[Federal Register Volume 85, Number 29 (Wednesday, February 12, 2020)]
[Notices]
[Pages 8020-8029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02834]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2020-01; Exemption Application No. D-
11998]


Exemption From Certain Prohibited Transaction Restrictions 
Involving UBS Asset 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 Global Wealth Management U.S. 
Divisions (collectively, the Applicants or the UBS QPAMs) Located in 
Chicago, Illinois; Hartford, Connecticut; New York, New York; and 
Chicago, Illinois, Respectively

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of exemption.

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SUMMARY: This document contains a notice of exemption 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). The exemption affects the ability of certain entities with 
specified relationships to UBS AG (UBS), UBS Securities Japan Co., Ltd. 
(UBS Securities Japan), and UBS (France) S.A. (UBS France) to continue 
to rely upon relief provided by Prohibited Transaction Exemption 84-14.

DATES: This exemption will be in effect for five years beginning on 
February 20, 2020 and ending on February 20, 2025.

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

SUPPLEMENTARY INFORMATION: On September 30, 2019, the Department 
published a notice of proposed exemption in the Federal Register at 84 
FR 51621, permitting certain entities with specified relationships to 
UBS to continue to rely upon the relief provided by PTE 84-14 \1\ for a 
period of five years, notwithstanding certain criminal convictions, as 
described herein (the Convictions) and the 2019 French Conviction.
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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.
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    The Department is granting this exemption to ensure that Covered 
Plans \2\ with assets managed by an asset manager within the corporate 
family of UBS may continue to benefit from the relief provided by PTE 
84-14. This exemption will be in effect for five years from February 
20, 2020 (the date the relief in PTE 2019-01\3\ expires) through 
February 20, 2025. The grant of this five-year exemption does not 
imply, and is not intended to imply, that the Department will grant 
additional relief for UBS QPAMs to continue to rely on the relief in 
PTE 84-14 following the end of the five-year period.
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    \2\ ``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.
    \3\ See PTE 2019-01; 84 FR 6163, February 26, 2019.
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    This exemption provides only the relief specified in the text of 
the exemption, and only with respect to the criminal convictions or 
criminal conduct described herein. It provides no relief from 
violations of any law other

[[Page 8021]]

the prohibited transaction provisions of ERISA and the Code. 
Furthermore, the Department cautions that the relief in this exemption 
will terminate immediately if, among other things, an entity within the 
UBS corporate structure is convicted of a crime described in Section 
I(g) of PTE 84-14 (other than the Convictions or the 2019 French 
Conviction) during the Exemption Period. The Department intends for the 
terms of this exemption to promote adherence to basic fiduciary 
standards under ERISA and the Code. This exemption also aims to ensure 
that Covered Plans can terminate relationships in an orderly and cost-
effective fashion in the event the fiduciary of a Covered Plan 
determines it is prudent to terminate the relationship with a UBS QPAM. 
The Department makes the requisite findings under ERISA section 408(a) 
based on adherence to all of the conditions of the exemption. 
Accordingly, affected parties should be aware that the conditions 
incorporated in this exemption are, taken as a whole, necessary for the 
Department to grant the relief requested by the Applicant. Absent these 
or similar conditions, the Department would not have granted this 
exemption.
    The Applicants requested an individual exemption pursuant to 
section 408(a) of ERISA and section 4975(c)(2) of the Code, and in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(76 FR 66637, 66644, October 27, 2011). Effective December 31, 1978, 
section 102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 
(1996), transferred the authority of the Secretary of the Treasury to 
issue administrative exemptions under section 4975(c)(2) of the Code to 
the Secretary of Labor. Accordingly, the Department grants this 
exemption under its sole authority.

Department's Comment

    The Department cautions that the relief in this exemption will 
terminate immediately if an entity within the UBS corporate structure 
is convicted of a crime described in Section I(g) of PTE 84-14 (other 
than the Convictions and the 2019 French Conviction) during the 
Exemption Period. Although the UBS QPAMs could apply for a new 
exemption in that circumstance, the Department would not be obligated 
to grant the exemption. The Department specifically designed the terms 
of this exemption to permit plans to terminate their relationships in 
an orderly and cost effective fashion in the event of an additional 
conviction, or the expiration of this exemption without additional 
relief, or a determination that it is otherwise prudent for a plan to 
terminate its relationship with an entity covered by the 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 exemption. All comments and requests for a hearing 
were due by November 14, 2019. The Department received written comments 
from the Applicants and a member of the public. After considering the 
entire record developed in connection with the Applicant's exemption 
request, the Department has determined to grant the exemption, as 
described below.

UBS QPAMs' Comments

I. The Term of the Exemption

    The Applicants request that the Department grant exemptive relief 
for the full term of the PTE 84-14 Section I(g) disqualification period 
by extending the term of the exemption from five years to either nine 
years or, if UBS is successful in its appeal of the 2019 French 
Conviction, to 10 years, beginning on January 10, 2017 (the 2017 
Conviction Date).
    The UBS QPAMs state the ``reasons articulated in the notice of the 
Proposed Exemption do not support the Department's determination that 
an additional exemption for a 5-year period--but not through the end of 
the 9-year disqualification period--`would be protective [of] and in 
the best interest of participants and beneficiaries.' '' The UBS QPAMs 
argue that the conditions of the exemption, such as the independent 
audit and the Audit Report, are designed to provide the Department with 
sufficient opportunities to review the UBS QPAMs compliance with the 
exemption. The UBS QPAMs state that the ``basis for the Department's 
determination that the Proposed Exemption is administratively feasible 
is that these same conditions `will provide an incentive for, and a 
measure of,' the UBS QPAMs' ongoing compliance with the exemption 
without any `immediate need for review and oversight by the 
Department.' ''.\4\ The UBS QPAMs argue that limiting the term of the 
exemption to five years provides no additional protections given the 
exemption's comprehensive internal and external monitoring requirements 
and the protections provided by the Department's exemption regulations.
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    \4\ The Department notes that UBS QPAMs incorrectly restated the 
relevant language in the proposed exemption. The actual language of 
the proposed exemption states ``The Department has tentatively 
determined that the proposal is administratively feasible since, 
among other things, a qualified independent auditor will be required 
to perform an in-depth audit covering, among other things, each UBS 
QPAM's compliance with the exemption, and a corresponding written 
audit report will be provided to the Department and available to the 
public. The independent audit will provide an incentive for, and a 
measure of, compliance, while reducing the immediate need for review 
and oversight by the Department.'' See 84 FR 51621 at 51627 
(September 30, 2019).
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    The UBS QPAMs argue that the Department justifies the five-year 
term in the proposed exemption by referring to a finding by the 
independent auditors that a UBS QPAM failed to follow the conditions of 
class exemption PTE 86-128 when using affiliated brokers for securities 
transactions,\5\ but that the Department failed to explain the 
relevance of the auditor's findings to the five-year term. The UBS 
QPAMs represent that they fully corrected the audit finding, including 
reimbursement of approximately $11,000 of commissions plus interest for 
the relevant period. The UBS QPAMs also state that the following year's 
audit report submitted on October 3, 2019, noted the correction and 
stated that the relevant UBS QPAM adopted a policy prohibiting ERISA 
accounts from trading with affiliates.
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    \5\ In that audit report dated August 7, 2018, Fiduciary 
Counselors, Inc. states, on page 26: ``Asset Management [QPAM] 
informed us that during the Audit Period it utilized PTE 86-128 with 
respect to effecting securities transactions using affiliated 
brokers for one ERISA Plan client. However, it does not appear that 
Asset Management correctly followed all of the requirement of PTE 
86-128. Specifically, it does not appear that Asset Management 
provided its client with the required annual termination notice. 
Additionally, it does not appear that Asset Management timely 
provided its client with the required annual disclosure summary.''
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    Furthermore, the UBS QPAMs state that the Department did not 
explain how or why the detailing of UBS's prior convictions and conduct 
in the proposed exemption was relevant and how the prior convictions 
and conduct persuaded the Department to conclude that a only a five-
year exemption would be appropriate even though the UBS QPAMs have 
represented that no UBS QPAM personnel participated in or had knowledge 
of the underlying conduct in those matters. Lastly, the UBS QPAMs, 
repeating their previous comments on the proposal for PTE 2017-07,\6\ 
claim that granting a limited-term exemption would create uncertainty 
among covered plans regarding the duration of relief and therefore 
cause potential harm to the covered plans from having to

[[Page 8022]]

expend the time and resources to be sure that they can replace the UBS 
QPAMs in the event that the Department does not grant permanent relief.
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    \6\ 82 FR 61903 (December 29, 2017). PTE 2017-07 is an exemption 
that permits UBS QPAMs to rely on the exemptive relief provided by 
PTE 84-14, notwithstanding the 2013 and 2017 Convictions. See also 
the notice of proposed exemption at 81 FR 83385 (November 21, 2016).
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    Department's Response:
    The Department is not persuaded that a nine-year exemption period 
would be protective and in the interest of Covered Plans. UBS entities 
were criminally convicted three times, including twice in U.S. courts, 
for illegal behavior that, collectively, involved billions of dollars 
and spanned numerous years, across different UBS entities. Given the 
duration and magnitude of the UBS entities' criminal behavior, the 
Department cannot determine that the conditions in this exemption 
anticipate all of the protections that may be necessary to protect 
Covered Plans over the entire nine-year disqualification period. The 
Department remains convinced that the prospect of the Department's 
prospective in-depth review of any future exemption request by the UBS 
QPAMs provides a strong incentive for the UBS QPAMs to diligently 
monitor compliance with the conditions of this exemption, to the 
benefit of Covered Plans.
    The audits required by this exemption will provide the Department 
with valuable insight into the UBS QPAMs' compliance history and 
operations. If those audits identify deficiencies, the audits' findings 
may well provide a basis for imposing different or additional 
conditions, or for the denial of a new exemption application after 
expiration of this exemption's five-year term.
    However, the Department would not view a cycle of several positive 
audits alone as dispositive proof that this exemption meets, and will 
continue to meet, the requirements of Section 408(a) of ERISA over the 
entire remaining UBS QPAM disqualification period. An exemption request 
submitted by the UBS QPAMs containing all current, accurate, relevant 
material will be another necessary and important basis for any such 
determination.
    A failure to comply with the Department's prohibited transaction 
class exemption 86-128 is a failure to comply with ERISA. The 
Department considers any instance of an exemption applicant's 
noncompliance with ERISA when contemplating whether the requested 
exemption is appropriate. Information regarding an applicant's non-
compliance with ERISA, even if corrected, heightens the Department's 
scrutiny of the exemption request. The Department's ability to review 
the Audit Reports annually and for any noncompliance reported therein, 
whether isolated, continuing or corrected, along with the limited term 
of the exemption, provides the Department the opportunity to add, 
modify, and enhance any conditions, as necessary, in a potential future 
exemption and assists in determining if a future exemption is 
appropriate.
    The Department considers the entire record before it when 
determining the appropriate term of the exemption. The record in this 
instance contains an abundance of factual information detailing the 
severity of the misconduct, repeated criminal violations, supervisory 
failures, and the breach of two previous exemptions, which themselves 
were necessitated by criminal conduct. Such a detailed record of 
criminal behavior reflects on the offending organization's compliance 
culture, which is a factor at the core of the Department's 
determinations and certainly is a large factor in the Department's 
consideration of the length of any exemptive relief provided.
    The Department additionally notes that, if the UBS QPAMs' appeal of 
the 2019 French Conviction is successful, the UBS QPAMs may rely on PTE 
2017-07 or this exemption during their respective effective periods, as 
long as the applicable conditions therein are met.\7\
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    \7\ In this circumstance, the Department would consider good 
faith compliance with the conditions of this exemption as compliance 
with the conditions of PTE 2017-07.
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II. Advisory Opinion Request

    Along with their comments to the proposed exemption the UBS QPAMs 
reiterated their request that the Department issue an advisory opinion 
as to whether foreign convictions are disqualifying convictions under 
section I(g) of PTE 84-14. The UBS QPAMs state the request presents 
questions of law and policy that are critically important regardless of 
the Department's determinations on the term and condition of this 
exemption. The Department acknowledges the request, and is separately 
considering it pursuant to ERISA Procedure 76-1.

III. Requested Revisions to the Exemption's Conditions

    The UBS QPAMs requested certain specific revisions based on their 
request that the Department increase the exemption's term from five 
years to nine years. As discussed above, the Department has decided not 
to modify the term of the exemption to nine years. Accordingly, it is 
not making these requested revisions.
    The UBS QPAMs also requested other revisions to the proposed 
exemption's operative language in certain conditions, as discussed 
below.

Section I(a)

    The UBS QPAMs requested that the Department modify text in Section 
I(a) of the proposed exemption, which in part conditions relief on the 
premise that third parties engaged ``on behalf of'' the UBS QPAMs did 
not ``know of, have reason to know of, or participate in'' the criminal 
conduct that is the subject of the 2019 French Conviction. 
Specifically, the UBS QPAMs request deletion of the sentence in Section 
I(a) stating ``[f]urther, any other party engaged on behalf of such UBS 
QPAMs who had responsibility for, or exercised authority in connection 
with the management of plan assets did not know of, did not have reason 
to know of, or participate in the criminal conduct of UBS and UBS 
France that is the subject of the 2019 French Conviction.'' 
Furthermore, the UBS QPAMs requested modification of the last sentence 
of Section I(a), which provides that a person ``participated in'' the 
criminal misconduct not only if the person actively engaged in the 
misconduct, but also if he or she knowingly approved of the criminal 
conduct or, with knowledge of the misconduct, failed to take active 
steps to prohibit it, such as reporting the conduct to supervisors. The 
UBS QPAMs request that the phrase ``or knowledge of such conduct 
without taking active steps to prohibit such conduct, including 
reporting the conduct to such individual's supervisors, and to the 
Board of Directors'' be deleted from Section I(a).
    The Department declines to make the requested modifications to 
Section I(a). The Department expects the QPAMs, their employees, and 
agents to adhere to high standards of integrity. These standards are 
not satisfied merely by avoiding actively engaging in misconduct, but 
also extends to taking measures to stop misconduct that is known or 
should be known. Silent acquiescence to criminal conduct falls far 
short of the standards expected of parties relying on the exemption. 
Accordingly, the condition treats as knowing participation a party's 
failure to take active steps to prevent the criminal conduct that is 
the subject of the Convictions and the 2019 French Conviction. 
Moreover, it is the Department's view that the UBS QPAMs are 
appropriately held accountable in this manner for the conduct of the 
third parties they engaged on their behalf to manage or exercise 
authority over plan assets. If such parties knowingly participated in 
the criminal conduct

[[Page 8023]]

that is the subject of the 2019 French Conviction, the QPAMs' 
culpability is potentially greater than the Department assumed in 
drafting the exemption conditions, and there may be need for greater 
protections or reduced relief. The condition was specifically designed 
to give assurance that the UBS QPAMs and third parties engaged on the 
UBS QPAMs' behalf did not participate in, approve, or facilitate 
criminal misconduct.

Section I(b)

    The UBS QPAMs have also requested that the Department modify text 
in Section I(b) of the proposed exemption, which in part provides that 
the parties engaged to act on behalf of the UBS QPAMs must not have 
received compensation in connection with the criminal conduct that is 
the subject of the 2019 French Conviction. The UBS QPAMs have requested 
deletion of the last sentence of Section I(b), which provides: 
``[f]urther, any other party engaged on behalf of such UBS QPAMs who 
had responsibility for, or exercised authority in connection with the 
management of plan assets did not receive direct compensation, or 
knowingly receive indirect compensation, in connection with the 
criminal conduct of UBS and UBS France that is the subject of the 2019 
French Conviction.''
    Section I(b) also reflects the Department's view that the QPAMs and 
the parties engaged on their behalf to manage or exercise authority 
over plan assets must adhere to high standards of integrity. 
Accordingly, these parties engaged by the UBS QPAMs should neither have 
participated in nor profited from the criminal conduct that is the 
subject of the 2019 French Conviction. If such parties, in fact, 
received direct or indirect compensation in connection with the 
criminal conduct, their culpability, and the culpability of the UBS 
QPAMs, is potentially greater than the Department assumed in 
formulating this exemption's conditions, and there may be need for 
greater protections or reduced relief. Therefore, Section I(b) of the 
exemption will continue to extend the prohibition against the receipt 
of compensation in connection with the conduct that is the subject of 
the 2019 French Conviction to third parties with responsibility or 
authority over plan assets.

Section I(k)--Written Notice

    Section I(k) of the exemption requires the UBS QPAMs to provide 
each sponsor and beneficial owner of a Covered Plan that has entered 
into a written asset or investment management agreement with a UBS 
QPAM, 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, with a copy of the notice of exemption, a 
summary describing the facts that led to the Convictions and the 2019 
French Conviction (the Summary), and a statement (the Statement) that 
the Convictions, and in the Department's view, the 2019 French 
Conviction, each separately result in a failure to meet a condition in 
PTE 84-14 and PTE 2017-07. The UBS QPAMs request the condition's 
language be revised to reflect that this disclosure is to be provided 
within 60 days of the effective date of the five-year exemption to 
Covered Plans that currently have a written investment or asset 
management agreement and that covered plans that enter a written 
investment or asset management agreement with a UBS QPAM after such 60-
day time period must receive a copy of the exemption, the Summary, and 
the Notice prior to or contemporaneously with the Covered Plan's 
receipt of a written asset management agreement from the UBS QPAM.
    The Department agrees with the request and has revised Section I(k) 
accordingly.

Section I(m)(1)(ii)--Compliance Officer

    Section I(m)(1)(ii) states that ``[t]he Compliance Officer must 
have 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, 
the Investment Bank, and Global Wealth Management--and is led by the 
head of Group Compliance, Regulatory and Governance, or another 
appropriate member of the Group Executive Board.'' The UBS QPAMs 
requested that the phrase ``to the Head of Compliance and Operational 
Risk Control, Asset Management'' in the first sentence of Section 
I(m)(1)(ii) be deleted.
    The Department declines to make the requested change. The UBS QPAMs 
did not provide any substantive reason for the removal of the language 
from this condition and therefore have not demonstrated why the 
deletion of the language would be in the interest of and protective of 
affected plans and their participants and beneficiaries. The Department 
formulated this condition to ensure that the Compliance Officer 
designated by UBS is an individual who is directly accountable to 
senior management. The Department considers the Compliance Officer, the 
Exemption Reviews, and the Exemption Reports integral parts of this 
five-year exemption, without which the Department could not have made 
its findings that the exemption is in the interest of and protective of 
affected plans and their participants and beneficiaries. The 
exemption's conditions ensure that senior management is aware of and 
knowledgeable about compliance with this five-year exemption and the 
Policies and Training mandate. The reporting and accountability of the 
Compliance Officer to senior management is a part of that process.

References to ``2017 Conviction''

    The term ``2018 Conviction'' was used in the proposed exemption to 
describe the judgment of conviction against UBS in case number 3:15-cr-
00076-RNC in the U.S. District Court for the District of Connecticut 
for one count of wire fraud in violation of Title 18, United States 
Code, Sections 1343 and 2 in connection with UBS's submission of Yen 
London Interbank Offered Rates and other benchmark interest rates 
between 2001 and 2010. The UBS QPAMs request the term be changed from 
``2018 Conviction'' to the term ``2017 Conviction'' which was used in 
PTE 2017-07 and because the date of this conviction is January 10, 
2017. The UBS QPAMs also request the Department add a definitional 
Section to the exemption stating the term ``2017 Conviction Date'' 
means ``January 10, 2017.''
    The Department accepts the UBS QPAMs' request, and for clarity has 
added a definitional section to the five-year exemption stating that 
``[a]ll references to `the 2017 Conviction Date' means January 10, 
2017.'' In addition, the Department has replaced the references to the 
``2018 Conviction'' with the term ``2017 Conviction.''

Section II(b)--``2019 French Conviction''

    On its own motion and for clarity, the Department is modifying 
Section II(b) defining the term ``2019 French Conviction'' to include 
the sentence ``The term `2019 French Conviction' also includes a 
decision upholding the February 20, 2019 judgment of the French First 
Instance Court.''

Comment From the Public

    The Department received one anonymous comment from the public that 
did not raise any substantive issue.
    After full consideration and review of the entire record, the 
Department has decided to grant the exemption, with

[[Page 8024]]

the modifications discussed above. The complete application file (D-
11998) is available for public inspection in the Public Disclosure Room 
of the Employee Benefits Security Administration, Room N-1515, U.S. 
Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210. 
For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 30, 2019, at 84 
FR 51621.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act or section 4975(c)(2) of the Code does 
not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(B) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) In accordance with section 408(a) of ERISA and section 
4975(c)(2) of the Code, the Department makes the following 
determinations: The exemption is administratively feasible, the 
exemption is in the interests of affected plans and of their 
participants and beneficiaries, and the exemption is protective of the 
rights of participants and beneficiaries of such plans;
    (3) The exemption is supplemental to, and not in derogation of, any 
other provisions of ERISA, including statutory or administrative 
exemptions and transitional rules. Furthermore, the fact that a 
transaction is subject to an administrative or statutory exemption is 
not dispositive of whether the transaction is in fact a prohibited 
transaction; and
    (4) The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describe all material terms of the transaction 
which is the subject of the exemption.
    Accordingly, the following exemption is granted under the authority 
of section 408(a) of ERISA and section 4975(c)(2) of the Code and in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(76 FR 66637, 66644, October 27, 2011):

Exemption

Section I. Covered Transactions

    Certain entities with specified relationships to UBS (hereinafter, 
the UBS QPAMs, as defined in Section II(e)) will not be precluded from 
relying on the exemptive relief provided by Prohibited Transaction 
Class Exemption 84-14 (PTE 84-14 or the QPAM Exemption) \8\ during the 
Exemption Period, notwithstanding the 2013 Conviction of UBS Securities 
Japan Co., Ltd., the 2017 Conviction of UBS (collectively the 
Convictions, as defined in Section II(a)), and the 2019 French 
Conviction of UBS and UBS France (as defined in Section II(b)), 
provided that the following conditions are satisfied:
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    \8\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430, 
(October 10, 1985), as amended at 70 FR 49305(August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
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    (a) The UBS QPAMs (including their officers, directors, agents 
other than UBS and UBS Securities Japan and UBS France, and the 
employees of such UBS QPAMs) did not know of, did not have reason to 
know of, or did not participate in: (1) The FX Misconduct; or (2) the 
criminal conduct of UBS Securities Japan and UBS that is the subject of 
the Convictions; or (3) the criminal conduct of UBS and UBS France that 
is the subject of the 2019 French Conviction. Further, any other party 
engaged on behalf of such UBS QPAMs who had responsibility for, or 
exercised authority in connection with the management of plan assets 
did not know of, did not have reason to know of, or participate in the 
criminal conduct of UBS and UBS France that is the subject of the 2019 
French Conviction. For purposes of this exemption, ``participate in'' 
refers not only to active participation in the FX Misconduct, the 
criminal conduct that is the subject of the Convictions, and the 
criminal conduct that is the subject of the 2019 French Conviction, but 
also to knowing approval of the criminal conduct, or knowledge of such 
conduct without taking active steps to prohibit such conduct, including 
reporting the conduct to such individual's supervisors, and to the 
Board of Directors;
    (b) The UBS QPAMs (including their officers, directors, agents 
other than UBS, UBS Securities Japan, and UBS France, and employees of 
such UBS QPAMs) did not receive direct compensation, or knowingly 
receive indirect compensation, in connection with: (1) The FX 
Misconduct; (2) the criminal conduct of UBS Securities Japan and UBS 
that is the subject of the Convictions; or (3) the criminal conduct of 
UBS and UBS France that is the subject of the 2019 French Conviction. 
Further, any other party engaged on behalf of such UBS QPAMs who had 
responsibility for, or exercised authority in connection with the 
management of plan assets did not receive direct compensation, or 
knowingly receive indirect compensation, in connection with the 
criminal conduct of UBS and UBS France that is the subject of the 2019 
French Conviction;
    (c) The UBS QPAMs will not employ or knowingly engage any of the 
individuals who participated in: (1) The FX Misconduct; (2) the 
criminal conduct of UBS Securities Japan and UBS that is the subject of 
the Convictions; or (3) the criminal conduct of UBS and UBS France that 
is the subject of the 2019 French Conviction;
    (d) At all times during the Exemption Period, no UBS QPAM will 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 UBS QPAM with respect to one or more Covered Plans (as 
defined in Section II(c)) to enter into any transaction with UBS, UBS 
Securities Japan, or UBS France or to engage UBS, UBS Securities Japan, 
or UBS France 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 UBS QPAMs to satisfy Section I(g) of PTE 84-
14 arose solely from the Convictions and the 2019 French Conviction;
    (f) 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, the criminal conduct that 
is the subject of the Convictions, or the criminal conduct that is the 
subject of the 2019 French Conviction; or cause the UBS QPAM or its 
affiliates to directly or indirectly profit from the FX Misconduct, the 
criminal conduct that is the subject of the Convictions, or the 
criminal conduct that is the subject of the 2019 French Conviction;

[[Page 8025]]

    (g) Other than with respect to employee benefit plans maintained or 
sponsored for its own employees or the employees of an affiliate, UBS, 
UBS Securities Japan, and UBS France will not act as fiduciaries within 
the meaning of section 3(21)(A)(i) or (iii) of ERISA, or section 
4975(e)(3)(A) and (C) of the Code, with respect to ERISA-covered plan 
and IRA assets; provided, however, that UBS, UBS Securities Japan, and 
UBS France will not be treated as violating the conditions of this 
exemption solely because they acted as an investment advice fiduciary 
within the meaning of section 3(21)(A)(ii) of ERISA or section 
4975(e)(3)(B) of the Code;
    (h)(1) Each UBS QPAM must continue to maintain, adjust (to the 
extent necessary), implement, and follow written policies and 
procedures (the Policies). The Policies must require, and must be 
reasonably designed to ensure that:
    (i) The asset management decisions of the UBS QPAM are conducted 
independently of UBS's corporate management and business activities, 
including the corporate management and business activities of the 
Investment Bank division, UBS Securities Japan, and UBS France. This 
condition does not preclude a UBS QPAM from receiving publicly 
available research and other widely available information from a UBS 
affiliate;
    (ii) 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;
    (iii) The UBS QPAM does not knowingly participate in any other 
person's violation of ERISA or the Code with respect to Covered Plans;
    (iv) Any filings or statements made by the UBS QPAM to regulators, 
including, but not limited to, the Department, the Department of the 
Treasury, the Department of Justice, and the Pension Benefit Guaranty 
Corporation, on behalf of or in relation to Covered Plans, are 
materially accurate and complete, to the best of such QPAM's knowledge 
at that time;
    (v) To the best of the UBS QPAM's knowledge at that time, the UBS 
QPAM does not make material misrepresentations or omit material 
information in its communications with such regulators with respect to 
Covered Plans, or make material misrepresentations or omit material 
information in its communications with Covered Plans; and
    (vi) The UBS QPAM complies with the terms of this five-year 
exemption;
    (2) Any violation of, or failure to comply with an item in 
subparagraphs (h)(1)(ii) through (vi), is corrected as soon as 
reasonably possible upon discovery, or as soon after the QPAM 
reasonably should have known of the noncompliance (whichever is 
earlier), and any such violation or compliance failure not so corrected 
is reported, upon the discovery of such failure to so correct, in 
writing. Such report shall be made to the head of compliance and the 
General Counsel (or their functional equivalent) of the relevant UBS 
QPAM that engaged in the violation or failure, and the independent 
auditor responsible for reviewing compliance with the Policies. A UBS 
QPAM will not be treated as having failed to develop, implement, 
maintain, or follow the Policies, provided that it corrects any 
instance of noncompliance as soon as reasonably possible upon 
discovery, or as soon as reasonably possible after the UBS QPAM 
reasonably should have known of the noncompliance (whichever is 
earlier), and provided that it adheres to the reporting requirements 
set forth in this subparagraph (2);
    (3) Each UBS QPAM will maintain, adjust (to the extent necessary) 
and implement a program of training during the Exemption Period, to be 
conducted at least annually, for all relevant UBS QPAM asset/portfolio 
management, trading, legal, compliance, and internal audit personnel. 
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; and
    (ii) Be conducted by a professional who has been prudently selected 
and who has appropriate technical training and proficiency with ERISA 
and the Code;
    (i)(1) Each UBS 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 each UBS QPAM's compliance with, the 
Policies and Training described herein. The audit requirement must be 
incorporated in the Policies. The initial audit must cover the 13-month 
period that begins on February 20, 2020 and ends on March 19, 2021, and 
must be completed by September 19, 2021. The second audit must cover 
the period March 20, 2021 through March 19, 2022 and must be completed 
by September 19, 2022. The third audit must cover the period March 20, 
2022 through March 19, 2023 and must be completed by September 19, 
2023. The fourth audit must cover the period March 20, 2023 through 
March 19, 2024 and must be completed by September 19, 2024. The fifth 
audit must cover the period March 20, 2024 through February 20, 2025 
and must be completed by August 20, 2025. The corresponding certified 
Audit Reports must be submitted to the Department no later than 45 days 
following the completion of the audit.\9\ For time periods ending prior 
to February 20, 2020, and covered by the audit required pursuant to PTE 
2019-01,\10\ the audit requirements in Section I(i) PTE 2019-01 will 
remain in effect.\11\
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    \9\ The initial Audit Report must be submitted to the Department 
by November 3, 2021. The second Audit Report must be submitted to 
the Department by November 3, 2022. The third Audit Report must be 
submitted to the Department by November 3, 2023. The fourth Audit 
Report must be submitted to the Department by November 3, 2024. The 
fifth Audit Report must be submitted to the Department by October 4, 
2025.
    \10\ 84 FR 6163 (February 26, 2019). PTE 2019-01 is an exemption 
that permits the UBS QPAMs to rely on the exemptive relief provided 
by PTE 84-14 notwithstanding the 2013 and 2017 Convictions and the 
2019 French Conviction.
    \11\ Accordingly, pursuant to PTE 2019-01, the required audit 
must cover the period beginning February 20, 2019 and ending on 
February 19, 2020. The corresponding Audit Report must be completed 
by August 19, 2020 and submitted to the Department by October 3, 
2020.
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    (2) Within the scope of the audit and 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 only to the extent such 
disclosure is not prevented by state or federal statute, or involves 
communications subject to attorney-client privilege, each UBS QPAM and, 
if applicable, UBS, 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. Such access is limited to information relevant to the 
auditor's objectives as specified by the terms of this exemption;
    (3) The auditor's engagement must specifically require the auditor 
to determine whether each UBS QPAM has developed, implemented, 
maintained, and followed the Policies in accordance with the conditions 
of this five-year exemption, and has developed and implemented the 
Training, as required herein;
    (4) The auditor's engagement must specifically require the auditor 
to test

[[Page 8026]]

each UBS QPAM's operational compliance with the Policies and Training. 
In this regard, the auditor must test, for each UBS QPAM, a sample of 
such UBS QPAM's transactions involving Covered Plans, sufficient in 
size and nature to afford the auditor a reasonable basis to determine 
such UBS QPAM's operational compliance with the Policies and Training;
    (5) For the 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 in connection with 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:
    (i) The adequacy of each UBS QPAM's Policies and Training; each UBS 
QPAM's compliance with the Policies and Training; the need, if any, to 
strengthen such Policies and Training; and any instance of the 
respective UBS QPAM's noncompliance with the written Policies and 
Training described in Section I(h) above. The UBS QPAM must promptly 
address any noncompliance. The UBS QPAM must promptly address or 
prepare a written plan of action to address any determination as to 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 UBS QPAM. Any action taken or the plan of action to be taken 
by the respective UBS QPAM must be included in an addendum to the Audit 
Report (such addendum must be completed prior to the certification 
described in Section I(i)(7) below). In the event such a plan of action 
to address the auditor's recommendation regarding the adequacy of the 
Policies and Training is not completed by the time of submission of the 
Audit Report, the following period's Audit Report must state whether 
the plan was satisfactorily completed. Any determination by the auditor 
that a UBS QPAM has implemented, maintained, and followed sufficient 
Policies and Training must not be based solely or in substantial part 
on an absence of evidence indicating noncompliance. In this last 
regard, any finding that a UBS QPAM has complied with the requirements 
under this subparagraph must be based on evidence that the particular 
UBS QPAM has actually implemented, maintained, and followed the 
Policies and Training required by this exemption. Furthermore, the 
auditor must not solely rely on the Exemption Report created by the 
Compliance Officer, as described in Section I(m) below, as the basis 
for the auditor's conclusions in lieu of independent determinations and 
testing performed by the auditor as required by Section I(i)(3) and (4) 
above; and
    (ii) The adequacy of the Exemption Review described in Section 
I(m);
    (6) The auditor must notify the respective UBS QPAM of any instance 
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 the 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 UBS QPAM has addressed, corrected, and 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;
    (8) The Risk Committee of UBS's Board of Directors is provided a 
copy of the Audit Report; and a senior executive officer of UBS's 
Compliance and Operational Risk Control function must review the Audit 
Report for each UBS QPAM and must certify in writing, under penalty of 
perjury, that such officer has reviewed the Audit Report;
    (9) Each UBS QPAM provides its certified Audit Report, by regular 
mail to: 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. This delivery 
must take place no later than 45 days following completion of the Audit 
Report. The Audit Reports will be made part of the public record 
regarding this five-year exemption. Furthermore, each UBS QPAM must 
make its Audit Reports unconditionally available, electronically or 
otherwise, for examination upon request by any duly authorized employee 
or representative of the Department, other relevant regulators, and any 
fiduciary of a Covered Plan;
    (10) Any engagement agreement with an auditor to perform the audit 
required by this exemption that is entered into subsequent to the 
effective date of this exemption must be submitted to OED no later than 
two months after the execution of such agreement;
    (11) The auditor must provide the Department, upon request, for 
inspection and review, access to all the workpapers created and used in 
connection with the audit, provided such access and inspection is 
otherwise permitted by law; and
    (12) UBS must notify the Department of a change in the independent 
auditor no later than two months after the engagement of a substitute 
or subsequent auditor and must provide an explanation for the 
substitution or change including a description of any material disputes 
between the terminated auditor and UBS;
    (j) As of the effective date of this five-year exemption, with 
respect to any arrangement, agreement, or contract between a UBS QPAM 
and a Covered Plan, the UBS QPAM agrees and warrants to Covered Plans:
    (1) To comply with ERISA and the Code, as applicable with respect 
to such Covered Plan; 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 to the extent that section 404 
is applicable;
    (2) To indemnify and hold harmless the Covered Plan for any actual 
losses resulting directly from: A UBS QPAM's violation of ERISA's 
fiduciary duties, as applicable, and of the prohibited transaction 
provisions of ERISA and the Code, as applicable; a breach of contract 
by the QPAM; or any claim arising out of the failure of such UBS 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 Convictions 
and the 2019 French Conviction. This condition applies only to actual 
losses caused by the UBS QPAM's violations.
    (3) Not to require (or otherwise cause) the Covered Plan to waive, 
limit, or qualify the liability of the UBS QPAM for violating ERISA or 
the Code or engaging in prohibited transactions;
    (4) Not to restrict the ability of such Covered Plan to terminate 
or withdraw

[[Page 8027]]

from its arrangement with the UBS QPAM with respect to 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. In connection with any such arrangements involving 
investments in pooled funds subject to ERISA entered into after the 
effective date of PTE 2017-07,\12\ the adverse consequences must relate 
to a lack of liquidity of the underlying assets, valuation issues, or 
regulatory reasons that prevent the fund from promptly redeeming an 
ERISA-covered plan's or IRA's investment, and such restrictions must be 
applicable to all such investors and be effective no longer than 
reasonably necessary to avoid the adverse consequences;
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    \12\ 82 FR 61903 (December 29, 2017). PTE 2017-07 is an 
exemption that permits UBS QPAMs to rely on the exemptive relief 
provided by PTE 84-14, notwithstanding the 2013 and 2017 
Convictions.
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    (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 a like manner to all such investors; 
and
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting liability of the UBS QPAM for a violation of such agreement's 
terms. To the extent consistent with Section 410 of ERISA, however, 
this provision does not prohibit disclaimers 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 UBS and its 
affiliates, or damages arising from acts outside the control of the UBS 
QPAM;
    (7) For Covered Plans that enter into a written asset or investment 
management agreement with a UBS QPAM on or after the effective date of 
this exemption, 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, PTE 2017-07, and/or PTE 2019-01 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.
    (k) Within 60 days of the effective date of this five-year 
exemption, each UBS QPAM will provide a Federal Register copy of the 
notice of the exemption, along with a separate summary describing the 
facts that led to the Convictions and the 2019 French Conviction (the 
Summary), which have been submitted to the Department, and a 
prominently displayed statement (the Statement) that the Convictions 
and, in the Department's view, the 2019 French Conviction, each 
separately result in a failure to meet a condition in PTE 84-14 and PTE 
2017-07, to each sponsor and beneficial owner of a Covered Plan that 
has entered into a written asset or investment management agreement 
with a UBS QPAM, 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. All Covered Plan clients that enter 
into a written asset or investment management agreement with a UBS QPAM 
after that date must receive a copy of the exemption, the Summary, and 
the Statement prior to, or contemporaneously with, the Covered Plan's 
receipt of a written asset or investment management agreement from the 
UBS QPAM. The notices may be delivered electronically (including by an 
email that has a link to the five-year exemption);
    (l) The UBS QPAMs must comply with each condition of PTE 84-14, as 
amended, with the sole exception of the violations of Section I(g) of 
PTE 84-14 that are attributable to the Convictions and the 2019 French 
Conviction. If, during the Exemption Period, an entity within the UBS 
corporate structure is convicted of a crime described in Section I(g) 
of PTE 84-14 (other than the 2013 Conviction, 2017 Conviction, and the 
2019 French Conviction), relief in this exemption would terminate 
immediately;
    (m)(1) UBS continues to designate 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 during the Exemption Period (the 
Exemption 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:
    (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; and
    (ii) The Compliance Officer must have 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, the Investment Bank, and Global Wealth 
Management--and is led by the head of Group Compliance, Regulatory and 
Governance, or another appropriate member of the Group Executive Board;
    (2) With respect to the Exemption Review, the following conditions 
must be met:
    (i) The Exemption Review includes a review of the UBS QPAMs' 
compliance with and effectiveness of the Policies and Training and of 
the following: Any compliance matter related to the Policies or 
Training that was identified by, or reported to, the Compliance Officer 
or others within the C&ORC function during the previous year; the most 
recent Audit Report issued pursuant to this exemption or PTE 2019-01; 
any material change in the relevant business activities of the UBS 
QPAMs; and any change to ERISA, the Code, or regulations related to 
fiduciary duties and the prohibited transaction provisions that may be 
applicable to the activities of the UBS QPAMs;
    (ii) The Compliance Officer prepares a written report for the 
Exemption Review (an Exemption Report) that (A) summarizes his or her 
material activities during the Exemption Period; (B) sets forth any 
instance of noncompliance discovered during the Exemption Period, and 
any related corrective action; (C) details any change to the Policies 
or Training to guard against any similar instance of noncompliance 
occurring again; and (D) makes recommendations, as necessary, for 
additional training, procedures, monitoring, or additional and/or 
changed processes or systems, and management's actions on such 
recommendations;
    (iii) In the Exemption Report, the Compliance Officer must certify 
in writing that to the best of his or her

[[Page 8028]]

knowledge at the time: (A) The report is accurate; (B) the Policies and 
Training are working in a manner which is reasonably designed to ensure 
that the Policies and Training requirements described herein are met; 
(C) any known instance of noncompliance during the Exemption Period and 
any related correction taken to date have been identified in the 
Exemption Report; and (D) the UBS QPAMs have complied with the Policies 
and Training, and/or corrected (or are correcting) any known instances 
of noncompliance in accordance with Section I(h) above;
    (iv) The Exemption Report must be provided to appropriate corporate 
officers of UBS and each UBS QPAM to which such report relates, and to 
the head of compliance and the General Counsel (or their functional 
equivalent) of the relevant UBS QPAM; and the report must be made 
unconditionally available to the independent auditor described in 
Section I(i) above;
    (v) The first Exemption Review, including the Compliance Officer's 
written Exemption Report, must cover the thirteen-month period 
beginning on February 20, 2020 and ending on March 19, 2021, and must 
be completed by June 19, 2021. The second Exemption Review and 
Exemption Report must cover the period beginning on March 20, 2021 and 
ending on March 19, 2022, and must be completed by June 19, 2022. The 
third Exemption Review and Exemption Report must cover the period 
beginning on March 20, 2022 and ending on March 19, 2023, and must be 
completed by June 19, 2023. The fourth Exemption Review and Exemption 
Report must cover the period beginning on March 20, 2023 and ending on 
March 19, 2024, and must be completed by June 19, 2024. The fifth 
Exemption Review and Exemption Report must cover the period beginning 
on March 20, 2024 and ending on February 20, 2025, and must be 
completed by May 20, 2025. The Exemption review undertaken pursuant to 
PTE 2019-01 must cover the period February 20, 2019 through February 
19, 2020 and be completed by May 19, 2020; \13\
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    \13\ The Exemption Reviews for the period February 20, 2019 
through February 19, 2020 must be conducted and completed pursuant 
to the requirements of PTE 2019-01.
---------------------------------------------------------------------------

    (n) UBS imposes its internal procedures, controls, and protocols on 
UBS Securities Japan to: (1) Reduce the likelihood of any recurrence of 
conduct that is the subject of the 2013 Conviction, and (2) comply in 
all material respects with the Business Improvement Order, dated 
December 16, 2011, issued by the Japanese Financial Services Authority;
    (o) UBS complies in all material respects with the audit and 
monitoring procedures imposed on UBS by the U.S. Commodity Futures 
Trading Commission Order, dated December 19, 2012;
    (p) Each UBS QPAM will maintain records necessary to demonstrate 
that the conditions of this exemption have been met for six years 
following the date of any transaction for which such UBS QPAM relies 
upon the relief in the exemption;
    (q) During the Exemption Period, UBS must: (1) Immediately disclose 
to the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA) with the U.S. Department of Justice, 
entered into by UBS or any of its affiliates (as defined in Section 
VI(d) of PTE 84-14) in connection with conduct described in Section 
I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately provide 
the Department any information requested by the Department, as 
permitted by law, regarding the agreement and/or conduct and 
allegations that led to the agreement;
    (r) 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. If the Policies are thereafter 
changed, each Covered Plan client must receive a new disclosure within 
six months following the end of the calendar year during which the 
Policies were changed.\14\ With respect to this requirement, the 
description may be continuously maintained on a website, provided that 
such website link to the Policies or Summary Policies is clearly and 
prominently disclosed to each Covered Plan; and
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    \14\ In the event the Applicant meets this disclosure 
requirement through Summary Policies, changes to the Policies shall 
not result in the requirement for a new disclosure unless, as a 
result of changes to the Policies, the Summary Policies are no 
longer accurate.
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    (s) A UBS QPAM will not fail to meet the terms of this exemption 
solely because a different UBS QPAM fails to satisfy a condition for 
relief described in Sections I(c), (d), (h), (i), (j), (k), (l), (p), 
or (r); or if the independent auditor described in Section I(i) fails a 
provision of the exemption other than the requirement described in 
Section I(i)(11), provided that such failure did not result from any 
actions or inactions of UBS or its affiliates.

Section II. Definitions

    (a) The term ``Convictions'' means the 2013 Conviction and the 2017 
Conviction. The term ``2013 Conviction'' means the judgment of 
conviction against UBS Securities Japan Co. Ltd. in case number 3:12-
cr-00268-RNC in the U.S. District Court for the District of Connecticut 
for one count of wire fraud in violation of Title 18, United States 
Code, sections 1343 and 2 in connection with submission of YEN London 
Interbank Offered Rates and other benchmark interest rates. The term 
``2017 Conviction'' means the judgment of conviction against UBS in 
case number 3:15-cr-00076-RNC in the U.S. District Court for the 
District of Connecticut for one count of wire fraud in violation of 
Title 18, United States Code, Sections 1343 and 2 in connection with 
UBS's submission of Yen London Interbank Offered Rates and other 
benchmark interest rates between 2001 and 2010. For all purposes under 
this exemption, ``conduct'' of any person or entity that is the 
``subject of the Convictions'' encompasses any conduct of UBS and/or 
their personnel that is described in (i) Exhibit 3 to the Plea 
Agreement entered into between UBS and the Department of Justice 
Criminal Division, on May 20, 2015, in connection with case number 
3:15-cr-00076-RNC, and (ii) Exhibits 3 and 4 to the Plea Agreement 
entered into between UBS Securities Japan and the Department of Justice 
Criminal Division, on December 19, 2012, in connection with case number 
3:12-cr-00268-RNC;
    (b) The term ``2019 French Conviction'' means the adverse judgment 
on February 20, 2019 against UBS and UBS France in case Number 
1105592033 in the French First Instance Court. For all purposes under 
this exemption, ``conduct'' of any person or entity that is the 
``criminal conduct that is the subject of the 2019 French Conviction'', 
includes any conduct of UBS, its affiliates, or UBS France and/or their 
personnel that is described in any such judgment. The term ``2019 
French Conviction'' also includes a decision upholding the February 20, 
2019 judgment of the French First Instance Court;
    (c) The term ``Covered Plan'' means a plan subject to Part IV of 
Title I of ERISA (an ``ERISA-covered plan'') or a plan subject to 
section 4975 of the Code (an ``IRA''), in each case, 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

[[Page 8029]]

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 a 
contract, arrangement, or agreement with the ERISA-covered plan or IRA.
    (d) The term ``FX Misconduct'' means the conduct engaged in by UBS 
personnel described in Exhibit 1 of the Plea Agreement (Factual Basis 
for Breach) entered into between UBS and the U.S. Department of Justice 
Criminal Division, on May 20, 2015 in connection with Case Number 3:15-
cr-00076-RNC filed in the U.S. District Court for the District of 
Connecticut.
    (e) 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 
Global Wealth Management Americas U.S. divisions of UBS that qualifies 
as a ``qualified professional asset manager'' (as defined in Section 
VI(a) of PTE 84-14) \15\ 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 Securities 
Japan, the entity implicated in the criminal conduct that is the 
subject of the 2013 Conviction; UBS, the entity implicated in the 
criminal conduct that is the subject of the 2017 Conviction and 
implicated in the criminal conduct of UBS and UBS France that is the 
subject of the 2019 French Conviction; and UBS France, the entity 
implicated in the criminal conduct of UBS and UBS France that is the 
subject of the 2019 French Conviction.
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    \15\ 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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    (f) The term ``UBS'' means UBS AG.
    (g) The term ``UBS France'' means ``UBS (France) S.A.,'' a wholly-
owned subsidiary of UBS incorporated under the laws of France.
    (h) The term ``UBS Securities Japan'' means UBS Securities Japan 
Co. Ltd, a wholly-owned subsidiary of UBS incorporated under the laws 
of Japan.
    (i) All references to ``the 2019 French Conviction Date'' means 
February 20, 2019;
    (j) All references to ``the 2017 Conviction Date'' means January 
10, 2017.
    (k) The term ``Exemption Period'' means the five-year period 
beginning on February 20, 2020 and ending on February 20, 2025;
    (l) The term ``Plea Agreement'' means the Plea Agreement (including 
Exhibits 1 and 3 attached thereto) entered into between UBS and the 
U.S. Department of Justice Criminal Division, on May 20, 2015 in 
connection with Case Number 3:15-cr-00076-RNC filed in the U.S. 
District Court for the District of Connecticut.
    Effective Date: This exemption will be in effect for a period of 
five years beginning on February 20, 2020.

    Signed at Washington, DC, this 7th day of February, 2020.
Lyssa Hall,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2020-02834 Filed 2-11-20; 8:45 am]
 BILLING CODE 4510-29-P