM on or after July 10, 2018.
Section I(k)
    Section I(k) of the exemption states: ``(k) By March 10, 2018, each 
JPMC Affiliated QPAM will provide a notice of the exemption, along with 
a separate summary describing the facts that led to the Conviction (the 
Summary), which have been submitted to the Department, and a 
prominently displayed statement (the Statement) that the Conviction 
results in a failure to meet a condition in PTE 84-14, to each sponsor 
and beneficial owner of a Covered Plan, or the sponsor of an investment 
fund in any case where a JPMC Affiliated QPAM acts as a sub-advisor to 
the investment fund in which such ERISA-covered plan and IRA invests. 
Any prospective client for which a JPMC Affiliated QPAM relies on PTE 
84-14 or has expressly represented that the manager qualifies as a QPAM 
or relies on the QPAM class exemption must receive the proposed and 
final exemptions with the Summary and the Statement prior to, or 
contemporaneously with, the client's receipt of a written asset 
management agreement from the JPMC Affiliated QPAM. Disclosures may be 
delivered electronically.''
    The Department is replacing the term ``prospective client'' with 
``prospective Covered Plan.'' As revised, ``prospective Covered Plan,'' 
as used in Section I(k), means a Covered Plan that enters into a 
written asset or investment management agreement with a JPMC Affiliated 
QPAM on or after March 10, 2018.
    The Department is clarifying that the requirements of Section I(k) 
will be met with respect to all current and prospective Covered Plans 
if, by March 10, 2018, the Applicant posts the required Section I(k) 
disclosure documents on a website whose link/address is referenced in: 
(a) The notice sent by the Applicant following the grant of the 
temporary exemption; or (b) the relevant investment management 
agreement received by the client (including instances where such 
reference describes the site as containing the required obligations 
under the temporary exemption), and the Applicant informs clients who 
are Covered Plan clients as of the effective date of this exemption, in 
writing, by March 10, that they can go back to the website to find the 
additional documents, which are identified.
    The Department is also clarifying that, for Covered Plans that 
enter into a written asset or investment management agreement with the 
Applicant between January 11, 2018, and March 9, 2018, the written 
notice that the website has been updated must be provided to such 
Covered Plans by March 31, 2018.

FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department, 
telephone (202) 693-8456. (This is not a toll-free number).

Deutsche Investment Management Americas Inc. (DIMA) and Certain Current 
and Future Asset Management Affiliates of Deutsche Bank AG 
(Collectively, the Applicant or the DB QPAMs), Located in New York, New 
York

[Prohibited Transaction Exemption (PTE) 2017-04; Exemption Application 
No. D-11908]

Discussion

    On December 29, 2017, the Department published PTE 2017-04 in the 
Federal Register at 82 FR 61840. PTE 2017-04 is an administrative 
exemption from the prohibited transaction provisions of the Employee 
Retirement Income Security Act of 1974 (the Act), and the Internal 
Revenue Code of 1986, that permits certain entities with specified 
relationships to Deutsche Securities Korea, Co. (DSK) \3\ or DB Group 
Services (UK) Limited (DB Group Services) \4\ to continue to rely upon 
the relief provided by PTE 84-14 for a period of three years,\5\ 
notwithstanding certain criminal convictions (the Convictions). The 
Department granted PTE 2017-04 to ensure that Covered Plans \6\ with 
assets managed by an asset manager within the corporate family of 
Deutsche Bank AG (together with its current and future affiliates, 
Deutsche Bank) may continue to benefit from the relief provided by PTE 
84-14. The exemption is effective from April 18, 2018 through April 17, 
2021 (the Exemption Period). The Department has decided to make certain 
technical and clarifying corrections to the exemption, as described 
below.
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    \3\ Deutsche Securities Korea, Co. is a South Korean 
``affiliate'' (as defined in Section VI(d) of PTE 84-14) of Deutsche 
Bank AG.
    \4\ DB Group Services (UK) Limited is United Kingdom-based 
``affiliate'' (as defined in Section VI(d) of PTE 84-14) of Deutsche 
Bank AG.
    \5\ 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), hereinafter referred to as 
PTE 84-14 or the QPAM exemption.
    \6\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of 
ERISA (``ERISA-covered plan'') or a plan subject to section 4975 of 
the Code (``IRA'') with respect to which a DB QPAM relies on PTE 84-
14, or with respect to which a DB QPAM (or any Deutsche Bank 
affiliate) has expressly represented that the manager qualifies as a 
QPAM or relies on the QPAM class exemption (PTE 84-14). A Covered 
Plan does not include an ERISA-covered plan or IRA to the extent the 
DB QPAM has expressly disclaimed reliance on QPAM status or PTE 84-
14 in entering into its contract, arrangement, or agreement with the 
ERISA-covered plan or IRA.
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Technical Corrections

Section I Prefatory Language
    The prefatory language of Section I of the exemption states, in 
relevant part: ``Certain entities with specified relationships to 
Deutsche Bank AG . . . will not be precluded from relying on the 
exemptive relief provided by Prohibited Transaction Class Exemption 84-
14 . . . notwithstanding: . . . . (2) the `US Conviction' against DB 
Group Services (UK) Limited, an affiliate of Deutsche Bank based in the 
United Kingdom (hereinafter, DB Group Services, as further defined in 
Section II(e)) . . . .''
    For consistency with the re-ordered Definitions in Section II of 
the exemption, the relevant prefatory language of Section I now reads, 
``DB Group Services (UK) Limited, an affiliate of Deutsche Bank based 
in the United Kingdom (hereinafter, DB Group Services, as further 
defined in Section II(c)).''
Section I(h)(1)(v)
    Section I(h)(1)(v) in the exemption states, in relevant part: ``The 
Policies must require, and must be reasonably designed to ensure that: 
. . . . (v) To the best of the DB QPAM's knowledge at the time, 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 with respect to Covered Plans.''
    For clarity, the Department has deleted the phrase ``with respect 
to ERISA-covered plans or IRAs.'' As revised, Section I(h)(1)(v) now 
reads, in relevant part: ``The Policies must require, and must be 
reasonably designed to ensure that: . . . . (v) To the best of the DB 
QPAM's knowledge at the time, the DB QPAM does not make material 
misrepresentations or omit material information in its communications 
with such regulators with respect to Covered Plans.''

[[Page 7228]]

Section I(h)(2)
    Section I(h)(2) of the exemption states: ``Each DB QPAM must 
develop and implement a program of training (the Training), to be 
conducted at least annually . . . The first Training under this Final 
Exemption must be completed by all relevant DB QPAM personnel by April 
18, 2019 (by the end of this 30-month period, asset/portfolio 
management, trading, legal, compliance, and internal audit personnel 
who were employed from the start to the end of the period must have 
been trained twice: The first time under PTE 2016-13; and the second 
time under this exemption).''
    The Department is revising this condition to reflect the 
Department's intended timeline for completing the first Training under 
this exemption. To this end, the Department is replacing ``April 18, 
2019'' with ``April 17, 2019.'' Furthermore, the Department is 
replacing the phrase ``by the end of this 30-month period'' with ``by 
the end of the 24-month period commencing on the effective date of PTE 
2016-13 and ending on April 17, 2019.'' As revised, Section I(h)(2) in 
relevant part now reads: ``The first Training under this Final 
Exemption must be completed by all relevant DB QPAM personnel by April 
17, 2019 (by the end of the 24-month period commencing on the effective 
date of PTE 2016-13 and ending on April 17, 2019, asset/portfolio 
management, trading, legal, compliance, and internal audit personnel 
who were employed from the start to the end of the period must have 
been trained twice: The first time under PTE 2016-13; and the second 
time under this exemption).''
Section I(h)(2)(i)
    Section I(h)(2)(i) of the exemption states: ``The Training must: 
(i) 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 exemption (including any loss of exemptive 
relief provided herein), and prompt reporting of wrongdoing.''
    The Department is revising Section I(h)(2)(i) to clarify that this 
exemption's Training requirement must be included in the Policies. As 
revised, Section I(h)(2)(i) reads, in relevant part: ``The Training 
must: (i) Be required by the Policies and, at a minimum. . . .''
Section I(i)(5)(i)
    Section I(i)(5)(i) of the exemption states: ``For each audit, on or 
before the end of the relevant period described in Section I(i)(1) for 
completing the audit, the auditor must issue a written report (the 
Audit Report) . . . The Audit Report must include the auditor's 
specific determinations regarding: (i) The adequacy of each DB QPAM's 
Policies and Training . . . The DB QPAM must promptly address or 
prepare a written plan of action to address any determination of 
inadequacy by the auditor regarding the adequacy of the Policies and 
Training. . . .''
    For clarity, the Department is replacing the phrase ``any 
determination of inadequacy by the auditor regarding the adequacy of 
the Policies and Training'' with ``any determination by the auditor 
regarding the adequacy of the Policies and Training.'' As revised, 
Section I(i)(5)(i) in relevant part now states: ``The DB QPAM must 
promptly address or prepare a written plan of action to address any 
determination by the auditor regarding the adequacy of the Policies and 
Training. . . .''
Section I(i)(7)
    Section I(i)(7) of the exemption states: ``(7) With respect to each 
Audit Report, the General Counsel, or one of the three most senior 
executive officers of the line of business engaged in discretionary 
asset management services through the DB QPAM with respect to which the 
Audit Report applies, must certify in writing, under penalty of 
perjury, that the officer has reviewed the Audit Report and this 
exemption; that such DB QPAM has addressed, corrected, or remedied any 
noncompliance and inadequacy or has an appropriate written plan to 
address any inadequacy regarding the Policies and Training identified 
in the Audit Report. . . .''
    The Department is replacing the term ``General Counsel'' with 
``general counsel'' and making clear that the certification of the 
Audit Report can come from the respective line of business's general 
counsel or one of its three most senior officers. As revised, Section 
I(i)(7) in relevant part now reads: ``With respect to each Audit 
Report, the general counsel, or one of the three most senior executive 
officers of the line of business engaged in discretionary asset 
management services through the DB QPAM with respect to which the Audit 
Report applies, must certify in writing, under penalty of perjury, that 
the officer has reviewed the Audit Report and this exemption.''
Section I(i)(8)
    Section I(i)(8) of the exemption states: ``(8) The Audit Committee 
of Deutsche Bank's Supervisory Board is provided a copy of each Audit 
Report; and a senior executive officer with a direct reporting line to 
the highest ranking legal compliance officer of Deutsche Bank must 
review the Audit Report for each DB QPAM and must certify in writing, 
under penalty of perjury, that such officer has reviewed each Audit 
Report. Deutsche Bank must provide notice to the Department in the 
event of a switch in the committee to which the Audit Report will be 
provided.''
    The Department is revising the first sentence of Section I(i)(8) by 
removing the term ``legal.'' The condition now reads: ``(8) The Audit 
Committee of Deutsche Bank's Supervisory Board is provided a copy of 
each Audit Report; and a senior executive officer with a direct 
reporting line to the highest ranking compliance officer of Deutsche 
Bank must review the Audit Report for each DB QPAM and must certify in 
writing, under penalty of perjury, that such officer has reviewed each 
Audit Report.''
Section I(i)(9)
    Section I(i)(9) of the proposed exemption states: ``(9) Each DB 
QPAM provides its certified Audit Report, by regular mail to: The 
Department's Office of Exemption Determinations (OED), 200 Constitution 
Avenue NW, Suite 400, Washington, DC 20210, or by private carrier to: 
122 C Street NW, Suite 400, Washington, DC 20001-2109, no later than 45 
days following its completion.'' Section I(i)(9) of the final exemption 
states: ``(9) Each DB QPAM provides its certified Audit Report, by 
regular mail. . . . This delivery must take place no later than thirty 
(30) days following completion of the Audit Report. . . .''
    The Department is revising Section I(i)(9) for consistency with the 
proposed exemption by replacing ``thirty (30) days'' with ``forty-five 
(45) days.'' Section I(i)(9) in relevant part now states: ``This 
delivery must take place no later than forty-five (45) days following 
completion of the Audit Report.''
Section I(i)(10)
    Section I(i)(10) of the exemption states: ``(10) Each DB QPAM and 
the auditor must submit to OED any engagement agreement(s) entered into 
pursuant to the engagement of the auditor under this exemption, no 
later than two (2) months after the execution of any such engagement 
agreement.''
    The Department is revising Section I(i)(10) to reflect that any 
engagement agreement entered into with the auditor prior to or on April 
18, 2018 in order to comply with this exemption must be submitted by 
June 17, 2018. Section

[[Page 7229]]

I(i)(10), as revised, now reads: ``(10) Any engagement agreement to 
perform the audits required under the terms of this exemption must be 
submitted to OED by June 17, 2018 if the agreement was executed on or 
prior to April 18, 2018. Any engagement agreement(s) entered into 
subsequent to April 18, 2018 must be submitted to OED no later than two 
(2) months after the execution of such engagement agreement.''
Section I(j)(7)
    Section I(j)(7) of the exemption in relevant part states: ``(7) By 
October 17, 2018, each DB QPAM must provide a notice of its obligations 
under this Section I(j) to each Covered Plan. For all other prospective 
Covered Plans, the DB QPAM will agree to its obligations under this 
Section I(j) in an updated investment management agreement between the 
DB QPAM and such clients or other written contractual agreement. This 
condition will be deemed met for each Covered Plan that received a 
notice pursuant to PTE 2016-13 that meets the terms of this 
condition.''
    The Department notes that the term ``prospective Covered Plan,'' as 
used in Section I(j)(7), means a Covered Plan that enters into a 
written asset or investment management agreement with a DB QPAM on or 
after October 17, 2018.
    The Department also notes that the phrase, ``This condition will be 
deemed met for each Covered Plan that received a notice pursuant to PTE 
2016-13 that meets the terms of this condition,'' means that a notice 
that satisfies Section I(j) of PTE 2016-13 will satisfy Section I(j)(7) 
of this exemption, unless such notice contains any language that 
limits, or is inconsistent with, the scope of this exemption.
Section I(k)
    Section I(k) of the exemption states: ``(k) By June 17, 2018, each 
DB QPAM will provide a notice of the exemption, along with a separate 
summary describing the facts that led to the Convictions (the Summary), 
which have been submitted to the Department, and a prominently 
displayed statement (the Statement) that the Convictions result in a 
failure to meet a condition in PTE 84-14, to each sponsor and 
beneficial owner of a Covered Plan, or the sponsor of an investment 
fund in any case where a DB QPAM acts as a sub-advisor to the 
investment fund in which such ERISA-covered plan and IRA invests. Any 
prospective client for which a DB QPAM relies on PTE 84-14 or has 
expressly represented that the manager qualifies as a QPAM or relies on 
the QPAM class exemption must receive the proposed and final exemptions 
with the Summary and the Statement prior to, or contemporaneously with, 
the client's receipt of a written asset management agreement from the 
DB QPAM. Disclosures may be delivered electronically.''
    The Department is revising Section I(k) by adding the phrase ``that 
entered into a written asset or investment management agreement with a 
DB QPAM on or before June 16, 2018'' following the phrase ``to each 
sponsor and beneficial owner of a Covered Plan.'' As revised, Section 
I(k) now states, in relevant part: ``By June 17, 2018, each DB QPAM 
will provide a notice of the exemption, along with a separate summary 
describing the facts that led to the Convictions (the Summary), which 
have been submitted to the Department, and a prominently displayed 
statement (the Statement) that each Conviction separately results in a 
failure to meet a condition in PTE 84-14, to each sponsor and 
beneficial owner of a Covered Plan that entered into a written asset or 
investment management agreement with a DB QPAM on or before June 16, 
2018, or the sponsor of an investment fund in any case where a DB QPAM 
acts as a sub-advisor to the investment fund in which such ERISA-
covered plan and IRA invests.''
    The Department notes that the phrase, ``Any prospective client for 
which a DB QPAM relies on PTE 84-14 or has expressly represented that 
the manager qualifies as a QPAM or relies on the QPAM class exemption . 
. .'' means any Covered Plan that enters into a written asset or 
investment management agreement with a DB QPAM on or after June 17, 
2018.
Section I(m)(1)
    Section I(m)(1) of the exemption states: ``(1) By October 17, 2018, 
Deutsche Bank designates a senior compliance officer (the Compliance 
Officer) who will be responsible for compliance with the Policies and 
Training requirements described herein.''
    The Department notes that each relevant line of business may 
designate its own Compliance Officer in order to comply with this 
condition.
Section I(m)(1)(i)
    Section I(m)(1)(i) of the exemption states: ``(i) The Compliance 
Officer must be a legal professional who has extensive experience with, 
and knowledge of, the regulation of financial services and products, 
including under ERISA and the Code.''
    The Department is removing the word ``legal'' from Section 
I(m)(1)(i). As revised, Section I(m)(1)(i) now reads: ``(i) The 
Compliance Officer must be a professional who has extensive experience 
with, and knowledge of, the regulation of financial services and 
products, including under ERISA and the Code.''
Section I(m)(1)(ii)
    Section I(m)(1)(ii) of the exemption states: ``(ii) The Compliance 
Officer must have a direct reporting line to the highest-ranking 
corporate officer in charge of legal compliance for asset management.''
    The Department is removing the word ``legal'' from Section 
I(m)(1)(ii). As revised, Section I(m)(1)(ii) now reads: ``(ii) The 
Compliance Officer must have a direct reporting line to the highest-
ranking corporate officer in charge of compliance for asset 
management.''
Section II(a)
    Section II(a) of the exemption states: ``The term `Convictions' 
means (1) the judgment of conviction against DB Group Services, in case 
number 3:15-cr-00062-RNC to be entered in the United States District 
Court for the District of Connecticut to a single count of wire fraud, 
in violation of 18 Sec.  U.S.C. 1343 . . .'' This Section is revised to 
read,: ``The term `Convictions' means (1) the judgment of conviction 
against DB Group Services that was entered on April 18, 2017, in case 
number 3:15-cr-00062-RNC in the United States District Court for the 
District of Connecticut to a single count of wire fraud, in violation 
of 18 U.S.C.[thinsp]1343 . . .''

Discussion of Written Comments

    The prefatory section to the discussion of written comments on page 
61840 of the Federal Register states: ``[t]he Department received 
written comments from the Applicant, members of the U.S. Congress, and 
a number of plan and IRA clients of Deutsche Bank.'' This section is 
revised to read, in relevant part, ``[t]he Department received written 
comments from the Applicant, members of the U.S. Congress, and several 
other commenters.''

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

[[Page 7230]]

Citigroup Inc. (Citigroup or the Applicant) Located in New York, New 
York

[Prohibited Transaction Exemption (PTE) 2017-05; Exemption Application 
No. D-11909]

Discussion

    On December 29, 2017, the Department published PTE 2017-05 in the 
Federal Register at 82 FR 61864. PTE 2017-05 is an administrative 
exemption from the prohibited transaction provisions of the Employee 
Retirement Income Security Act of 1974 (the Act), and the Internal 
Revenue Code of 1986, that permits certain entities with specified 
relationships to Citigroup to continue to rely upon the relief provided 
by PTE 84-14 \7\ for a period of five years,\8\ notwithstanding 
Citicorp's criminal conviction (the Conviction). The Department granted 
PTE 2017-05 to ensure that Covered Plans \9\ whose assets are managed 
by a Citigroup Affiliated QPAM or Citigroup Related QPAM may continue 
to benefit from the relief provided by PTE 84-14.
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    \7\ 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), hereinafter referred to as 
PTE 84-14 or the QPAM Exemption.
    \8\ PTE 2017-05 is effective from January 10, 2018 through 
January 9, 2023.
    \9\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of 
ERISA (``ERISA-covered plan'') or a plan subject to Section 4975 of 
the Code (``IRA''), with respect to which a Citigroup Affiliated 
QPAM relies on PTE 84-14, or with respect to which a Citigroup 
Affiliated QPAM (or any Citigroup affiliate) has expressly 
represented that the manager qualifies as a QPAM or relies on the 
QPAM class exemption (PTE 84-14). A Covered Plan does not include an 
ERISA-covered Plan or IRA to the extent the Citigroup Affiliated 
QPAM has expressly disclaimed reliance on QPAM status or PTE 84-14 
in entering into its contract, arrangement, or agreement with the 
ERISA covered plan or IRA.
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    The Department has decided to make certain technical and clarifying 
corrections to the exemption, as described below.

Technical Corrections

Preamble
    The Department is replacing the term ``Citcorp'' with ``Citicorp'' 
on page 61876 of the preamble to the exemption.
Section I(i)(1)
    The Department is revising its discussion of the entities subject 
to the Section I(i) Audit requirement. On page 61869 of the exemption, 
the Department is replacing the sentence that reads: ``The Department 
notes that Section I(i) requires the audit of each Citigroup entity 
that relies upon QPAM status, or expressly represents to ERISA-covered 
plan or IRA clients that it qualifies as a QPAM,'' with the following: 
``The Department notes that Section I(i) requires the audit of each 
Citigroup Affiliated QPAM.''
Section I(i)(10)
    Section I(i)(10) of the exemption states: ``(10) Each Citigroup 
Affiliated QPAM and the auditor must submit to [the Office of Exemption 
Determinations] OED: Any engagement agreement(s) entered into pursuant 
to the engagement of the auditor under this exemption, no later than 
two (2) months after the execution of any such engagement agreement.''
    The Department is revising Section I(i)(10) of the exemption to 
clarify the timing requirements for submission of the auditor 
agreements. As revised, Section I(i)(10) of the exemption now states: 
``(10) Any engagement agreement with an auditor to perform the audits 
required under the terms of this exemption must be submitted to OED by 
March 9, 2018 if the agreement was executed on or prior to January 10, 
2018. Any engagement agreement(s) entered into subsequent to January 
10, 2018 must be submitted to OED no later than two (2) months after 
the execution of such engagement agreement.''
Section I(j)(7)
    Section I(j)(7) of the exemption states: ``(7) By July 9, 2018, 
each Citigroup Affiliated QPAM must provide a notice of its obligations 
under this Section I(j) to each Covered Plan. For all other prospective 
Covered Plans, the Citigroup Affiliated QPAM will agree to its 
obligations under this Section I(j) in an updated investment management 
agreement between the Citigroup Affiliated QPAM and such clients or 
other written contractual agreement.''
    The Department notes that the term ``prospective Covered Plan,'' as 
used in Section I(j)(7), means a Covered Plan that enters into a 
written asset or investment management agreement with a Citigroup 
Affiliated QPAM on or after July 10, 2018.
Section I(k)
    Section I(k) of the exemption states: ``(k) By March 10, 2018, each 
Citigroup Affiliated QPAM will provide a notice of the exemption, along 
with a separate summary describing the facts that led to the Conviction 
(the Summary), which have been submitted to the Department, and a 
prominently displayed statement (the Statement) that the Conviction 
results in a failure to meet a condition in PTE 84-14, to each sponsor 
and beneficial owner of a Covered Plan, or the sponsor of an investment 
fund in any case where a Citigroup Affiliated QPAM acts as a sub-
advisor to the investment fund in which such ERISA-covered plan and IRA 
invests. Any prospective clients for which a Citigroup Affiliated QPAM 
relies on PTE 84-14 or has expressly represented that the manager 
qualifies as a QPAM or relies on the QPAM class exemption must receive 
the proposed and final exemptions with the Summary and the Statement 
prior to, or contemporaneously with, the client's receipt of a written 
asset or investment management agreement from the Citigroup Affiliated 
QPAM. Disclosures may be delivered electronically.''
    The Department notes that ``prospective clients,'' as referred to 
in Section I(k), means Covered Plans that enter into a written asset or 
investment management agreement with a Citigroup Affiliated QPAM on or 
after March 10, 2018. The Department also notes that the disclosure 
materials required to be provided to prospective clients under Section 
I(k) do not need to be provided to such clients prior to March 10, 
2018. Such disclosures, rather, must be made, ``prior to, or 
contemporaneously with, the client's receipt of a written asset or 
investment management agreement from the Citigroup Affiliated QPAM.'' 
Finally, the Department notes that the disclosure materials required to 
be provided to prospective clients under the second sentence of Section 
I(k) are the same materials referenced in the first sentence of Section 
I(k).
Section I(p)
    The discussion of the Right to Copies of Policies and Procedures on 
page 61876 of the exemption states: ``The Department has also modified 
Section I(p) to require that the Citigroup Affiliated QPAMs provide 
notice regarding the information on the website within 60 days of the 
effective date of this exemption, and thereafter to the extent certain 
material changes are made to the Policies.''
    The Department is revising the discussion of the Right to Copies of 
Policies and Procedures to conform with the language of Section I(p). 
As revised, the discussion on page 61876 now states: ``The Department 
has also modified Section I(p) to require that the Citigroup Affiliated 
QPAMs provide notice regarding the information on the website by July 
9, 2018. If the Policies are thereafter changed, each Covered Plan 
client must receive a new disclosure within six (6) months following 
the end of the calendar year during which the Policies were changed.''

[[Page 7231]]


FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department, 
telephone (202) 693-8456. (This is not a toll-free number).

Barclays Capital Inc. (BCI or the Applicant), Located in New York, New 
York

[Prohibited Transaction Exemption (PTE) 2017-06; Exemption Application 
No. D-11910]

Discussion

    On December 29, 2017, the Department published PTE 2017-06 in the 
Federal Register at 82 FR 61881. PTE 2017-06 is an administrative 
exemption from the prohibited transaction provisions of the Employee 
Retirement Income Security Act of 1974 (the Act), and the Internal 
Revenue Code of 1986, that permits certain entities with specified 
relationships to Barclays PLC (BPLC) to continue to rely upon the 
relief provided by PTE 84-14 for a period of five years,\10\ 
notwithstanding certain criminal convictions (the Convictions). The 
Department granted PTE 2017-06 to ensure that Covered Plans \11\ with 
assets managed by an asset manager within the corporate family of BPLC 
may continue to benefit from the relief provided by PTE 84-14. The 
effective date of PTE 2017-06 is January 10, 2018, and the exemption is 
effective from January 10, 2018, through January 9, 2023 (the Exemption 
Period).
---------------------------------------------------------------------------

    \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), hereinafter referred to as 
PTE 84-14.
    \11\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 
of ERISA (``ERISA-covered plan'') or a plan subject to section 4975 
of the Code (``IRA'') with respect to which a Barclays Affiliated 
QPAM relies on PTE 84-14, or with respect to which a Barclays 
Affiliated QPAM (or any BPLC affiliate) has expressly represented 
that the manager qualifies as a QPAM or relies on the QPAM class 
exemption (PTE 84-14). A Covered Plan does not include an ERISA-
covered plan or IRA to the extent the Barclays Affiliated QPAM has 
expressly disclaimed reliance on QPAM status or PTE 84-14 in 
entering into its contract, arrangement, or agreement with the 
ERISA-covered plan or IRA.
---------------------------------------------------------------------------

    The Department has decided to make certain technical and clarifying 
corrections to the exemption, as described below.

Technical Corrections

Section I(b)
    Section I(b) of the exemption states: ``Apart from a non-fiduciary 
line of business within BCI, the Barclays Affiliated QPAMs and the 
Barclays Related QPAMs (including their officers, directors, and agents 
other than BPLC, and employees of such Barclays Affiliated QPAMs) did 
not receive direct compensation, or knowingly receive indirect 
compensation, in connection with the criminal conduct that is the 
subject of the Conviction.'' This Section is revised by replacing 
``within BCI'' with ``of a BPLC subsidiary.'' In addition, the phrase, 
``who had responsibility for or exercised authority in connection with 
the management of plan assets'' now appears after ``Barclays Affiliated 
QPAMs'' in the parenthetical. As revised, Section I(b) reads, in 
pertinent part, ``Apart from a non-fiduciary line of business of a BPLC 
subsidiary, the Barclays Affiliated QPAMs and the Barclays Related 
QPAMs (including their officers, directors, and agents other than BPLC, 
and employees of such Barclays Affiliated QPAMs who had responsibility 
for or exercised authority in connection with the management of plan 
assets) did not receive direct compensation . . . .''
Section I(j)
    Section I(j) of the exemption states, in relevant part:
    ``As of January 10, 2018 and throughout the Exemption Period, with 
respect to any arrangement, agreement, or contract between a Barclays 
Affiliated QPAM and a Covered Plan, the Barclays Affiliated QPAM agrees 
and warrants . . . .''
    For clarity, the phrase, ``As of January 10, 2018 and throughout 
the Exemption Period,'' is revised to read, ``Effective on the date 
that a Barclays Affiliated QPAM enters into any arrangement, agreement, 
or contract, after January 10, 2018, with any Covered Plan, and 
throughout the Exemption Period, . . . .''
Section I(j)(7)
    Section I(j)(7) states: ``Prior to a Barclays Affiliated QPAM's 
engagement with an ERISA-covered plan or IRA for the provision of asset 
management or other discretionary fiduciary services . . . .'' The 
Department is replacing the phrase, ``an ERISA-covered plan or IRA'' 
with ``a Covered Plan.''
Section I(k)
    Section I(k) states: ``Any client for which a Barclays Affiliated 
QPAM relies on PTE 84-14 or has expressly represented that the manager 
qualifies as a QPAM or relies on the QPAM class exemption must receive 
the proposed and final exemptions, along with a separate summary 
describing the facts that led to the Conviction (the Summary), which 
have been submitted to the Department, and a prominently displayed 
statement (the Statement) that the Conviction results in a failure to 
meet a condition in PTE 84-14, prior to, or contemporaneously with, the 
client's receipt of a written asset management agreement from the 
Barclays Affiliated QPAM. Disclosures may be delivered 
electronically.''
    The Department is replacing the term ``client'' with ``Covered 
Plan.'' As revised, ``Covered Plan,'' as used in Section I(k), means a 
Covered Plan that enters into a written asset or investment management 
agreement with a Barclays Affiliated QPAM.
Section I(m)(1)(iv)
    Section I(m)(1)(iv) states: ``(iv) Each Annual Report must be 
provided to the appropriate corporate officers of BPLC and each 
Barclays Affiliated QPAM to which such report relates; the head of 
compliance and the General Counsel (or their functional equivalent) of 
the relevant Barclays Affiliated QPAM and the General Counsel (or their 
functional equivalent) of BPLC; and must be made unconditionally 
available to the independent auditor described in Section I(i) above.''
    Comment Section 37 of the exemption at 82 FR 61896 states that the 
Department intended to revise Section I(m)(1)(iv) by deleting the 
phrase, ``the appropriate corporate officers of BPLC and each Barclays 
Affiliated QPAM to which such report relates'' from the condition. Such 
revision did not appear in the text. Therefore, the Department is now 
revising Section I(m)(1)(iv) to read, ``(iv) Each Annual Report must be 
provided to the head of compliance and the General Counsel (or their 
functional equivalent) of the relevant Barclays Affiliated QPAM and the 
General Counsel (or their functional equivalent) of BPLC; and must be 
made unconditionally available to the independent auditor described in 
Section I(i) above.''
Section II(d) \12\
    Section II(d) states, ``The term ``Conviction'' means the judgment 
of conviction against BPLC for violation of the Sherman Antitrust Act, 
15 U.S.C. 1, which is scheduled to be entered in the District Court for 
the District of Connecticut (the District Court), Case Number 3:15-cr-
00077-SRU-1.''
---------------------------------------------------------------------------

    \12\ In the final grant notice, the Department renumbered 
Section II(d), which was previously Section II(e) in the proposed 
exemption.
---------------------------------------------------------------------------

    Section II(d) is revised to reflect that the Conviction occurred 
prior to the effective date of the exemption. Section II(d) now reads, 
in pertinent part,

[[Page 7232]]

``. . . . 15 U.S.C. 1, which was entered in the District Court. . . .''
Section II(e) \13\
    Section II(e) states, ``The term ``Conviction Date'' means the date 
of the judgment of the trial court. For avoidance of confusion, the 
Conviction Date is January 10, 2017, as set forth in Case Number 3:15-
cr-00077-SRU.'' Section II(e) is revised to add a ``-1'' after the 
letters ``SRU'' in the case number. As revised, Section II(e) now 
reads, in pertinent part, ``. . . . as set forth in Case Number 3:15-
cr-00077-SRU-1.''
---------------------------------------------------------------------------

    \13\ In the final grant notice, the Department renumbered 
Section II(e), which was previously Section II(f) in the proposed 
exemption.

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

UBS Assets Management (Americas) Inc.; UBS Realty Investors LLC; UBS 
Hedge Fund Solutions LLC; UBS O'Connor LLC; and Certain Future 
Affiliates in UBS's Asset Management and Wealth Management Americas 
Divisions (collectively, the Applicants or the UBS QPAMs) Located in 
Chicago, Illinois; Hartford, Connecticut; New York, New York; and 
Chicago, Illinois, Respectively

[Prohibited Transaction Exemption (PTE) 2017-07; Exemption Application 
No. D-11907]

Discussion

    On December 29, 2017, the Department published PTE 2017-07 in the 
Federal Register at 82 FR 61903. PTE 2017-07 is an administrative 
exemption from the prohibited transaction provisions of the Employee 
Retirement Income Security Act of 1974 (the Act), and the Internal 
Revenue Code of 1986, that permits certain entities with specified 
relationships to UBS (as defined in Section II(g)) (hereinafter, the 
UBS QPAMs) to continue to rely upon the relief provided by PTE 84-14 
for a period of three years,\14\ notwithstanding the ``2013 
Conviction'' of UBS Securities Japan Co. Ltd \15\ and the ``2017 
Conviction'' of UBS (collectively, the Convictions as defined in 
Section II(a)). The Department granted PTE 2017-07 to ensure that 
Covered Plans \16\ with assets managed by UBS QPAMs may continue to 
benefit from the relief provided by PTE 84-14. The exemption is 
effective from January 10, 2018 through January 9, 2021 (the Exemption 
Period). The Department has decided to make certain technical and 
clarifying corrections to the exemption, as described below.
---------------------------------------------------------------------------

    \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), hereinafter referred to as 
PTE 84-14 or the QPAM exemption.
    \15\ UBS Securities Japan Co. Ltd is a wholly owned subsidiary 
of UBS incorporated under the laws of Japan.
    \16\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 
of ERISA (``ERISA-covered plan'') or a plan subject to section 4975 
of the Code (``IRA'') with respect to which a UBS QPAM relies on PTE 
84-14, or with respect to which a UBS QPAM (or any UBS affiliate) 
has expressly represented that the manager qualifies as a QPAM or 
relies on the QPAM class exemption (PTE 84-14). A Covered Plan does 
not include an ERISA-covered plan or IRA to the extent the UBS QPAM 
has expressly disclaimed reliance on QPAM status or PTE 84-14 in 
entering into its contract, arrangement, or agreement with the 
ERISA-covered plan or IRA.
---------------------------------------------------------------------------

Technical Corrections

Section I(f)
    Section I(f) of the exemption states: ``[a] UBS QPAM did not 
exercise authority over 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) in a manner that it knew or should have known would: Further 
the FX Misconduct or the criminal conduct that is the subject of the 
Convictions; or cause the UBS QPAM, its affiliates or related parties 
to directly or indirectly profit from the FX Misconduct or the criminal 
conduct that is the subject of the Convictions.'' The Department is 
revising Section I(f) by inserting the word ``or'' between the phrase 
``or cause the UBS QPAM'' and the phrase ``its affiliates'' and by 
removing the phrase ``or related parties.'' As revised, Section I(f) 
now reads, ``A UBS QPAM did not exercise authority over 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) in a manner that it knew or should 
have known would: further the FX Misconduct or the criminal conduct 
that is the subject of the Convictions; or cause the UBS QPAM or its 
affiliates to directly or indirectly profit from the FX Misconduct or 
the criminal conduct that is the subject of the Convictions.''
Section I(h)(1)(ii)
    Section I(h)(1)(ii) of the exemption states: ``[t]he UBS QPAM fully 
complies with ERISA's fiduciary duties, and with ERISA and the Code's 
prohibited transaction provisions, in such case as applicable, and does 
not knowingly participate in any violation of these duties and 
provisions with respect to Covered Plans.'' For clarity and 
consistency, the Department is replacing the word ``such'' with the 
word ``each'' and by inserting the phrase ``with respect to each 
Covered Plan'' after the phrase ``as applicable.'' As revised, Section 
I(h)(1)(ii) now reads, ``The UBS QPAM fully complies with ERISA's 
fiduciary duties, and with ERISA and the Code's prohibited transaction 
provisions, in each case as applicable with respect to each Covered 
Plan, and does not knowingly participate in any violation of these 
duties and provisions with respect to Covered Plans.''
Section I(h)(2)(ii) and Section I(i)(10)
    Section I(h)(2)(ii) of the exemption states: ``(2) Each UBS QPAM 
must develop and implement a program of training (the Training), 
conducted at least annually, for all relevant UBS QPAM asset/portfolio 
management, trading, legal, compliance, and internal audit personnel. 
The Training must: . . . . (ii) [b]e conducted by an independent 
professional who has been prudently selected and who has appropriate 
technical training and proficiency with ERISA and the Code.'' The 
Department is revising Section I(h)(2)(ii) to reflect that the required 
training may be conducted by appropriate UBS personnel who have been 
prudently selected. Therefore, the Department is removing the word 
``independent'' from Section I(h)(2)(ii) and, as revised, Section 
I(h)(2)(ii) now reads: ``Be conducted by a professional who has been 
prudently selected and who has appropriate technical training and 
proficiency with ERISA and the Code.''
    Section I(i)(10) of the exemption states: ``[e]ach UBS QPAM and the 
auditor must submit to OED any engagement agreement(s) entered into 
pursuant to the engagement of the auditor under this exemption. 
Further, each UBS QPAM must submit to OED any engagement entered into 
with any other person or entity retained in connection with such QPAM's 
compliance with the Training or Policies conditions of this exemption 
no later than two (2) months after the execution of any such engagement 
agreement.'' The Department is revising Section I(i)(10) to reflect 
that the UBS QPAMs need not submit to Office of Exemption 
Determinations (OED) an engagement agreement entered into to comply 
with the training or Policy conditions, and to reflect that any 
engagement agreement entered into with the auditor prior to or on 
January 10, 2018 in order to comply with this exemption must be 
submitted by March 9, 2018. Section I(i)(10), as revised, now reads: 
``Any engagement agreement with an auditor to perform the audits

[[Page 7233]]

required under the terms of this exemption must be submitted to OED by 
March 9, 2018 if the agreement was executed on or prior to January 10, 
2018. Any engagement agreement(s) entered into subsequent to January 
10, 2018 must be submitted to OED no later than two (2) months after 
the execution of such engagement agreement.''
Section I(i)(1) and Footnote 71
    Section I(i)(1) of the exemption states, in relevant part: ``Each 
UBS QPAM submits to an audit conducted annually 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 each UBS QPAM's compliance with, the Policies and 
Training described herein. The audit requirement must be incorporated 
in the Policies. The first annual audit must cover a fourteen-month 
period that begins on January 10, 2017 (the Initial Audit Period) and 
all subsequent audits must cover consecutive twelve month periods 
commencing upon the end of the Initial Audit Period. The Initial Audit 
Period shall cover the period of time during which PTE 2016-17 is 
effective and a portion of the time during which this exemption is 
effective and the audit terms contained in this Section I(i) will 
supersede the terms of Section I(i) of PTE 2016-17 except as otherwise 
provided in this exemption. In determining compliance with the 
conditions for relief in PTE 2016-17 and this exemption, including the 
Policies and Training requirements, for purposes of conducting the 
audit, the auditor will rely on the conditions for exemptive relief as 
then applicable to the respective periods under audit'' (footnotes 
omitted).
    To correct the timing of the audit requirement, the Department is 
revising Section I(i)(1) of the exemption to reflect that the Initial 
Audit Period begins on January 10, 2018 and ends on March 9, 2019, and 
the corresponding Audit Report must be completed by September 9, 2019. 
Additionally, the Second audit period must cover the period March 10, 
2019 through March 9, 2020 and must be completed by September 9, 2020 
and the third audit must cover the period from March 10, 2020 through 
March 9, 2021. In connection with the revision, the Department is 
deleting from Section I(i) the following language and corresponding 
footnote 72 on page 61917 of the exemption: ``The Initial Audit Period 
shall cover the period of time during which PTE 2016-17 is effective 
and a portion of the time during which this exemption is effective and 
the audit terms contained in this Section I(i) will supersede the terms 
of Section I(i) of PTE 2016-17 except as otherwise provided in this 
exemption. In determining compliance with the conditions for relief in 
PTE 2016-17 and this exemption, including the Policies and Training 
requirements, for purposes of conducting the audit, the auditor will 
rely on the conditions for exemptive relief as then applicable to the 
respective periods under audit.''
    As revised, Section I(i)(1) in relevant part now states, ``Each UBS 
QPAM submits to an audit conducted annually 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 each UBS QPAM's compliance with, the Policies and 
Training described herein. The audit requirement must be incorporated 
in the Policies. The first annual audit must cover a fourteen-month 
period that begins on January 10, 2018 and ends on March 9, 2019 (the 
Initial Audit Period), and must be completed by September 9, 2019. The 
second audit must cover the period from March 10, 2019 through March 9, 
2020 and must be completed by September 9, 2020. In the event that the 
Exemption Period is extended or a new exemption is granted, the third 
audit would cover the period from March 10, 2020 through March 9, 2021 
and would have to be completed by September 9, 2021 (unless the 
Department chooses to alter the annual audit requirement in the new or 
extended exemption).''
    In coordination with the correction to Section I(i)(1) above, 
Footnote 71 on page 61917 included with Section I(i) is revised to 
state, ``The third audit referenced above would not have to be 
completed until after the Exemption Period expires. If the Department 
ultimately decides to grant relief for an additional period, it could 
decide to alter the terms of the exemption, including the audit 
conditions (and the timing of the audit requirements). Nevertheless, 
the Applicant should anticipate that the Department will insist on 
strict compliance with the audit terms and schedule set forth above. As 
it considers any new exemption application, the Department may also 
contact the auditor for any information relevant to its 
determination.''
    The Department's discussion in Comment V on page 61909 of the 
exemption should be read in a manner that is consistent with these 
revisions.
Section I(i)(5)(ii)
    Section I(i)(5)(ii) of the exemption states: ``(5) For each audit, 
on or before the end of the relevant period described in Section 
I(i)(1) for completing the audit, the auditor must issue a written 
report (the Audit Report) to UBS and the UBS QPAM to which the audit 
applies that describes the procedures performed by the auditor during 
the course of its examination. The auditor, at its discretion, may 
issue a single consolidated Audit Report that covers all the UBS QPAMs. 
The Audit Report must include the auditor's specific determinations 
regarding: . . . (ii) The adequacy of the Annual Review described in 
Section I(m).''
    For clarity, the Department is revising Section I(i)(5)(ii) of the 
exemption by adding the phrase ``most recent'' before the phrase 
``Annual Review''. As revised, Section I(i)(5)(ii) now reads, in 
relevant part, ``The adequacy of the most recent Annual Review 
described in Section I(m).''
Section I((i)(7)
    Section I(i)(7) of the exemption states: ``[w]ith respect to each 
Audit Report, the General Counsel, or one of the three most senior 
executive officers of the UBS QPAM to which the Audit Report applies, 
must certify in writing, under penalty of perjury, that the officer has 
reviewed the Audit Report and this exemption; that, such UBS QPAM has 
addressed, corrected, remedied any noncompliance and inadequacy or has 
an appropriate written plan to address any inadequacy regarding the 
Policies and Training identified in the Audit Report. Such 
certification must also include the signatory's determination, 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.''
    For consistence with the Department's intention, as expressed in 
the exemption's comment section on page 61911 regarding certification 
of the Audit Report, Section I(i)(7) is revised by adding the phrase 
``to the best of such officer's knowledge at the time'' after the 
phrase ``that the officer has reviewed the Audit Report and this 
exemption; that . . .'' and after the phrase ``Such certification must 
also include the signatory's determination that. . . .'' As revised, 
Section I(i)(7) now reads, ``With respect to each Audit Report, the 
General Counsel, or one of the three most senior executive officers of 
the UBS QPAM to which the Audit Report applies, must certify in 
writing, under penalty of perjury, that the officer has reviewed the 
Audit Report and this exemption; that, to the best of such officer's 
knowledge at the time, such

[[Page 7234]]

UBS QPAM has addressed, corrected, remedied any noncompliance and 
inadequacy or has an appropriate written plan to address any inadequacy 
regarding the Policies and Training identified in the Audit Report. 
Such certification must also include the signatory's determination 
that, to the best of such officer's knowledge at the time, 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.''
Section I(i)(9)
    Section I(i)(9) of the proposed exemption states: ``(9) Each UBS 
QPAM must provide its certified Audit Report, by regular mail to: The 
Department's Office of Exemption Determinations (OED), 200 Constitution 
Avenue NW, Suite 400, Washington, DC 20210, or by private carrier to: 
122 C Street NW, Suite 400, Washington, DC 20001-2109, no later than 45 
days following its completion.'' Section I(i)(9) of the final exemption 
states: ``(9) Each UBS QPAM provides its certified Audit Report, by 
regular mail . . . . This delivery must take place no later than 30 
days following completion of the Audit Report.''
    The Department is revising Section I(i)(9) for consistence with the 
proposed exemption, by replacing the phrase ``30 days'' with the phrase 
``45 days.'' As revised, Section I(i)(9) in relevant part now states, 
``This delivery must take place no later than 45 days following 
completion of the Audit Report.''
Section I(j)(7)
    Section I(j)(7) of the exemption states: ``[b]y July 9, 2018, each 
UBS QPAM must provide a notice of its obligations under this Section 
I(j) to each Covered Plan. For all other prospective Covered Plans, the 
UBS QPAM will agree to its obligations under this Section I(j) in an 
updated investment management agreement between the UBS QPAM and such 
clients or other written contractual agreement. This condition will be 
deemed met for each Covered Plan that received a notice pursuant to PTE 
2016-17 that meets the terms of this condition. Notwithstanding the 
above, a UBS QPAM will not violate the condition solely because a Plan 
or IRA refuses to sign an updated investment management agreement.''
    The Department notes that the term ``prospective Covered Plan,'' as 
used in Section I(j)(7), means a Covered Plan that enters into a 
written asset or investment management agreement with a UBS QPAM on or 
after July 9, 2018.
Section I(k)
    Section I(k) of the exemption states: ``By March 10, 2018, each UBS 
QPAM will provide a notice of the exemption, along with a separate 
summary describing the facts that led to the Convictions (the Summary), 
which have been submitted to the Department, and a prominently 
displayed statement (the Statement) that each Conviction separately 
results in a failure to meet a condition in PTE 84-14, to each sponsor 
and beneficial owner of a Covered Plan, or the sponsor of an investment 
fund in any case where a UBS QPAM acts as a sub-advisor to the 
investment fund in which such ERISA-covered plan and IRA invests. Any 
prospective client for which a UBS QPAM relies on PTE 84-14 or has 
expressly represented that the manager qualifies as a QPAM or relies on 
the QPAM class exemption must receive the proposed and final exemptions 
with the Summary and the Statement prior to, or contemporaneously with, 
the client's receipt of a written asset management agreement from the 
UBS QPAM. Disclosures may be delivered electronically.''
    The Department is revising Section I(k) by adding the phrase ``that 
entered into a written asset or investment management agreement with a 
UBS QPAM on or before March 9, 2018'' following the phrase ``to each 
sponsor and beneficial owner of a Covered Plan'' to clarify that 
Covered Plans that have entered into a written asset or investment 
management agreement with a UBS QPAM on or before March 9, 2018 must 
receive the disclosure material required under Section I(k) by March 
10, 2018. As revised, Section I(k) in relevant part now states, ``By 
March 10, 2018, each UBS QPAM will provide a notice of the exemption, 
along with a separate summary describing the facts that led to the 
Convictions (the Summary), which have been submitted to the Department, 
and a prominently displayed statement (the Statement) that each 
Conviction separately results in a failure to meet a condition in PTE 
84-14, to each sponsor and beneficial owner of a Covered Plan that 
entered into a written asset or investment management agreement with a 
UBS QPAM on or before March 9, 2018, or the sponsor of an investment 
fund in any case where a UBS QPAM acts as a sub-advisor to the 
investment fund in which such ERISA-covered plan and IRA invests.''
    The Department notes that the phrase, ``Any prospective client for 
which a UBS QPAM relies on PTE 84-14 or has expressly represented that 
the manager qualifies as a QPAM or relies on the QPAM class exemption . 
. .'' means: Any Covered Plan that enters into a written asset or 
investment management agreement with a UBS QPAM on or after March 10, 
2018.
Section I(m)(1) and Footnote 73
    Section I(m)(1) of the exemption states: ``[b]y July 9, 2018, UBS 
designates a senior compliance officer (the Compliance Officer) who 
will be responsible for compliance with the Policies and Training 
requirements described herein. The Compliance Officer must conduct an 
annual review for each period corresponding to the audit periods set 
forth in Section I(i)(1) (including the Initial Audit Period) (the 
Annual Review) to determine the adequacy and effectiveness of the 
implementation of the Policies and Training. With respect to the 
Compliance Officer, the following conditions must be met'' (footnote 
omitted). Footnote 73 on page 61919 of the exemption provides that, 
``Note that such Annual Review must be completed with respect to the 
annual periods ending January 9, 2019; January 9, 2020; and January 9, 
2021.''
    For consistence with the Department's intention, as expressed in 
the exemption's comment section V on page 61909, that it would be 
efficient for the time frame for the Annual Review to coordinate with 
the time frame for the compliance review conducted by the UBS QPAMs for 
other regulators, the Department is revising the Initial Audit Period 
to reflect that such period begins on January 10, 2018 and ends on 
March 9, 2019. Additionally, the Department is revising footnote 73 on 
page 61919 of the exemption to be consistent with the revised dates of 
the audit periods and to remove the word ``annual'' before the word 
``periods.'' As revised, footnote 73 now reads, ``Note that such Annual 
Review must be completed with respect to the periods ending March 9, 
2019; March 9, 2020; and March 9, 2021.''
Section I(m)(1)(ii)
    Section I(m)(1)(ii) provides that, ``[t]he Compliance Officer has a 
dual-reporting line within UBS's Compliance and Operational Risk 
Control (C&ORC) function: (A) a divisional reporting line to the Head 
of Compliance and Operational Risk Control, Asset Management, and (B) a 
regional reporting line to the Head of Americas Compliance and 
Operational Risk Control. The C&ORC function will be organizationally 
independent of UBS's business divisions--including Asset Management and 
the Investment Bank--and is led by the Global Head of

[[Page 7235]]

C&ORC, who will report directly to UBS's Chief Risk Officer.''
    To accommodate UBS's organizational structure in a manner 
consistent with the requirements of this exemption, Section I(m)(1)(ii) 
of the exemption is revised to read, ``The Compliance Officer has a 
reporting line within UBS's Compliance and Operational Risk Control 
(C&ORC) function to the Head of Compliance and Operational Risk 
Control, Asset Management. The C&ORC function is organizationally 
independent of UBS's business divisions--including Asset Management and 
the Investment Bank--and is led by the Global Head of C&ORC, who will 
report directly to UBS's Chief Risk Officer.''
Section I(m)(2)(v)
    Section I(m)(2)(v) of the exemption states that, ``[e]ach Annual 
Review, including the Compliance Officer's written Annual Report, must 
be completed within at least three (3) months following the end of the 
period to which it relates.'' Section I(m)(2)(v) of the exemption is 
revised by deleting the phrase ``at least.'' As revised, Section 
I(m)(2)(v) now reads, ``Each Annual Review, including the Compliance 
Officer's written Annual Report, must be completed within three (3) 
months following the end of the period to which it relates.''

Comment Section Regarding Notice of Right To Obtain Copy of Policies--
Section I(r)

    The comment section on page 61915 of the exemption discussing the 
right to obtain a copy of the Polices is hereby revised to be 
consistent with Section I(r) of the exemption, which provides that 
``[b]y July 09, 2018, each UBS QPAM, in its agreements with, or in 
other written disclosures provided to Covered Plans, will clearly and 
prominently inform Covered Plan clients of their right to obtain a copy 
of the Policies or a description (Summary Policies) which accurately 
summarizes key components of the UBS QPAM's written Policies developed 
in connection with this exemption. . . .'' Accordingly, the sentence 
beginning ``[t]he Department also agrees with the Applicant . . .'' in 
the first full paragraph in the second column on page 61915 is revised 
to read, ``The Department also agrees with the Applicant that the 
timing requirement for disclosure should be revised and, accordingly, 
has modified the condition of Section I(r) to require notice regarding 
the information on the website within 6 months of the effective date of 
this exemption (by July 09, 2018), and thereafter to the extent certain 
material changes are made to the Policies.''

References to ``UBS'' and ``UBS, AG''

    The term ``UBS, AG'' as it appears in Section II(g) is revised to 
``UBS AG.'' The term ``UBS, AG'' is it appears elsewhere in the 
exemption is revised to mean ``UBS.''

Definition of UBS QPAM--Section II(h)

    Section II(h) of the exemption states: ``[t]he term `UBS QPAM' 
means UBS Asset Management (Americas) Inc., UBS Realty Investors LLC, 
UBS Hedge Fund Solutions LLC, UBS O'Connor LLC, and any future entity 
within the Asset Management or the Wealth Management Americas divisions 
of UBS, AG that qualifies as a `qualified professional asset manager' 
(as defined in Section VI(a) of PTE 84-14) and that relies on the 
relief provided by PTE 84-14 or represents to ERISA-covered plans and 
IRAs that it qualifies as a QPAM and with respect to which UBS, AG is 
an `affiliate' (as defined in Part VI(d) of PTE 84-14). The term `UBS 
QPAM' excludes UBS, AG and UBS Securities Japan'' (footnote omitted).
    The Department is revising Section II(h) of the exemption by 
deleting the phrase ``or represents to ERISA-covered plans and IRAs 
that it qualifies as a QPAM.'' As revised, Section II(h) now reads, 
``The term `UBS QPAM' means UBS Asset Management (Americas) Inc., UBS 
Realty Investors LLC, UBS Hedge Fund Solutions LLC, UBS O'Connor LLC, 
and any future entity within the Asset Management or the Wealth 
Management Americas divisions of UBS that qualifies as a `qualified 
professional asset manager' (as defined in Section VI(a) \17\ of PTE 
84-14) and that relies on the relief provided by PTE 84-14 and with 
respect to which UBS is an `affiliate' (as defined in Part VI(d) of PTE 
84-14). The term `UBS QPAM' excludes UBS and UBS Securities Japan.''
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    \17\ 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.

FOR FURTHER INFORMATION CONTACT: Mr. Brian Mica of the Department, 
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telephone (202) 693-8402. (This is not a toll-free number).

Lyssa E. Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2018-03396 Filed 2-16-18; 8:45 am]
 BILLING CODE 4510-29-P