[Federal Register Volume 89, Number 66 (Thursday, April 4, 2024)]
[Notices]
[Pages 23612-23614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07128]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Technical Correction to PTE 2016-11, Exemption From Certain 
Prohibited Transaction Restrictions: Northern Trust Corporation 
(Together With Its Current and Future Affiliates, Northern Trust or the 
Applicant)

AGENCY: Employee Benefits Security Administration (EBSA), Labor.

ACTION: Notice of Technical Correction.

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[[Page 23613]]

SUMMARY: This document makes a technical correction to Prohibited 
Transaction Exemption (PTE) 2016-11 granted to Northern Trust 
Corporation (D-11875) on October 28, 2016.

DATES: 
    Issuance Date: This technical correction is issued on April 4, 2024 
without further action or notice.
    Exemption Date: PTE 2016-11 will remain in effect for the period 
beginning on the Conviction date (as corrected herein) until the 
earlier of: (1) the date that is twelve months following the Conviction 
date; or (2) the effective date of a final agency action made by the 
Department in connection with an application for long-term exemptive 
relief for the covered transactions described in PTE 2016-11.

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

SUPPLEMENTARY INFORMATION:

Background

    On October 28, 2016, the Department published PTE 2016-11 in the 
Federal Register.\1\ PTE 2016-11 is a temporary administrative 
exemption that permits certain entities (the Northern Trust Qualified 
Professional Asset Managers (QPAMs)) with specified relationships to 
Northern Trust Fiduciary Services (Guernsey) ltd. (NTFS) to continue to 
rely upon the relief provided by the Department's QPAM Exemption \2\ 
for a one-year period, notwithstanding a judgment of conviction against 
NTFS for aiding and abetting tax fraud.\3\
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    \1\ 81 FR 75150 (October 28, 2016).
    \2\ PTE 84-14, 49 FR 9494 (March 13, 1984), as corrected at 50 
FR 41430 (October 10, 1985), as amended at 70 FR 49305 (August 23, 
2005) and as amended at 75 FR 38837 (July 6, 2010), hereinafter 
referred to as PTE 84-14 or the QPAM Exemption.
    \3\ Section I(g) of PTE 84-14 prevents an entity that may 
otherwise meet the definition of a QPAM from utilizing the exemptive 
relief provided by PTE 84-14 for itself and its client plans, if 
that entity or an ``affiliate'' thereof, or any owner, direct or 
indirect, of a five percent or more interest in the QPAM has within 
10 years immediately preceding the transaction, been either 
convicted or released from imprisonment, whichever is later, as a 
result of criminal activity described in that section.
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    The Department granted PTE 2016-11 to protect Covered Plans \4\ 
from the harm that could result from the Northern Trust QPAMs' loss of 
relief under PTE 84-14 due to the potential conviction of NTFS. 
Exemptive relief was provided for a period of 12 months from the 
potential Conviction date to provide the Department with sufficient 
time to determine whether longer-term relief was appropriate.\5\ PTE 
2016-11, as initially granted, defined the term ``Conviction'' as ``the 
potential judgment of conviction against NTFS for aiding and abetting 
tax fraud to be entered in France in the District Court of Paris, 
French Special Prosecutor No. 1120392066, French Investigative Judge 
No. JIRSIF/11/12.''
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    \4\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of 
ERISA (``ERISA-covered plan'') or a plan subject to Section 4975 of 
the Code (``IRA''), with respect to which a Northern Trust QPAM 
relies on PTE 84-14, or with respect to which a Northern Trust QPAM 
(or any Northern Trust affiliate) has expressly represented that the 
manager qualifies as a QPAM or relies on the QPAM class exemption. A 
Covered Plan does not include an ERISA-covered Plan or IRA to the 
extent the Northern Trust 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.
    \5\ Northern Trust's exemption request (D-11875) is available by 
contacting EBSA's Public Disclosure Room at (202) 693-8673.
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    In January 2017, the trial court (the Paris District Court) in 
France acquitted NTFS and all prosecuted parties of the aiding and 
abetting tax fraud charge, so the exemptive relief provided in PTE 
2016-11 was unnecessary. The Paris District Court's verdict was 
appealed by the French government to the Paris Court of Appeal, which 
in March 2018 conducted a retrial and in June 2018 upheld the acquittal 
of all prosecuted parties on the basis that the offenses were time-
barred. The Paris Court of Appeal's verdict was appealed by the French 
government to the Court of Cassation, the highest court in France, 
which in January 2021, quashed the appellate court's judgment and found 
that the offenses were not time-barred and there was a legal obligation 
under French law to declare assets held in certain (but not all) types 
of trusts.\6\ The Court of Cassation directed a re-trial of all 
prosecuted parties, including NTFS, and tasked a different panel of the 
Paris Court of Appeal with ascertaining the nature of the trusts in 
question. In September-October 2023, the case was tried a third time in 
front of a different panel of the Paris Court of Appeal. On March 5, 
2024, the Paris Court of Appeal issued a judgment of conviction (the 
2024 Conviction) against NTFS for aiding and abetting tax fraud. On the 
same day, NTFS appealed the verdict to the Court of Cassation.
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    \6\ The Applicant states that a key issue in this case was 
whether trust assets were required to be declared as part of an 
inheritance tax filing. The Court of Cassation held that the legal 
requirement to declare trust assets as a part of an inheritance 
applies to trusts where the settlor had not divested of the trust 
assets during their lifetime. The Paris Court of Appeal analyzed the 
features and operations of the applicable trusts to determine 
whether Mr. Wildenstein had effectively divested himself of the 
trusts' assets in connection with its March 5, 2024 decision. The 
Applicant states that the Paris Court of Appeal concluded that Mr. 
Wildenstein had not effectively divested himself of trust assets.
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    As a result of the most recent legal proceedings, Northern Trust 
requests the Department to issue a technical correction to PTE 2016-11 
to change the definition of the term ``Conviction'' in PTE 2016-11 by 
replacing references to the ``District Court of Paris'' with references 
to the ``Paris Court of Appeal.'' Northern Trust represents that all 
other identifying information, including the identity of the case and 
the underlying facts, remain the same.
    Before the 2024 Conviction, a separate defendant in the case 
against Northern Trust, Royal Bank of Canada, requested and received a 
technical correction to PTE 2016-10.\7\ Northern Trust requested the 
Department to make the same technical correction to PTE 2016-11 that it 
made to PTE 2016-10, because PTE 2016-11 also references the ``District 
Court of Paris'' case rather than the Paris Court of Appeal case.
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    \7\ See PTE 2016-10, 81 FR 75147 (October 28, 2016). The 
Department issued a technical correction on December 11, 2023 at 88 
FR 85931 that corrected the definition of ``Conviction'' in PTE 
2016-10 to correct the name of the court in France hearing the case 
as well as the date of conviction.
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    As noted above, PTE 2016-11 was granted in order to protect Covered 
Plans from harm if Northern Trust were convicted for the crime 
described in that exemption. PTE 2016-11 would have provided 12 months 
of exemptive relief to Northern Trust in order to afford the Department 
sufficient time to evaluate whether a longer-term exemption would be in 
the interest of, and protective of the rights of, Covered Plans and 
their participants and beneficiaries. This same harm would arise now 
that NTFS is convicted for the same crime, pursuant to the 2024 
Conviction. Therefore, to ensure that Covered Plans are protected from 
any harm arising from the Conviction while the Department evaluates 
whether longer-term relief is appropriate, the Department is correcting 
the definition of ``Conviction'' in PTE 2016-11 to refer to ``the 
judgment of conviction against NTFS for aiding and abetting tax fraud 
entered in France in the Court of Appeal, French Special Prosecutor No. 
1120392066, French Investigative Judge No. JIRSIF/11/12 or another 
court of competent jurisdiction.'' PTE 2016-11, as corrected, will be 
effective for a period of 12 months from the date of such Conviction.
    The Applicant represents to the Department that, to the best of 
Northern Trust's knowledge, there have been no material changes since 
February 29, 2016, the date of submission of Northern Trust's exemption 
application

[[Page 23614]]

that serves as the record upon which PTE 2016-11 was proposed and 
granted, that are relevant to that application or the technical 
corrections set forth herein, other than changes in Northern Trust's 
numbers of clients and assets managed. In addition, the Applicant 
represents that Northern Trust is and has been subject to a variety of 
legal proceedings, including civil claims and lawsuits, regulatory 
examinations, investigations, audits, and requests for information by 
various governmental regulatory agencies and law enforcement 
authorities in various jurisdictions. To the best of its knowledge at 
this time, however, Northern Trust does not believe that the outcome of 
any current investigation would cause the exemption to be unavailable. 
Moreover, the Applicant represents that no affiliate of Northern Trust 
has been convicted of any crime described in section I(g) of the QPAM 
Exemption and, to the best of Northern Trust's knowledge, neither 
Northern Trust nor any affiliate has entered into a deferred 
prosecution agreement (DPA) or non-prosecution agreement (NPA) since 
February 29, 2016.
    The Department notes that it is making this technical correction 
based upon Northern Trust's certified representation that since 
February 29, 2016: (1) there have in fact been no material changes 
other than those changes noted above; (2) no affiliate of Northern 
Trust has been convicted of any crime described in section I(g) of the 
QPAM Exemption, other than the conviction covered under PTE 2016-11 as 
corrected herein; (3) neither Northern Trust nor any of its affiliates 
have entered into a DPA or NPA; and (4) to the best of its knowledge at 
this time, Northern Trust does not believe that the outcome of any 
current investigation by any of the various governmental regulatory 
agencies and law enforcement authorities in various jurisdictions would 
cause the exemption to be unavailable. If, at any time, Northern Trust 
discovers that any of these representations are no longer true, 
Northern Trust must immediately contact the Department and separately 
submit a written statement that provides the Department with the 
complete details on the circumstances discovered that led any 
representations to become untrue.
    The Department is not taking a position on whether the outcome of 
any proceedings will cause the exemption to be unavailable and also 
notes that the availability of PTE 2016-11 is conditioned upon Northern 
Trust's compliance with all of the conditions included therein, 
including the condition that expressly states: ``During the effective 
period of this temporary exemption, Northern Trust: (1) Immediately 
discloses to the Department any DPA or NPA that Northern Trust enters 
into with the U.S. Department of Justice, to the extent such DPA or NPA 
involves conduct described in Section I(g) of PTE 84-14 or section 411 
of ERISA.'' As noted in the preceding paragraph, if Northern Trust 
discovers that Northern Trust or any of its affiliates have entered 
into a DPA or NPA at any time on or after February 29, 2016, Northern 
Trust must inform the Department promptly upon Northern Trust or its 
affiliates' discovery of such fact.
    Furthermore, if Northern Trust later submits an exemption 
application requesting longer term exemptive relief from Section I(g) 
of PTE 84-14 due to the Conviction, the Department would consider 
relevant any legal proceedings, including civil claims and lawsuits, 
regulatory examinations, investigations, audits, and requests for 
information by various governmental regulatory agencies and law 
enforcement authorities in various jurisdictions that may be pending at 
that time notwithstanding whether such proceedings would trigger 
ineligibility. In this regard, any such proceedings would be relevant 
to the Department's analysis of whether the Northern Trust QPAMs (and 
those who may be in a position to influence the QPAMs' policies) 
maintain the high standard of integrity required to operate as a QPAM.

Technical Correction

    Section II(a) of PTE 2016-11 is corrected to read as follows:
    ``(a) The term ``Conviction'' means the judgment of conviction 
against NTFS for aiding and abetting tax fraud entered in France in the 
Court of Appeal, French Special Prosecutor No. 1120392066, French 
Investigative Judge No. JIRSIF/11/12 or another court of competent 
jurisdiction.''

    Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits 
Security Administration, U.S. Department of Labor.
[FR Doc. 2024-07128 Filed 4-3-24; 8:45 am]
BILLING CODE 4510-29-P