[Federal Register Volume 89, Number 57 (Friday, March 22, 2024)]
[Notices]
[Pages 20493-20502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06125]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2024-01; Exemption Application No. D-
12096]


Exemption From Certain Prohibited Transaction Restrictions 
Involving TT International Asset Management Ltd (TTI or the Applicant) 
Located in London, United Kingdom

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). This exemption allows TTI to continue to rely on the 
exemptive relief provided by Prohibited Transaction Class Exemption 84-
14 (PTE 84-14 or the QPAM Exemption), notwithstanding the judgment of 
conviction against SMBC Nikko Securities, Inc. (Nikko Tokyo), as 
described below.

DATES: The exemption will be in effect for a period of five years, 
beginning on February 13, 2024, and ending on February 12, 2029.

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

SUPPLEMENTARY INFORMATION: On December 20, 2023, the Department 
published a notice of proposed exemption in the Federal Register \1\ 
that would permit TTI to continue its reliance on the exemptive relief 
provided by the QPAM Exemption \2\ for a period of five years, 
notwithstanding the judgment of conviction against TTI's affiliate, 
Nikko Tokyo for attempting to peg, fix or stabilize the prices of 
certain Japanese equity securities that Nikko Tokyo was attempting to 
place in a block offering (the Conviction).\3\ After considering the 
Applicant's comment on the proposal, the Department is granting this 
exemption to protect the interests of participants and beneficiaries of 
ERISA-covered Plans and IRAs managed by TTI (together, Covered 
Plans).\4\
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    \1\ 88 FR 88115 (December 20, 2023).
    \2\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430 
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and 
as amended at 75 FR 38837 (July 6, 2010).
    \3\ Section I(g) of PTE 84-14 generally provides that 
``[n]either the QPAM nor any affiliate thereof . . . nor any owner . 
. . of a 5 percent or more interest in the QPAM is a person who 
within the 10 years immediately preceding the transaction has been 
either convicted or released from imprisonment, whichever is later, 
as a result of'' certain crimes.
    \4\ 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 
Code section 4975 (an ``IRA''), in each case, with respect to which 
TTI relies on PTE 84-14, or with respect to which TTI has expressly 
represented that the manager qualifies as a QPAM or relies on PTE 
84-14. A Covered Plan does not include an ERISA-covered plan or IRA 
to the extent that TTI 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.
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    This exemption provides only the relief specified in the text of 
the exemption and does not provide relief from violations of any law 
other than the prohibited transaction provisions of Title I of ERISA 
and the Code expressly stated herein.

[[Page 20494]]

    The Department intends for the terms of this exemption to promote 
adherence by TTI to basic fiduciary standards under Title I of ERISA 
and the Code. An important objective in granting this exemption is to 
ensure that Covered Plans can terminate their relationships with TTI in 
an orderly and cost-effective fashion if the fiduciary of a Covered 
Plan determines it is prudent to do so.
    Based on the Applicant's adherence to all the conditions of PTE 
2023-13 and this exemption, the Department makes the requisite findings 
under ERISA section 408(a) that the exemption is: (1) administratively 
feasible for the Department, (2) in the interest of Covered Plans and 
their participants and beneficiaries, and (3) protective of the rights 
of the participants and beneficiaries of Covered Plans. Accordingly, 
affected parties should be aware that the conditions incorporated in 
this exemption are necessary, individually and taken as a whole, 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 Applicant requested an individual exemption pursuant to ERISA 
section 408(a) in accordance with the Department's exemption procedures 
set forth in 29 CFR part 2570, subpart B.\5\
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    \5\ 76 FR 66637, 66644, (October 27, 2011).
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Background

    1. The Sumitomo Mitsui Banking Corporation group (SMBC) is a 
Japanese financial services firm that provides asset management 
services through two subsidiaries. The first is TTI, which is managed 
independently of the broader SMBC group. The second is Sumitomo Mitsui 
DS Asset Management Company, Limited, an investment manager 
headquartered in Tokyo. The SMBC group also conducts securities market 
activities through the SMBC Nikko Securities franchise, which includes 
Nikko Tokyo, a Japanese broker-dealer.
    2. TTI is a global investment firm headquartered in London, UK that 
manages approximately $7.1 billion in assets. TTI and its subsidiaries 
have operations in the United States, Hong Kong, and Japan.\6\ TTI was 
wholly acquired by Sumitomo Mitsui Financial Group, Inc. (SMFG) on 
February 28, 2020, and is currently a member of the SMBC Group. Since 
the acquisition, TTI has remained a stand-alone business with distinct 
reporting lines, governance structures, and control frameworks.
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    \6\ TTI subsidiaries include TT International Investment 
Management LLP, TT International (Hong Kong) Ltd, TT Crosby Ltd, and 
TT International Advisors Inc.
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    3. TTI is an SEC-registered investment advisor that specializes in 
managing portfolios for institutional investors, including ERISA-
covered Plans, public retirement plans, and other collective investment 
vehicles through a variety of investment strategies and industry 
sectors.
    4. When offering investment management services, TTI operates as a 
QPAM in reliance on PTE 84-14.\7\ TTI advises four segregated ERISA 
accounts on behalf of the ERISA-covered plans of two major U.S. 
employers \8\ and operates a single public pension plan account with 
approximately $40 million in assets. TTI also manages two funds as 
ERISA ``plan asset'' funds: the TT Emerging Markets Opportunities Fund 
II Limited, which is operational and holds ERISA assets; \9\ and the TT 
Environmental Solutions Equity Master Fund II Limited, which TTI is in 
the process of launching.
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    \7\ TTI is currently the only member of the SMBC group that 
relies on the QPAM Exemption.
    \8\ Together, these two ERISA-covered plans currently hold 
approximately $352.7 million in assets.
    \9\ As of February 29, 2024, the total value of ERISA plan 
assets in TT Emerging Markets Opportunities Fund II Limited was 
$135,959,197.43.
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ERISA and Code Prohibited Transactions and PTE 84-14

    5. The rules set forth in ERISA section 406 and Code section 
4975(c)(1) proscribe certain ``prohibited transactions'' between plans 
and certain parties in interest with respect to those plans.\10\ ERISA 
section 3(14) defines parties in interest with respect to a plan to 
include, among others, the plan fiduciary and a sponsoring employer of 
the plan, and certain of their affiliates.\11\ The prohibited 
transaction provisions under ERISA section 406(a) and Code section 
4975(c)(1) prohibit, in relevant part, (1) sales, leases, loans, or the 
provision of services between a party in interest and a plan (or an 
entity whose assets are deemed to constitute the assets of a plan), (2) 
the use of plan assets by or for the benefit of a party in interest, or 
(3) a transfer of plan assets to a party in interest.\12\
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    \10\ For purposes of the Summary of Facts and Representations, 
references to specific provisions of Title I of ERISA, unless 
otherwise specified, refer also to the corresponding provisions of 
the Code.
    \11\ Under the Code, such parties, or similar parties, are 
referred to as ``disqualified persons.''
    \12\ The prohibited transaction provisions also include certain 
fiduciary prohibited transactions under ERISA Section 406(b). These 
include transactions involving fiduciary self-dealing, fiduciary 
conflicts of interest, and kickbacks to fiduciaries.
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    6. Under the authority of ERISA section 408(a) and Code section 
4975(c)(2), the Department has the authority to grant an exemption from 
such ``prohibited transactions'' in accordance with the procedures set 
forth in its exemption procedure regulation, if the Department finds 
that an exemption is: (a) administratively feasible, (b) in the 
interests of the plan and of its participants and beneficiaries, and 
(c) protective of the rights of the plan's participants and 
beneficiaries.\13\
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    \13\ The Department's exemption procedure regulation is codified 
at 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 
2011).
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    7. PTE 84-14 exempts certain prohibited transactions between a 
party in interest and an ``investment fund'' (as defined in Section 
VI(b) of PTE 84-14) in which a plan has an interest if the investment 
manager managing the investment fund satisfies the definition of a 
``qualified professional asset manager'' (QPAM) and satisfies 
additional conditions of the exemption. PTE 84-14 was developed and 
granted based on the essential premise that broad relief could be 
afforded for all types of transactions in which a plan engages only if 
the commitments and the investments of plan assets and the negotiations 
leading thereto are the sole responsibility of an independent, 
discretionary manager.\14\
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    \14\ See 75 FR 38837, 38839 (July 6, 2010).
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    8. Section I(g) of PTE 84-14 prevents an entity that may otherwise 
meet the QPAM definition from utilizing the exemptive relief for itself 
and its client plans if that entity, an ``affiliate'' thereof, or any 
direct or indirect five percent or more owner in the QPAM has been 
either convicted or released from imprisonment, whichever is later, as 
a result of criminal activity described in Section I(g) within the 10 
years immediately preceding a transaction.\15\
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    \15\ 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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Nikko Tokyo Conviction and PTE 84-14 Disqualification

    9. On February 13, 2023, Nikko Tokyo was convicted in Tokyo 
District Court of violating Japan's Financial Instruments and Exchange 
Act (the FIEA) for attempting to peg, fix, or stabilize \16\ the

[[Page 20495]]

prices of certain Japanese equity securities that Nikko Tokyo was 
attempting to place in a block offering (the Conviction). Nikko Tokyo 
was convicted of 10 violations of the FIEA and was ordered to pay a 
[yen]700 million fine (approximately $5.3 million) and a surcharge of 
approximately [yen]4.5 billion (approximately $33.7 million).\17\
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    \16\ According to the Applicant, the unofficial English-language 
translation of Article 159, paragraph 3 of the FIEA, available on 
the Japanese Financial Services Agency website, provides that no 
person may ``conduct a series of Sales and Purchase of Securities, 
etc. or make offer, Entrustment, etc. or Accepting an Entrustment, 
etc. therefore in violation of a Cabinet Order for the purpose of 
pegging, fixing or stabilizing prices of Listed Financial 
Instruments, etc. in a Financial Instruments Exchange Market or 
prices of Over-the-Counter Traded Securities in an Over-the-Counter 
Securities Market.''
    \17\ A block offering is a type of limited public offering that 
is common in Japan whereby a dealer typically applies a spread to 
the price at which it purchases the shares from the seller and the 
price at which it sells them in the block offering.
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    Between December 2019 and November 2021, Nikko Tokyo, through the 
actions of relevant officers and employees, purchased shares of ten 
issuers for its own account in an attempt to peg, fix, or stabilize the 
prices of those securities in anticipation of a block offer. This 
activity was intended to ensure that the price of the securities being 
sold through the block offering did not decline significantly, which 
would have potentially harmed Nikko Tokyo's interests.\18\
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    \18\ The Tokyo Public Prosecutor alleged that these 
``stabilization transactions'' violated Article 197 Paragraph 1, 
Item 5, Article 159, Paragraph 3, and Article 207, Paragraph 1, Item 
1 of the FIEA and Article 60 of the Penal Code.
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Nikko Tokyo Affiliation and Loss of QPAM Status

    10. Both TTI and Nikko Tokyo are direct subsidiaries of SMFG and 
thus are affiliates for purposes of Section I(g) of PTE 84-14. When the 
Tokyo District Court sentenced Nikko Tokyo in connection with the 
Conviction, Section I(g) of PTE 84-14 was triggered, and TTI became 
ineligible to rely on the QPAM Exemption to service its plan clients 
without receiving an individual prohibited transaction exemption from 
the Department.
PTE 2023-13
    11. On April 28, 2023, the Department granted PTE 2023-13,\19\ 
which permits TTI to continue to rely upon the relief provided in the 
QPAM exemption for a one-year period from the date of the Conviction. 
The Department declined TTI's request for a longer five-year exemption 
term and instead granted a limited one-year term that applies 
exclusively to TTI, to provide the Department with the opportunity to 
review TTI's adherence to the conditions set out in the one-year 
exemption before considering whether to provide TTI with longer-term 
relief after TTI submitted an exemption request for further relief.
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    \19\ See PTE 2023-13, 88 FR 26336 (April 28, 2023).
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TTI's Compliance With the Conditions of PTE 2023-13
    12. PTE 2023-13 contains a set of conditions that are designed to 
protect Covered Plans that entrust their assets to TTI despite the 
serious nature of the criminal misconduct underlying the Conviction of 
Nikko Tokyo. TTI states that it has complied with the conditions of PTE 
2023-13 and, therefore, should be permitted to continue to rely upon 
PTE 84-14 to avoid substantial costs and other disruptions that would 
occur if TTI could no longer act as a QPAM. TTI represents that it has 
taken the following concrete steps described in items 13-17 below to 
comply with the requirements of PTE 2023-13.
    13. Adoption of Comprehensive Policies. TTI represents that it has 
developed and implemented specific policies (the ERISA Policies) that 
ensure that asset management decisions of TTI are conducted 
independently of Nikko Tokyo. TTI represents that its ERISA Policies 
promote compliance with ERISA's fiduciary duties and prohibited 
transaction provisions, including with respect to co-fiduciary 
liability, and ensure accuracy in communications with regulators and 
Covered Plan clients. TTI further represents that its ERISA Policies 
require monitoring to ensure compliance with the specific terms of PTE 
2023-13 and the prompt identification and correction of any policy 
violations.
    TTI represents that it maintains policies and procedures that are 
reasonably designed to ensure that all TTI personnel comply with 
applicable regulations and act in the best interests of TTI's clients, 
including ERISA plan participants. TTI represents that it does not 
share trading decisions and investment strategies for its clients with 
personnel outside of TTI's asset management businesses and does not 
consult with other parts of the SMBC group in connection with the 
investment decisions it makes on behalf of its clients.
    14. Implementation of a Training Program. TTI represents that it 
has implemented a comprehensive, mandatory training program for all 
relevant TTI asset/portfolio management, trading, legal, compliance, 
and internal audit personnel (the ERISA Training). TTI submits that 
initial ERISA Training sessions under PTE 2023-13 have been completed, 
with mandatory attendance for relevant personnel. TTI represents 
further that it has made electronic training modules available for new 
relevant personnel and that follow-ups are made to ensure that all 
relevant personnel complete the Training.
    15. Disclosure to Client and Amendment of Client Agreements. TTI 
represents that it has provided its Covered Plan clients with a copy of 
PTE 2023-13, a summary of TTI's written ERISA Policies developed in 
connection therewith, a summary of the conduct leading to the 
Conviction, and notice that the requirements of the QPAM Exemption were 
not satisfied as a result of the Conviction. TTI states further that it 
has amended its agreements with Covered Plan clients to allow for the 
termination of the relationship with TTI without penalty to the Covered 
Plan clients, and to incorporate all other conditions of PTE 2023-13. 
TTI notes that, throughout this process, no Covered Plan client has 
decided to terminate its relationship with TTI.
    16. Strengthening of Compliance within TTI. TTI represents that it 
has designated its Chief Compliance Officer as the initial Compliance 
Officer under PTE 2023-13 to oversee TTI's ERISA Policies and ERISA 
Training and ensure that each conforms to the requirements set out in 
PTE 2023-13. TTI states that its Chief Compliance Officer has a direct 
reporting line to senior management.
    17. Strengthening of Compliance within the SMBC Group. TTI 
represents that TTI and the SMBC group have strengthened their group-
wide coordination regarding potentially disqualifying conduct to ensure 
compliance with the conditions of PTE 2023-13, including identification 
of deferred prosecution or non-prosecution agreements. Further, to 
prevent the possibility of reoccurrence, Nikko Tokyo has ceased block 
offerings while completing remedial measures supervised by Japanese 
regulators, including a verification process to assess whether the root 
causes of the problems have been addressed. For more information on 
TTI's compliance with the requirements of PTE 2023-13, please see 
Representations 14-20 of the proposed exemption.\20\
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    \20\ See 88 FR at 88118 (December 20, 2023).
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Remedial Efforts by Nikko Tokyo and SMFG
    18. According to TTI, Nikko Tokyo has taken significant steps to 
address the issues that led to the Conviction and has enhanced its 
policies and procedures related to proprietary trading and enhanced its 
surveillance over that activity, including hiring additional compliance 
officers. In addition, Nikko Tokyo refused to renew its employment 
contracts with each of

[[Page 20496]]

the four executive officers who were alleged to have been involved in 
the misconduct underlying the Conviction and has dismissed the 
remaining two employees on disciplinary grounds.
Separation of TTI and Nikko Tokyo
    19. TTI represents that: none of the misconduct underlying the 
Nikko Tokyo Conviction involved TTI or the SMBC group's asset 
management businesses; no TTI personnel were involved in the 
misconduct; and no individual officer or employee of Nikko Tokyo had 
any role at TTI. According to the Applicant, TTI and Nikko Tokyo have 
separate businesses, operations, management teams, systems, premises, 
and legal and compliance personnel. Since its acquisition by SMFG on 
February 28, 2020, TTI has remained a stand-alone business with 
distinct reporting lines, governance structures, and control 
frameworks. Further, TTI is not directly owned by or in the same 
vertical ownership chain as Nikko Tokyo, and TTI and Nikko Tokyo do not 
share personnel or office space.
    20. According to the Applicant, TTI personnel remain fully and 
independently responsible for TTI's material functions, including 
portfolio and risk management activities, investment and trading 
decisions, compliance, marketing, and the provision of client services. 
TTI states that it has detailed policies setting forth its process for 
handling ERISA assets, identifying and addressing conflicts of 
interest, and best execution. TTI also represents that it has a 
dedicated Compliance Manual that sets forth, among other things, firm 
policies related to whistleblowing, handling internal and external 
complaints, client onboarding, and the process for approving new 
products or instruments.
    TTI further represents that Nikko Tokyo is not a QPAM, does not 
manage any ERISA assets, and that no ERISA assets were involved in the 
misconduct underlying the Nikko Tokyo Conviction. Further, TTI has not 
engaged in trading activity with Nikko Tokyo on behalf of ERISA 
accounts at any point since TTI became affiliated with Nikko Tokyo. For 
more information on the separation of TTI and Nikko Tokyo, please see 
Representations 22-26 of the proposed exemption.\21\
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    \21\ See 88 FR at 88118-88119 (December 20, 2023).
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Hardship to Covered Plans
    21. TTI represents that Covered Plans would suffer certain 
hardships if TTI loses its eligibility to rely on the QPAM Exemption. 
TTI's representations regarding these hardships are set forth below in 
paragraphs 22 through 29.
    22. According to the Applicant, loss of the QPAM Exemption would 
severely limit the investment transactions available to the accounts 
that TTI manages on behalf of Covered Plans, hindering TTI's ability to 
efficiently manage the strategies for which it contracted with Covered 
Plan clients. Further, if TTI were ineligible to rely on the QPAM 
Exemption, it could receive less advantageous pricing for transactions 
it engages in on behalf of Covered Plans.
    23. TTI represents that the QPAM Exemption is the only exemption 
available to provide relief for certain types of investment 
transactions it enters into on behalf of Covered Plans. TTI represents 
that counterparties to the swaps and other transactions in which TTI-
managed accounts engage require compliance with, and a representation 
as to satisfaction of the conditions of, the QPAM Exemption.
    24. TTI represents that considering the nature of emerging market 
investments and swap, options, and other derivative transactions, 
Covered Plan clients and counterparties are reluctant to utilize more 
recent alternative exemptions, such as the service provider exemption 
under ERISA section 408(b)(17). This reluctance is due to uncertainty 
about the application of the adequate consideration requirements of the 
statutory exemption and the resulting possibility that the use of the 
exemption could later be challenged by the Department on those grounds.
    25. TTI states that it relies on the QPAM Exemption to conduct a 
variety of transactions on behalf of Covered Plans, including buying 
and selling equity securities; preferred stock; American Depository 
Receipts, and related options; U.S. and foreign fixed-income 
instruments, including unregistered offerings; various derivatives, 
including futures, options on futures, and swaps; and foreign exchange 
products, including spot currencies, forwards, and swaps.\22\
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    \22\ TTI also relies upon the QPAM Exemption for the purchase 
and sale of both foreign and domestic equity securities, registered 
and sold under Rule 144A or otherwise (e.g., traditional private 
placement).
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    26. TTI represents that if it loses its ability to rely upon the 
QPAM Exemption, it would no longer be able to hedge currency for its 
private and public plan asset clients, preventing it from managing 
absolute and relative currency risk for such clients in such clients' 
best interests. TTI states that it specializes in international and 
emerging market strategies that depend on TTI's ability to translate 
and maintain the value of Covered Plan investments from the local 
currency in which the investment is made into U.S. dollars, the 
benchmark currency in which performance is measured. To limit plan risk 
exposure to the underlying securities without simultaneously exposing 
them to the risk of currency fluctuation, TTI makes substantial use of 
foreign exchange (FX) hedges by using forward transactions and other FX 
derivatives. If this exemption is not granted, TTI states that nearly 
$900 million in ERISA plans and separately managed accounts for private 
and public employers would likely be affected, either directly or as a 
result of TTI's inability to effectively hedge risk. For all but one of 
the ERISA funds that TTI manages, virtually all assets are either 
actively or dynamically hedged based on exposures and market 
conditions.\23\
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    \23\ The actual percentage of AUM in each fund that is hedged at 
any given time varies.
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    As of November 3, 2022, approximately 16% of the assets under 
management (AUM) in each of the four segregated ERISA accounts that TTI 
manages are hedged with respect to Indian, Taiwanese, and Chinese 
currency, which translates to approximately $35 million in hedges. 
Further, the TT Emerging Markets Opportunities Fund II has over the 
past two years hedged risks associated with British, Indian, Taiwanese, 
Chinese, Mexican, and Polish currencies. Without these positions, the 
Applicant states that the TT Emerging Markets Opportunities Fund II 
would have incurred nearly $5.5 million in losses due to unhedged FX 
exposures, negatively impacting overall returns.
    27. TTI represents that the loss of the QPAM Exemption would also 
impact TTI's agreements with the swap dealers it executes these hedges 
with pursuant to International Swaps and Derivatives Association 
Agreements (ISDA Agreements). ISDA agreements require TTI to represent 
that it meets all conditions of the QPAM Exemption, and a breach of 
this representation would entitle the counterparty to terminate the 
transaction. TTI states that, as a practical matter, swap dealers would 
be nearly certain to exercise their right to terminate because TTI's 
loss of the QPAM Exemption would increase the swap dealers' exposure to 
risk. Thus, these agreements would be unwound and TTI would no longer 
be able to employ the hedging activities on which its strategies 
depend. If these ISDA Agreements were terminated, TTI

[[Page 20497]]

states that it would immediately need to unwind approximately 
$73,784,388 million in hedges.
    28. TTI submits that if this exemption is not granted, Covered 
Plans could incur transaction costs, costs associated with finding and 
evaluating other managers, and costs associated with reinvesting assets 
with those new managers. These costs, according to TTI include the 
following: (a) consultant fees, legal fees, and other due diligence 
expenses associated with identifying new managers; (b) transaction 
costs associated with a change in investment manager, including the 
sale and purchase of portfolio investments to accommodate the 
investment policies and strategy of the new manager, and the cost of 
entering into new custodial arrangements; and (c) lost investment 
opportunities as a result of the change in investment managers.
    The Applicant states that, given the sophistication of TTI's 
investment strategies, Covered Plan clients would likely engage in a 
full RFP process that could take several months to complete. TTI states 
that plans generally incur tens of thousands of dollars in consulting 
and legal fees in connection with a search for a new manager and that 
consultants may charge more for searches involving specialized 
strategies, such as TTI's international, emerging markets, and 
environmentally conscious portfolios.
    29. TTI provides estimated liquidation costs associated with a loss 
of QPAM status as dollar cost estimates for its emerging market equity 
portfolios only, which represents the predominant strategy for ERISA 
Clients. TTI states that its estimates on equity liquidation costs 
listed below are based on the gross values of the portfolio, utilizing 
the basis point figures, without analysis as to the specific portfolio 
components.

----------------------------------------------------------------------------------------------------------------
                                                            Min. 30-day
                                       Emerging market         equity          Max. 30-day     Min. intermediate
            ERISA client               portfolio AUM at   liquidation cost   liquidation cost   liquidation cost
                                           12/7/23            (30 bps)           (50 bps)           (40 bps)
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1...................................        $54,845,803           $164,537           $274,229           $219,383
2...................................        172,160,384            516,481            860,801            688,641
3...................................        102,787,100            308,361            513,935            411,148
(Plan Asset Fund)...................        441,117,644          1,323,352          2,205,588          1,764,470
                                     ---------------------------------------------------------------------------
    Total...........................        770,910,931          2,312,731          3,854,553          3,083,642
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----------------------------------------------------------------------------------------------------------------
                                                         Max. intermediate                      Liquidation cost
                      ERISA client                        liquidation cost   Commission fees   of currency hedge
                                                              (80 bps)           (10 bps)           (50 bps)
----------------------------------------------------------------------------------------------------------------
1......................................................           $438,766            $54,845            $27,788
2......................................................          1,377,283            172,160             86,914
3......................................................            822,296            102,787             51,982
Plan Asset Fund........................................          3,528,941            441,117            202,235
                                                        --------------------------------------------------------
    Total..............................................          6,167,286            770,909            368,919
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    The Department notes that this exemption includes protective 
conditions that allow Covered Plans to continue to utilize the services 
of TTI if they determine that it is prudent to do so. In this regard, 
this exemption allows Covered Plans to avoid cost and disruption to 
investment strategies that may arise if such Covered Plans are forced, 
on short notice, to hire a different QPAM or asset manager because TTI 
is no longer able to rely on the relief provided by PTE 84-14 due to 
the Conviction.

Written Comments

    In the proposed exemption, 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 by February 2, 2024. 
The Department received one written comment from the Applicant and no 
requests for a public hearing.

I. Comments From the Applicant

Comment 1: SMFG Review of the Audit Report (Section (III)(i)(8))
    The Applicant requests that condition (i)(8) of the proposed 
exemption be modified to permit the General Manager of the Corporate 
Planning Department to review and certify the Audit Report. The 
Applicant asserts that the General Manager of the Corporate Planning 
Department is senior to the joint general manager of SMFG's Corporate 
Planning Department.
    Department's Response: The Department agrees with the Applicant's 
request and has modified Section (III)(i)(8) accordingly.
Comment 2: Summary of Facts and Representations
    The Applicant notes the following updates and clarifications to the 
Summary of Facts and Representations.
     Paragraph 4: TTI currently has a single public plan 
account with approximately $40 million in assets, and the TT Non-U.S. 
Equity Master Fund Limited is now closed.
     Paragraph 9: Because the Conviction that occurred on 
February 13, 2023, only included Nikko Tokyo and not Nikko Tokyo and 
four of its officers and employees as stated in the proposed exemption, 
the first sentence of Paragraph 9 should state, ``On February 13, 2023, 
Nikko Tokyo was convicted . . .''
     Paragraph 9: the second sentence of the second paragraph 
should be updated as follows: ``Between December 2019 and April 2021, 
Nikko Tokyo, through the actions of relevant officers and employees, 
purchased shares of ten issuers for its own account . . .''
     Paragraph 21: the words ``its employment contracts'' 
should be ``its contracts''.
     Paragraph 23: the TTI Board now consists of six directors, 
made up of three TTI directors and three representatives of the SMBC 
group.
    Department's Response: The Department accepts the Applicant's 
updates and clarifications to the Summary of Facts and Representations.
    The complete application file (D-12096) is available for public 
inspection in the Public Disclosure Room of the

[[Page 20498]]

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, please refer to the 
notice of proposed exemption published on December 20, 2023, at 88 FR 
88115.

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 ERISA section 408(a) does not relieve a fiduciary or other party 
in interest from certain requirements of other ERISA provisions, 
including but not limited to any prohibited transaction provisions to 
which the exemption does not apply and the general fiduciary 
responsibility provisions of ERISA section 404, which, among other 
things, require a fiduciary to discharge their duties respecting the 
plan solely in the interest of the plan's participants and 
beneficiaries and in a prudent fashion in accordance with ERISA section 
404(a)(1)(B).
    (2) As required by ERISA section 408(a), the Department hereby 
finds that the exemption is: (a) administratively feasible for the 
Department; (b) in the interests of Covered Plans and their 
participants and beneficiaries; and (c) protective of the rights of the 
Covered Plans' participants and beneficiaries.
    (3) This exemption is supplemental to, and not in derogation of, 
any other ERISA provisions, 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 for determining whether the transaction is in fact a 
prohibited transaction.
    (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 transactions 
that are the subject of the exemption and are true at all times.
    Accordingly, after considering the entire record developed in 
connection with the Applicant's exemption application, the Department 
has determined to grant the following exemption under the authority of 
ERISA section 408(a) in accordance with the Department's exemption 
procedures set forth in 29 CFR part 2570, subpart B: \24\
---------------------------------------------------------------------------

    \24\ 76 FR 66637, 66644 (October 27, 2011).
---------------------------------------------------------------------------

Exemption

Section I. Definitions

    (a) The term ``Conviction'' means the judgment of conviction 
against SMBC Nikko Securities, Inc. (Nikko Tokyo) in Tokyo District 
Court for attempting to peg, fix or stabilize the prices of certain 
Japanese equity securities that Nikko Tokyo was attempting to place in 
a block offering that occurred on February 13, 2023.
    (b) 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 Code 
section 4975 (an ``IRA''), in each case, with respect to which TTI 
relies on PTE 84-14, or with respect to which TTI has expressly 
represented that the manager qualifies as a QPAM or relies on the QPAM 
class exemption (PTE 84-14 or the QPAM Exemption). A Covered Plan does 
not include an ERISA-covered plan or IRA to the extent that TTI has 
expressly disclaimed reliance on QPAM status or PTE 84-14 when entering 
into a contract, arrangement, or agreement with the ERISA-covered plan 
or IRA.
    (c) The term ``Exemption Period'' means the five-year period 
beginning on February 13, 2024, and ending on February 12, 2029.
    (d) The term ``TTI'' means TT International Asset Management Ltd, 
and does not include SMBC Nikko Securities, Inc. (Nikko Tokyo), or any 
other entity affiliated with TT International Asset Management Ltd.

Section II. Covered Transactions

    Under this exemption, TTI 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) notwithstanding the Conviction, as 
defined in Section I(a), during the Exemption Period, as defined in 
Section I(c), provided that it satisfies the conditions set forth in 
Section III below.

Section III. Conditions

    (a) TTI (including its officers, directors, agents other than Nikko 
Tokyo, and employees) did not know of, did not have reason to know of, 
and did not participate in the criminal conduct that is the subject of 
the Conviction. Further, any other party engaged on behalf of TTI who 
had responsibility for or exercised authority in connection with the 
management of plan assets did not know or have reason to know of and 
did not participate in the criminal conduct that is the subject of the 
Conviction. For purposes of this exemption, ``participate in'' refers 
not only to active participation in the criminal conduct of Nikko Tokyo 
that is the subject of the Conviction, but also to knowing approval of 
the criminal conduct or knowledge of such conduct without taking active 
steps to prohibit it, including reporting the conduct to such 
individual's supervisors, and to TTI's Board of Directors;
    (b) TTI (including its officers, directors, employees, and agents, 
other than Nikko Tokyo) did not receive direct compensation, or 
knowingly receive indirect compensation, in connection with the 
criminal conduct that is the subject of the Conviction. Further, any 
other party engaged on behalf of TTI 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 that is the 
subject of the Conviction;
    (c) TTI does not currently and will not in the future employ or 
knowingly engage any of the individuals who participated in the 
criminal conduct that is the subject of the Conviction;
    (d) At all times during the Exemption Period, TTI will not use its 
authority or influence to direct an ``investment fund'' (as defined in 
Section VI(b) of PTE 84-14) that is subject to ERISA or the Code and 
managed by TTI in reliance on PTE 84-14, or with respect to which TTI 
has expressly represented to a Covered Plan that it qualifies as a QPAM 
or relies on the QPAM Exemption, to enter into any transaction with 
Nikko Tokyo, or to engage Nikko Tokyo 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 TTI to satisfy Section I(g) of PTE 84-14 arose 
solely from the Conviction;
    (f) TTI did not exercise authority over the assets of any Covered 
Plan in a manner that it knew or should have known would further the 
criminal conduct that is the subject of the Conviction or cause TTI or 
its affiliates to directly or indirectly profit from the criminal 
conduct that is the subject of the Conviction;
    (g) Other than with respect to employee benefit plans maintained or 
sponsored for its own employees or the employees of an affiliate, Nikko 
Tokyo will not act as a fiduciary within the meaning of ERISA section 
3(21)(A)(i) or (iii), or Code section 4975(e)(3)(A) and (C), with 
respect to Covered Plan assets.

[[Page 20499]]

    (h)(1) TTI must continue to implement, maintain, adjust (to the 
extent necessary), and follow the written policies and procedures (the 
Policies). The Policies must require and be reasonably designed to 
ensure that:
    (i) The asset management decisions of TTI are conducted 
independently of the corporate management and business activities of 
Nikko Tokyo;
    (ii) TTI fully complies with ERISA's fiduciary duties and with 
ERISA and the Code's prohibited transaction provisions, 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) TTI 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 TTI to regulators, 
including, but not limited to, the Department of Labor (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 TTI's knowledge at the time, TTI 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;
    (vi) TTI complies with the terms of this exemption; and
    (vii) Any violation of or failure to comply with an item in 
subparagraphs (ii) through (vi) is corrected as soon as reasonably 
possible upon discovery or as soon after TTI 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, to the head of 
compliance and the general counsel (or their functional equivalent) of 
TTI, and the independent auditor responsible for reviewing compliance 
with the Policies. TTI will not be treated as having failed to develop, 
implement, maintain, or follow the Policies, provided it corrects any 
instance of noncompliance as soon as reasonably possible upon 
discovery, or as soon as reasonably possible after TTI reasonably 
should have known of the noncompliance (whichever is earlier), and 
provided it adheres to the reporting requirements set forth in this 
subparagraph (vii);
    (2) TTI must continue to implement an annual training program (the 
Training) during the Exemption Period for all relevant TTI asset/
portfolio management, trading, legal, compliance, and internal audit 
personnel. The Training required under this exemption may be conducted 
electronically and must: (a) 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 (b) be conducted by a professional who has been 
prudently selected and who has appropriate technical training and 
proficiency with ERISA and the Code to perform the tasks required by 
this exemption;
    (i)(1) TTI must submit to biennial audits 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 TTI's compliance with the Policies and 
Training conditions described herein. The audit requirement must be 
incorporated into the Policies. The first audit covered under this 
exemption must cover the period of February 13, 2025, through February 
12, 2026, and must be completed by August 12, 2026. The second audit 
covered under this exemption must cover the period of February 13, 
2027, through February 12, 2028, and must be completed by August 12, 
2028.
    (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, TTI will grant the auditor 
unconditional access to its businesses, including, but not limited to: 
its computer systems; business records; transactional data; workplace 
locations; training materials; and personnel. Such access will be 
provided only to the extent that it is not prevented by state or 
federal statute, or involves communications subject to attorney client 
privilege, and may be 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 TTI has developed, implemented, maintained, and 
followed the Policies in accordance with the conditions of the 
exemption, and has developed and implemented the Training, as required 
herein;
    (4) The auditor's engagement must specifically require the auditor 
to test TTI's operational compliance with the Policies and Training 
conditions. In this regard, the auditor must test, for TTI, 
transactions involving Covered Plans sufficient in size, number, and 
nature to afford the auditor a reasonable basis to determine TTI's 
operational compliance with the Policies and Training;
    (5) Before the end of the relevant period for completing the audit, 
the auditor must issue a written report (the Audit Report) to TTI that 
describes the procedures performed by the auditor during the course of 
its examination. The Audit Report must include the auditor's specific 
determinations regarding:
    (i) the adequacy of TTI's Policies and Training; TTI's compliance 
with the Policies and Training conditions; the need, if any, to 
strengthen such Policies and Training; and any instance of TTI's 
noncompliance with the written Policies and Training described in 
Section III(h) above. TTI must promptly address any noncompliance and 
promptly address or prepare a written plan of action to address any 
determination by the auditor regarding the adequacy of the Policies and 
Training and the auditor's recommendations (if any) with respect to 
strengthening the Policies and Training. Any action taken, or the plan 
of action to be taken by TTI must be included in an addendum to the 
Audit Report (and such addendum must be completed before the 
certification described in Section III(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 the 
Audit Report is submitted, the following period's Audit Report must 
state whether the plan was satisfactorily completed. Any determination 
by the auditor that TTI 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 TTI has complied with the 
requirements under this subparagraph must be based on evidence that TTI 
has actually implemented, maintained, and followed the Policies and 
Training required by the exemption. Furthermore, the auditor must not 
solely rely on the Report created by the compliance officer (the 
Compliance Officer), as described in Section III(m) below, as the basis 
for the auditor's conclusions in lieu of independent determinations and 
testing performed

[[Page 20500]]

by the auditor, as required by Section III(i)(3) and (4) above; and
    (ii) The adequacy of the Review described in Section III(m);
    (6) The auditor must notify TTI 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 TTI must certify in 
writing, under penalty of perjury, that the officer has reviewed the 
Audit Report and the exemption and that to the best of such officer's 
knowledge at the time, TTI 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 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. Notwithstanding the above, no person, including any 
person identified by Japanese authorities, who knew of, or should have 
known of, or participated in, any misconduct underlying the Conviction, 
by any party, may provide the certification required by the exemption, 
unless the person took active documented steps to stop the misconduct 
underlying the Conviction;
    (8) TTI's Board of Directors must be provided a copy of the Audit 
Report and the general manager or the joint general manager of SMFG's 
Corporate Planning Department must review the Audit Report for TTI and 
certify in writing, under penalty of perjury, that such officer has 
reviewed the Audit Report. With respect to this subsection (8), such 
certifying general manager or joint general manager must not have known 
of, had reason to know of, or participated in, any misconduct 
underlying the Conviction. If the certifying general manager or joint 
general manager was aware of the misconduct, they must have taken 
documented steps to stop the misconduct underlying the Conviction;
    (9) TTI must provide its certified Audit Report, by electronic mail 
to [email protected]. This delivery must take place no later than thirty 
(30) days following completion of the Audit Report. The Audit Report 
will be made part of the public record regarding this exemption. 
Furthermore, TTI must make its Audit Report 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) TTI and the auditor must submit to [email protected], any 
engagement agreement(s) entered into pursuant to the engagement of the 
auditor under the exemption no later than two (2) months after the 
execution of any such engagement agreement;
    (11) The auditor must provide the Department, upon request, access 
to all the workpapers it created and utilized in the course of the 
audit for inspection and review, provided such access and inspection is 
otherwise permitted by law; and
    (12) TTI must notify the Department of a change in the independent 
auditor no later than 60 days 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 TTI;
    (j) Throughout the Exemption Period, with respect to any 
arrangement, agreement, or contract between TTI and a Covered Plan, TTI 
agrees and warrants:
    (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 
prohibited transactions); and to comply with the standards of prudence 
and loyalty set forth in ERISA section 404 with respect to each such 
Covered Plan, to the extent that section is applicable;
    (2) To indemnify and hold harmless the Covered Plan with respect 
to: any actual losses resulting directly from TTI'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 TTI; or any claim arising out of the failure of TTI to 
qualify for the exemptive relief provided by PTE 84-14 as a result of a 
violation of Section I(g) of PTE 84-14, other than the Conviction. This 
condition applies only to actual losses caused by TTI's violations. 
Actual losses include losses and related costs arising from unwinding 
transactions with third parties and from transitioning Plan assets to 
an alternative asset manager as well as costs associated with any 
exposure to excise taxes under Code section 4975 because of TTI's 
inability to rely upon the relief in the QPAM Exemption.
    (3) Not to require (or otherwise cause) the Covered Plan to waive, 
limit, or qualify the liability of TTI for violating ERISA or the Code 
or engaging in prohibited transactions;
    (4) Not to restrict the ability of the Covered Plan to terminate or 
withdraw from its arrangement with TTI with respect to any investment 
in a separately managed account or pooled fund subject to ERISA and 
managed by TTI, 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 of these arrangements 
involving investments in pooled funds subject to ERISA entered into 
after the effective date of this exemption, 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 a Covered Plan's investment, and the restrictions must be 
applicable to all such investors and effective no longer than 
reasonably necessary to avoid the adverse consequences;
    (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 the withdrawal or termination may have 
adverse consequences for all other investors, provided that such fees 
are applied consistently and in like manner to all such investors;
    (6) Not to include exculpatory provisions disclaiming or otherwise 
limiting the liability of TTI for a violation of such agreement's 
terms. To the extent consistent with ERISA section 410, 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 TTI and its 
affiliates, or damages arising from acts outside the control of TTI; 
and
    (7) TTI must provide a notice of its obligations under this Section 
III(j) to each Covered Plan. For all other prospective Covered Plans, 
TTI must agree to its obligations under this Section III(j) in an 
updated investment management agreement between TTI and such clients or 
other written

[[Page 20501]]

contractual agreement. Notwithstanding the above, TTI will not violate 
this condition solely because a Covered Plan refuses to sign an updated 
investment management agreement;
    (k) Within 60 days after the effective date of this exemption, TTI 
must provide notice of the exemption as published in the Federal 
Register to each sponsor and beneficial owner of a Covered Plan that 
has entered into a written asset or investment management agreement 
with TTI, along with a separate summary describing the facts that led 
to the Conviction (the Summary), which has been submitted to the 
Department. The Summary must contain a prominently displayed statement 
(the Statement) that the Conviction resulted in TTI's failure to meet a 
condition in PTE 84-14. All prospective Covered Plan clients that enter 
into a written asset or investment management agreement with TTI within 
60 days after the effective date of this exemption must receive a copy 
of the notice of the exemption, the Summary, and the Statement before, 
or contemporaneously with, the Covered Plan's receipt of a written 
asset or investment management agreement from TTI. The notices may be 
delivered electronically (including by an email that has a website link 
to the exemption). Notwithstanding the above, TTI will not violate the 
condition solely because a Covered Plan refuses to sign an updated 
investment management agreement.
    (l) TTI must comply with each condition of PTE 84-14, as amended, 
with the sole exception of the violation of Section I(g) of PTE 84-14 
that is attributable to the Conviction. If an affiliate of TTI (as 
defined in Section VI(d) of PTE 84-14) is convicted of a crime 
described in Section I(g) of PTE 84-14 (other than the Conviction) 
during the Exemption Period, relief in the exemption would terminate 
immediately;
    (m)(1) TTI must continue to designate a senior compliance officer 
(the Compliance Officer) to be responsible for compliance with the 
Policies and Training requirements described herein. The Compliance 
Officer previously designated by TTI under PTE 2023-13 may continue to 
serve in the role of Compliance Officer provided they meet all the 
requirements of this Section (m)(1). Notwithstanding the above, no 
person, including any person referenced in the indictment that gave 
rise to the Conviction, who knew of, or should have known of, or 
participated in, any misconduct described in the indictment, by any 
party, may be involved with the designation or responsibilities 
required by this condition unless the person took active documented 
steps to stop the misconduct. The Compliance Officer must conduct a 
review of the Exemption Period (the Exemption Review), to determine the 
adequacy and effectiveness of TTI's implementation of the Policies and 
Training. With respect to the Compliance Officer, TTI must meet the 
following conditions:
    (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 direct reporting line to 
the highest-ranking corporate officer in charge of legal compliance for 
asset management.
    (2) With respect to the Exemption Review, TTI must meet the 
following conditions:
    (i) The Exemption Review must include a review of TTI's 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 compliance and risk control function (or its 
equivalent) during the previous year; any material change in the 
relevant business activities of TTI; 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 TTI;
    (ii) The Compliance Officer must prepare a written report for the 
Exemption Review (an Exemption Report) that (A) summarizes their 
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 in response to 
such recommendations;
    (iii) In the Exemption Report, the Compliance Officer must certify 
in writing that to the best of their 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 prior year, and any related correction 
taken to date, has been identified in the Exemption Report; and (D) TTI 
complied with the Policies and Training, and/or corrected (or are 
correcting) any known instances of noncompliance in accordance with 
Section III(h) above;
    (iv) The Exemption Report must be provided to appropriate corporate 
officers of TTI; the head of compliance and the general counsel (or 
their functional equivalent) of TTI; and must be made unconditionally 
available to the independent auditor described above;
    (v) The Exemption Review, including the Compliance Officer's 
written Report, must be completed within 90 days following the end of 
the period to which it relates.
    (n) TTI must impose internal procedures, controls, and protocols to 
reduce the likelihood of a recurrence of conduct that is the subject of 
the Conviction;
    (o) Nikko Tokyo must comply in all material respects with any 
requirements imposed by a U.S. regulatory authority in connection with 
the Conviction;
    (p) TTI must maintain records necessary to demonstrate that it has 
met the conditions of the exemption for six (6) years following the 
date of any transaction for which TTI relies upon the relief provided 
in this exemption;
    (q) During the Exemption Period, TTI must: (1) immediately disclose 
to the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA), TTI or any of its affiliates (as 
defined in Section VI(d) of PTE 84-14) enter into with the U.S. 
Department of Justice in connection with the conduct described in 
Section I(g) of PTE 84-14 or ERISA section 411; and (2) immediately 
provide the Department with any information requested by the 
Department, as permitted by law, regarding the conduct and allegations 
that led to the NPA or DPA;
    (r) Within 60 days after the effective date of this exemption, TTI, 
must clearly and prominently inform Covered Plan clients in its 
agreements with, or in other written disclosures provided to Covered 
Plans of their right to obtain a copy of the Policies or a description 
(Summary Policies) which accurately summarizes key components of TTI'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 180 days following the end of the calendar year 
during which the Policies were changed. If TTI meets this disclosure 
requirement by providing Summary Policies, changes to

[[Page 20502]]

the Policies will not result in the requirement for TTI to provide a 
new disclosure to Covered Plans unless the Summary Policies are no 
longer accurate as a result of changes to the Policies. With respect to 
this requirement, TTI may maintain the description continuously on a 
website, provided that TTI clearly and prominently provides a website 
link to the Policies or Summary Policies to each Covered Plan;
    (s) TTI must provide the Department with the records necessary to 
demonstrate that each condition of this exemption has been met within 
30 days of a request by the Department; and
    (t) All the material facts and representations set forth in the 
Summary of Facts and Representations must be true and accurate at all 
times.
    Exemption Date: This exemption is in effect for a period of five 
years beginning on February 13, 2024, and ending on February 12, 2029.

    Signed at Washington, DC, this 19th day of March 2024.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2024-06125 Filed 3-21-24; 8:45 am]
BILLING CODE 4510-29-P