[Federal Register Volume 90, Number 153 (Tuesday, August 12, 2025)]
[Notices]
[Pages 38813-38825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-15280]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2025-06; Application Number D-12101]
Exemption for Certain Prohibited Transactions Involving Northern
Trust Corporation (Together With Its Current and Future Affiliates,
Northern or the Applicant) Located in Chicago, IL
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of exemption.
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SUMMARY: This document provides notice of an individual exemption from
certain prohibited transaction restrictions of the Employee Retirement
Income Security Act of 1974 (ERISA) and/or the Internal Revenue Code of
1986 (the Code). The exemption permits certain entities with specified
relationships to Northern Trust Fiduciary Services (Guernsey) Limited
(NTFS) (hereinafter, the Northern QPAMs, as further defined in Section
I(e) of the operative language) 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 (the
Conviction) against NTFS for aiding and abetting tax fraud entered in
France in the Paris Court of Appeal, French Special Prosecutor No.
1120392066, French Investigative Judge No. JIRSIF/11/12.
DATES: This exemption will be in effect during the period beginning on
the earlier of September 5, 2025 or the date of publication in the
Federal Register; and ending on March 4, 2030.
FOR FURTHER INFORMATION CONTACT: Anna Mpras Vaughan, Office of
Exemption Determinations, Employee Benefits Security Administration,
U.S. Department of Labor, (202) 693-8565 (this is not a toll-free
number).
SUPPLEMENTARY INFORMATION: The Applicant requested an exemption
pursuant to ERISA section 408(a) and Code section 4975(c)(2) in
accordance with the Department's exemption procedures set forth in 29
CFR part 2570, subpart B.\1\ On January 21, 2025, the Department
published a notice of proposed exemption for Northern QPAMs to continue
to rely on the exemptive relief provided by PTE 84-14, notwithstanding
the Conviction (the Proposed Exemption).\2\
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\1\ The procedures for requesting an exemption are set forth in
29 CFR part 2570, subpart B (75 FR 66637, 66644, October 27, 2011).
The procedures were updated effective April 8, 2024 at 89 FR 4662,
4691, January 24, 2024. Because the application was filed with the
Department on April 1, 2024, this application is being processed
under the procedures in effect as of that date. 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 the Code
Section 4975(c)(2) to the Secretary of Labor. Accordingly, the
Department grants this exemption under its sole authority.
\2\ 90 FR 7174.
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Based on the record and representations made by the Applicant, as
discussed below, the Department has determined to grant the Proposed
Exemption to ensure that participants and beneficiaries of plans
subject to Part 4 of Title I of ERISA (i.e., ERISA-covered plans) and
plans subject to Code section 4975 (i.e., IRAs) managed by Northern
QPAMs (collectively referred to as Covered Plans \3\) do not suffer the
harm that Northern represented would occur if the Northern QPAMs are no
longer able to rely on PTE 84-14, due to the Conviction. This exemption
provides only the relief specified herein and does not provide relief
from violations of any law other than the prohibited transaction
provisions of ERISA or the Code.
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\3\ In each case, a Covered Plan is an ERISA-covered plan or an
IRA with respect to which Northern relies on PTE 84-14, or with
respect to which Northern 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 Northern 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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As discussed below, 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
[[Page 38814]]
and beneficiaries, and (3) protective of the rights of the participants
and beneficiaries of Covered Plans, based on the Applicant's adherence
to all the conditions and definitions of the exemption at all times.
Accordingly, affected parties should be aware that the conditions and
definitions incorporated in this exemption are, taken individually and
as a whole, necessary for the Department to grant the relief requested
by the Applicant.
Benefits of the Exemption: Among other things, this exemption
ensures that a Covered Plan can terminate its relationship with a
Northern QPAM in an orderly and cost-effective fashion when the
fiduciary of a Covered Plan determines that it is prudent to do so,
subject to certain reasonable restrictions described herein. This
exemption promotes adherence to basic fiduciary standards and
responsibilities required by Title I of ERISA and the Code by the
Northern QPAMs and reinforces their obligation to act with a high
degree of integrity on behalf of their Covered Plan clients as required
by PTE 84-14.
Background
1. Northern is a financial holding company that provides investment
management, asset and fund administration, fiduciary, and banking
services for corporations, institutions, and affluent individuals.
2. Northern has several U.S. and non-U.S. affiliates that provide
investment management services. The Northern affiliates that currently
manage assets of Covered Plans, collective investment trusts and other
commingled funds on a discretionary basis, and that routinely rely on
the QPAM Exemption to provide relief for party-in-interest
transactions, are:
The Bank, which acts as trustee for plans subject to Title
I of ERISA and IRAs and other accounts subject to ERISA or Code section
4975. The Bank also maintains ERISA-governed collective investment
trusts and commingled vehicles for investment of plan assets.
Northern Trust Investments, Inc. (NTI), which is both an
Illinois bank regulated by the Illinois Department of Financial and
Professional Regulation and an investment adviser registered with the
U.S. Securities and Exchange Commission (the SEC) under the Investment
Advisers Act of 1940, as amended. As of December 31, 2023, NTI managed
discretionary assets of approximately $1,017 billion, including ERISA
and IRA assets.
50 South Capital Advisors, LLC (50 South) is an investment
adviser registered with the SEC under the Advisers Act, with its
principal office in Chicago, Illinois. As of December 31, 2023, 50
South managed discretionary assets of nearly $11.13 billion, including
ERISA and IRA assets.
Northern Trust Securities, Inc. (NTSI) is an investment
advisor registered with the SEC under the Advisers Act with its
principal office in Chicago, Illinois. As of October 28, 2024, NTSI
managed discretionary assets of approximately $1.27 billion, including
ERISA and IRA assets.
3. According to the Applicant, these four Northern QPAMs rely on
the QPAM Exemption for transactions that include, without limitation,
global fixed income, global equities, futures, options, swaps and other
derivatives, investments made by alternative plan asset funds,
including hedge funds, and similar instruments and strategies. The
issuing documents for many instruments contain certain representations
or deemed representations regarding reliance, at least partially, on
PTE 84-14.
The Convicted Entity: NTFS
4. Northern has an indirect wholly owned subsidiary, NTFS, that is
a limited liability company organized under the laws of Guernsey. NTFS
provides a wide range of services, including trust and fiduciary
services, to a global client base that includes institutional clients
(such as non-U.S. thrift savings and pension trusts of large
corporations) and private ultra-high net worth individual or family
office clients/trusts. The Applicant represents that NTFS does not act
as a QPAM or otherwise provide investment management services to any
accounts subject to ERISA or Code section 4975 and does not act as a
fiduciary to any ERISA plan or IRA.
ERISA and Code Prohibited Transactions and PTE 84-14
5. The rules set forth in ERISA section 406 proscribe certain
``prohibited transactions'' between plans and parties in interest with
respect to those plans. ERISA section 3(14) defines parties in interest
with respect to a plan to include, among others, the plan fiduciary, a
sponsoring employer of the plan, a union whose members are covered by
the plan, service providers with respect to the plan, and certain of
their affiliates.\4\ The transactions prohibited by ERISA section
406(a) that are relevant to this exemption are (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.\5\
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\4\ Under the Code, such parties, or similar parties, are
referred to as ``disqualified persons.''
\5\ 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. PTE 84-14
provides only very narrow relief from ERISA Section 406(b).
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6. ERISA section 408(a) gives the Department the authority to grant
an exemption from such ``prohibited transactions'' if the Department
finds an exemption is: (a) administratively feasible for the
Department; (b) in the interests of the plan and of its participants
and beneficiaries; and (c) protective of the rights of participants and
beneficiaries.
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 satisfies the definition of ``qualified professional asset
manager'' (i.e., QPAM) and satisfies additional conditions of the
exemption.\6\ PTE 84-14 was developed and granted based on the 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.\7\
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\6\ PTE 84-14 was recently amended, effective June 17, 2024 to
among other things, (1) require a QPAM to provide a one-time notice
to the Department that the QPAM is relying upon the exemption; (2)
update the list of crimes enumerated under section I(g) to
explicitly include foreign crimes that are substantially equivalent
to the listed crimes; (3) expand the circumstances that may lead to
ineligibility; and (4) provide a one-year transition period to help
Covered Plans avoid or minimize possible negative impacts of
terminating or switching QPAMs or adjusting asset management
arrangements when a QPAM becomes ineligible pursuant to section I(g)
and allow QPAMs a reasonable period of time to seek an individual
exemption, if appropriate. See 89 FR 23090 (April 3, 2024) and as
corrected at 89 FR 65779 (August 13, 2024).
\7\ 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 definition of a QPAM from utilizing the exemptive relief
provided by the QPAM Exemption for itself and its client plans if that
entity, an ``affiliate'' thereof, or any direct or indirect five
percent or more owner of the QPAM has been either convicted or released
from imprisonment, whichever is later, because of criminal activity
described in section I(g), or otherwise violates section I(g), within
the 10 years
[[Page 38815]]
immediately preceding a transaction. Section I(g) was included in PTE
84-14, in part, based on the Department's expectation that QPAMs, and
those who may be in a position to influence the QPAM's policies, must
maintain a high standard of integrity.\8\
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\8\ See 47 FR 56947 (December 21, 1982).
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Investigation of NTFS for Tax Fraud
9. In 2010 and 2011, French prosecutors opened judicial
investigations questioning whether Guy Wildenstein and Alec Daniel
Armand Wildenstein (the Wildensteins), heirs to a set of trusts
established by family patriarch Daniel Wildenstein, had engaged in
money laundering, fraudulent organization of insolvency, forgery and/or
tax evasion in connection with their decision not to include trust
assets in French tax filings made following Daniel Wildenstein's death
in 2001. NTFS, as successor trustee to the trusts, was itself
investigated by French prosecutors.\9\
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\9\ In September 1999, Baring Trustees became the trustee of
these two trusts. Baring Trustees was acquired by Northern on March
31, 2005, and became NTFS by change of name effective on August 31,
2005. With respect to these trusts, the Applicant states that NTFS
was a directed trustee; as such, it was not involved in the
settlement of the trusts and was not involved in any of the family's
tax matters.
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10. The trial commenced on January 4, 2016. Due to the possibility
of a conviction that would lead to the loss of the Northern QPAMs'
ability to rely on PTE 84-14, the Applicant applied for and received a
temporary one-year exemption (PTE 2016-11) from the Department
effective as of the date of judgment of conviction against NTFS for
aiding and abetting tax fraud.\10\ The Department granted PTE 2016-11
to protect Covered Plans from the harm that could result from the
Northern QPAMs' loss of relief under PTE 84-14 due to the potential
conviction of NTFS.
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\10\ PTE 2016-11, 81 FR 75150, 75152 (October 28, 2016).
``Conviction Date'' was defined, in relevant part, to mean the date
a judgment was rendered against NTFS in the District Court of Paris,
French Special Prosecutor No. 1120392066, French Investigative Judge
No. JIRSIF/11/12.
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11. Ultimately, on March 5, 2024, the Paris Court of Appeal
rendered a judgment of conviction (i.e., the Conviction) against all
defendants, including NTFS. NTFS was ordered by the court to pay a fine
of [EURO]187,500 in conjunction with the judgment. The Applicant
represents that the US dollar equivalent of this fine is $204,197 as of
November 5, 2024.\11\
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\11\ The Applicant represents that it used the currency
converter from Oanda FX Data Services, located at https://www.oanda.com/currency-converter/en/ to calculate these figures.
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12. When the Paris Court of Appeal rendered a judgment of
conviction against NTFS, PTE 84-14 Section I(g) was triggered.\12\ PTE
2016-11, as corrected,\13\ was effective for a period of one year from
the date of the Conviction, and ended on March 4, 2025. The one-year
exemption was intended to give the Department time to consider whether
a longer term (e.g., 5 years) exemption would be appropriate based on
the facts of the Conviction and to more fully develop the record upon
which relief, if any, would be based.
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\12\ On March 5, 2024, NTFS appealed the verdict to the Court of
Cassation. According to the Applicant, under French law, until the
Conviction is final, there is no conviction, and NTFS continues to
be presumed innocent. The Applicant states that the judgment, as
well as its effects including the fine and joint and several
liability, will be stayed pending the outcome of the appeal.
However, under PTE 84-14 section I(g) as in effect on the date of
the Conviction, ``. . . a person shall be deemed to have been
``convicted'' from the date of the judgment of the trial court,
regardless of whether that judgment remains under appeal.''
\13\ On April 4, 2024, the Department issued a technical
correction to PTE 2016-11. The technical correction changed the
definition of the term ``Conviction'' in PTE 2016-11 by replacing
``the District Court of Paris, French Special Prosecutor No.
1120392066, French Investigative Judge No. JIRSIF/11/12'' with ``the
Court of Appeal, French Special Prosecutor No. 1120392066, French
Investigative Judge No. JIRSIF/11/12 or another court of competent
jurisdiction.''
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13. Northern subsequently applied to the Department for extended
relief that would begin after the relief in PTE 2016-11 expired on
March 4, 2025. On January 21, 2025, the Department published the
Proposed Exemption to extend the relief in PTE 2016-11 for five years
from March 5, 2025, to March 4, 2030.
14. Following publication of the Proposed Exemption in the Federal
Register, Northern expressed concern to the Department that, due to the
timing of the Proposed Exemption's publication, the 45-day notice and
comment period would not end until March 7, 2025, after the expiration
of relief in PTE 2016-11 on March 4, 2025. Northern stated that, even
if the Northern QPAMs eventually received relief retroactive to March
5, 2025, the timing would result in a ``gap period'' during which the
Northern QPAMs would not qualify for the QPAM Exemption from March 5,
2025, until the date the Department published a final exemption.
Northern's legal counsel represented to the Department that the
resultant gap period in the exemption's relief would be harmful to
affected plans and their participants and beneficiaries. For example,
the Applicant states that the Northern QPAMs make representations in
their Internal Swaps and Derivative Association (ISDA) agreements with
various counterparties stating that to the extent the QPAM is using
``plan assets'' (within the meaning of ERISA section 3(42)) in
connection with a transaction entered into under the ISDA, it is a
``qualified professional asset manager,'' and PTE 84-14 will apply to
any applicable transactions entered thereunder. The failure to satisfy
this representation can result in a default-based early termination of
the ISDA agreements and a lump sum payment would be due to the
applicable counterparty.\14\
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\14\ See 90 FR 11330, 11331 for a more detailed explanation of
potential harms to plans that could be caused by a gap period in
exemptive relief.
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15. To protect Covered Plans, on March 5, 2025, the Department
published the notice of amendment to PTE 2016-11 (the Amendment) in the
Federal Register to extend the exemption's effective period until the
earlier of September 4, 2025 or the date the Department issues its
final agency action in connection with the Proposed Exemption.\15\
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\15\ See 90 FR 11330.
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Applicant's Representations Regarding This Exemption
16. According to the Applicant, the Northern QPAMs' investment
management business operations are separate from NTFS, and from the
activities of NTFS that are the subject of criminal charges under
French law.\16\ The Applicant states that the Northern QPAMs have
dedicated systems, management, risk and compliance officers, that are
separate from and independent of NTFS. The investment management
businesses of the Northern QPAMs are subject to codes of conduct, and
Northern QPAM personnel engage in training, designed to ensure that
such businesses understand and abide by their fiduciary duties in
accordance with applicable law. The codes of conduct create information
barriers designed to prevent employees of the Northern QPAMs from
gaining access to inside information that an affiliate may have
acquired or developed in connection with the investment banking,
treasury services or other investor services business activities. These
codes of conduct apply to employees, officers, and directors of
Northern QPAMs. The Applicant also maintains an employee hotline for
employees to express any concerns of wrongdoing anonymously.
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\16\ As described below, the conditions for relief provide that
no investment management services may be provided by NTFS to ERISA-
covered plans or IRAs.
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17. The Applicant represents that no NTFS employees (or former
employees of Baring Trustees) were investigated or
[[Page 38816]]
charged, nor were any other corporate entities related to NTFS
investigated or charged. The Applicant states that the individual who
appears to have been the primary contact for the Wildenstein business
after NTFS acquired Baring Trustees was a former employee of Baring
Trustees who was not charged in the French proceeding and who left NTFS
in January 2006, shortly after the acquisition. Further, the Applicant
represents that all personnel involved in working on the Wildenstein
accounts, regardless of whether they were implicated in the conduct
that became the subject of the Conviction, either left Baring Trustees
prior to its acquisition by NTFS in 2005 or shortly thereafter, and
none of these persons are employed by NTFS or other Northern affiliates
today.
18. The Applicant states that Northern's review of the files has
not identified any wrongdoing on the part of former NTFS staff, nor are
any current or former NTFS (or Baring Trustees) employees among the six
individuals charged by the French prosecutors in connection with the
Wildenstein business.
19. The Applicant represents that new policies, procedures and
training came into effect since Northern's acquisition of Baring
Trustees in 2005. Upon becoming a part of the Northern organization,
Baring Trustees was renamed NTFS and became subject to Northern's own
internal control procedures designed to prevent improper activities.
The Applicant represents that NTFS has complied (and will continue to
comply) with all applicable legal and regulatory requirements,
including but not limited to requirements potentially linked to the
conduct underlying the charges against NTFS.
20. The Applicant further represents that resources dedicated to
maintaining risk and compliance procedures have been enhanced
significantly since Northern's acquisition of Baring Trustees in 2005.
For example, according to the Applicant, Northern employs over 100
full-time employees in its Financial Crime Compliance department as of
December 31, 2024.
21. The Applicant represents that Northern maintains a system of
internal controls to ensure ongoing compliance with anti-money
laundering (AML) and know-your-client related regulations. One of the
key controls is the implementation of risk-based, comprehensive
customer due diligence policies, procedures and processes for all
customers, particularly those that present a high risk for money
laundering or terrorist financing. Northern has also adopted Global
Minimum Standards for Customer Due Diligence for its clients as a
critical part of its Global AML/Economic Sanctions Compliance Program.
22. The Applicant represents that it has new systems for evaluating
new clients or acquisitions. Northern represents that it assesses the
money laundering and related risks of each new client relationship.
Northern represents that it has developed a Global AntiMoney Laundering
& Combating the Financing of Terrorism Risk Rating Policy & Methodology
to evaluate new client/business relationships and assess their money
laundering risk and related risks. In addition, Northern represents
that it utilizes a Client Relationship Form to collect the information
necessary to assess the client risk rating. Clients will initially be
risk rated during the client take-on process and subsequently as the
client profile changes.
Hardship and Costs to Covered Plans
23. Paragraphs 28 through 38 of the Proposed Exemption, describe
and quantify the hardships that Northern represents Covered Plans would
incur if Northern QPAMs could not rely on PTE 84-14. In general terms,
Northern QPAMs would not be able to enter into, among other things,
contracts for the purchase and sale of certain securities and hedging
transactions that rely on compliance with PTE 84-14; and counterparties
could seek to terminate existing contracts or some contracts would
terminate automatically without notice or action. Among other things,
Covered Plan clients would incur costs from an inability to hedge risk,
inability to rely on appropriate investment strategies, and/or
counterparty costs resulting from the need to rely on different sources
of exemptive relief (e.g., ERISA section 408(b)(17)).
Department's Note Regarding Harms to Plans for Purposes of Section
III(j)(2)
24. In the preamble to the Proposed Exemption, the Department noted
that Section III(j)(2) of the Proposed Exemption requires a Northern
QPAM to ``indemnify and hold harmless'' Covered Plans for ``actual
losses resulting directly from the Northern QPAM's violation of any
conditions of this exemption, a Northern 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 Northern QPAM; or any claim arising out of the failure of such
Northern QPAM to qualify for the exemptive relief provided by PTE 84-14
as a result of a violation of section I(g) of PTE 84-14 other than the
Conviction.'' Furthermore, the Department noted that, to the extent
Covered Plans transition to new asset managers because the Northern
QPAMs can no longer rely on PTE 84-14, the liquidation and additional
costs arising from the transition constitute actual losses resulting
directly from the failure of such QPAM to qualify for the exemptive
relief provided by PTE 84-14 as a result of violation of section I(g)
of PTE 84-14. The Department also noted that if a plan's fiduciary is
compelled to replace a Northern asset manager as a result of a
violation of section I(g) and the asset manager's loss of QPAM status,
the affected plan is entitled to indemnification of its associated
losses, including the transitional expenses necessary to effectuate the
switch to a qualified QPAM.
Department's Note Regarding Applicability and Limitations of Relief
25. This exemption provides relief solely due to the ineligibility
of the Northern QPAMs to continue to rely on PTE 84-14 due to the
Conviction. The exemption includes protective conditions that allow
Covered Plans to continue to use the services of Northern QPAMs if the
Covered Plans determine that it is prudent to do so. 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 in connection with
the Conviction. The conditions of this exemption also require the
Northern QPAMs to adhere to every other specific condition for relief
that is required under PTE 84-14, as amended, including the
ineligibility provision in the amended version of PTE 84-14, which
became effective on June 17, 2024. If any Northern QPAMs violate any
conditions of amended PTE 84-14 in the future, they would fail to
comply with the requirements of the exemption, and the relief provided
under this exemption would become unavailable.
Comments Received
26. 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 Proposed Exemption. All comments and
requests for a hearing were due to the Department by March 7, 2025.
During the comment period, the Department received 28 phone calls from
interested persons generally seeking an explanation of the Proposed
Exemption. The Department received
[[Page 38817]]
three written comments and no requests for a public hearing.\17\ One of
these comments was a positive comment from an IRA owner with IRA assets
managed by Northern and their respective asset managers, asking the
Department to grant the Proposed Exemption. The other two comments were
from Northern. Northern's first comment addressed three categories of
issues: (I) Corrections to the Summary of Facts and Representations;
(II) responses to the Department's questions and comments in the
Proposed Exemption; and (III) the conditions in the Proposed Exemption.
Northern's second comment served as a supplement to clarify certain
information provided in Northern's first comment; and provides updates
to certain representations made in the exemption application D-12101
(the Exemption Application), pursuant to the Applicant's duty to
supplement the Exemption Application under 29 CFR 2570.37. Northern's
two comments are discussed together, below (the Northern Comment).
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\17\ All information submitted in connection with this exemption
is available through the Department's Public Disclosure Room, by
referencing Exemption Application D-12101.
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Part I. Corrections to the Summary of Facts and Representations
27. Comments 1 through 11 of the Applicant's Comment Letter. The
Applicant identified 11 items in the Summary of Facts and
Representations that it believed required ministerial or typographical
corrections, or that needed updating. For example, the Applicant notes
that Representation 2 of the Proposed Exemption reads, in pertinent
part, that ``. . . [a]s of December 31, 2023, 50 South manages
discretionary assets of nearly $11.3 billion, including ERISA and IRA
assets.'' Northern states that the correct approximation of
discretionary assets under management by 50 South as of December 31,
2023, is $11.13 billion.
28. The Department appreciates the Applicant's close reading of the
preamble and accepts their changes to the record. None of the 11 items
materially change the substance of the exemption or affect the
Department's decision to grant this exemption.
Part II. The Applicant's Responses to the Departments Questions
29. Comment 12--The Department's Request for Information Regarding
Harms to Plans in Representations 31 Through 38 of the Proposed
Exemption. The Department asked the Applicant to provide a clear
description of its estimates of costs to Covered Plans, and to respond
to requests (1) through (5) below.
30. Department's Request (1): The Department asked the Applicant to
describe the amount of Covered Plan assets that are likely to be
subject to the costs described in Representations 31 through 38 of the
Proposed Exemption and an explanation of the Applicant's assumptions or
methodologies in connection with such figures.
31. The Applicant's Response to Request (1): The Applicant
represents that out of $279 billion of Equity Collective Fund assets
described in the Proposed Exemption, $184 billion represent ERISA
account assets. Therefore, 66% of the total Equity Collective fund
assets are managed on behalf of Covered Plans which are governed by
ERISA. Further, out of the $127 billion of FI Collective Fund assets
described in the Proposed Exemption, $28 billion represent ERISA
account assets. Therefore, 22% of the total Fixed Income Collective
fund assets are managed on behalf of Covered Plans which are governed
by ERISA. To determine the amount of Covered Plan assets that would be
subject to the costs described in Representations 31 through 38, it has
assumed that 100% of Covered Plans would terminate the applicable
Northern QPAMs, but the Applicant has no way of confirming that
assumption and it would depend on the applicable facts and
circumstances at the relevant time.
32. Department's Request (2): The Department asked the Applicant to
describe the likelihood of the costs occurring, for each of the
transition costs described in Representations 31 through 38. For
example, with respect to Covered Plans' Alternative Investments, the
Department asked how likely Covered Plans are to leave Northern for a
different manager. Further, with respect to violating representations
as to QPAM status in an offering document, the Department instructed
the Applicant to provide information regarding how likely that is to
occur.
33. The Applicant's Response to Request (2): In calculating costs,
the Applicant assumed that all of its Covered Plan clients would seek
to transition to an investment manager who can rely on PTE 84-14.\18\
First, the Applicant states that PTE 84-14 allows an investment manager
to efficiently engage in a wide variety of transactions on behalf of
Covered Plans. Second, the Applicant represents that PTE 84-14 is
generally required by certain counterparties when an investment manager
transacts on behalf of Covered Plans. Third, the Applicant states that
fiduciaries of Covered Plans have long considered the ability to rely
on PTE 84-14 as the ``gold standard.'' Nonetheless, the Applicant
states that Northern cannot reasonably estimate the likelihood of
Covered Plans transitioning to a new investment manager should the
Department not provide exemptive relief to the Applicant.
---------------------------------------------------------------------------
\18\ The Applicant also notes that other financial institutions
that have applied for similar relief have assumed that all the
Covered Plan clients would seek to transition to a new investment
manager that can rely on PTE 84-14.
---------------------------------------------------------------------------
34. Department's Request (3): The Department asked the Applicant to
describe the circumstances under which the transition costs described
in the tables in Representations 33 through 35 of the Proposed
Exemption would be incurred by the Covered Plans.
35. The Applicant's Response to Request (3): The Applicant states
that the transaction costs are all related to the costs to Covered
Plans who seek to retain a different investment manager.
36. Department's Request (4): The Department asked the Applicant to
describe the extent to which any of the asserted costs reflect the
Northern QPAMs' imposition of additional charges or fees on Covered
Plans (due to the Northern QPAMs' loss of QPAM status), and the cause
of the additional charges or fees.
37. The Applicant's Response to Request (4): The Applicant
represents that none of the asserted costs reflect the Northern QPAMs'
imposition of additional charges or fees resulting from the loss of
QPAM status.
38. Department's Request (5): The Department asked the Applicant to
describe the extent to which the costs described in the Proposed
Exemption are not likely to be covered by the QPAMs indemnification
obligations under section III(j)(2), and an explanation why such costs
are not attributable to the Applicant's violation of exemption
conditions. Condition (j)(2) of the proposed exemption requires
Northern QPAMs to ``indemnify and hold harmless'' Covered Plans for
``actual losses resulting directly from the Northern QPAM's violation
of any conditions of this exemption, an Northern 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 Northern QPAM; or any claim arising out of the
failure of such Northern QPAM to qualify for the exemptive relief
provided by PTE 84-14 as a result of a violation of section I(g) of PTE
84-14 other than the Conviction.''
[[Page 38818]]
39. The Applicant's Response to Request (5): The Applicant states
that the Department seems to be asking which of the costs mentioned
above would apply if Northern were to again violate Section I(g) of PTE
84-14.\19\ The Applicant represents that if Northern were to again
violate Section I(g) of PTE 84-14, the answer would depend on the
applicable facts and circumstances in existence at that time.
---------------------------------------------------------------------------
\19\ The Applicant states that Northern's only violation to date
of Section I(g) of PTE 84-14 is the Conviction, and so, this
question is not relevant to the current circumstances.
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Department's Note: The Department notes Northern's representations
described in paragraph 34 above, regarding the importance of PTE 84-14
to Covered Plans that hire and retain Northern QPAMs. Those
representations suggest to the Department that a number of Covered
Plans may transition to new asset managers if the Northern QPAMs can no
longer rely on PTE 84-14 due to a conviction that violates Section
I(g). For that reason, the Department continues to believe that
affected Covered Plans are entitled to indemnification of associated
losses, including the transitional expenses necessary to effectuate the
switch to a qualified QPAM.
Part III. Requested Modifications to the Operative Language
Comment 13--Modification of Section I(a) of the Proposed Exemption
40. Section I(a) of the Proposed Exemption defines the
``Conviction'' as ``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 to be entered in another court of competent
jurisdiction.''
41. The Applicant requests the addition of a footnote after the
case citation in Section I(a), to read ``[o]n March 5, 2024, NTFS
appealed this conviction.'' The Applicant indicates that, given that
one potential outcome of such appeal is that the Conviction could be
quashed, it is important to note this appeal in the exemption's
operative language.
Department's Response: This information appears in the preamble of
the Proposed Exemption, at footnote 18, and noted in the preamble of
this exemption, at footnote 17. There is no need to reiterate this
information in the operative language. Accordingly, the Department
declines to make this modification.
Comment 14--Modification of the Exemption Period
42. Section I(c) of the Proposed Exemption defines the ``Exemption
Period'' as ``a period of five years, beginning on March 5, 2025 and
ending on March 4, 2030.'' The Applicant requests that, for consistency
with the effective period of the Amendment, the effective date of this
exemption be the earlier of the date that this exemption is published
in the Federal Register or September 5, 2025.
Department's Response: The Department has made the requested
revision.
Comment 15--Modification of Section I(f) of the Proposed Exemption
43. Section I(f) of the Proposed Exemption defines ``NTFS'' as
``Northern Trust Fiduciary Services (Guernsey) ltd., an affiliate''
[sic] of Northern (as defined in PTE 84-14 section VI(c)) located in
Guernsey.'' The Applicant requests that ``Northern Trust Fiduciary
Services (Guernsey) ltd.'' be modified to read ``Northern Trust
Fiduciary Services (Guernsey) Limited.''
Department's Response: The Department has made the requested
revision.
Comment 16--Two Requested Modifications of Sections III(h)(1)(vi) and
(vii) of the Proposed Exemption
44. The conditions of Section III(h)(1)(vi) and (vii) of the
Proposed Exemption require, in pertinent part, that ``(h)(1) [e]ach
Northern QPAM will continue to implement, maintain, adjust (to the
extent necessary), and follow written policies (the Policies) requiring
and reasonably designed to ensure that . . . (vi) [t]he Northern QPAM
complies with the terms of this exemption, if granted . . . and (vii)
[a]ny violation of, or failure to comply with, an item in subparagraph
(ii) through (vi), is corrected promptly upon discovery, and any such
violation or compliance failure not promptly corrected is reported,
upon discovering the failure to promptly correct, in writing, to
appropriate corporate officers, the head of compliance and the General
Counsel (or their functional equivalent) of the relevant Northern QPAM.
. . .''
45. Applicant's request regarding (h)(1)(vi)--The Applicant
requests that ``if granted'' be removed from the condition.
Department's Response: The Department has made the requested
change.
46. Applicant's request regarding (h)(1)(vii)--The Applicant
requests that the language ``to appropriate corporate officers, the
head of compliance and the General Counsel (or their functional
equivalent) . . .'' be replaced with ``to the Chief Risk Officer, Chief
Compliance Officer and General Counsel (or their functional
equivalent).''
Department's Response: The Department has made the requested
change.
Comment 17--Modification of Audit Period
47. Section III(i)(1) of the Proposed Exemption states, in
pertinent part, that ``[e]ach Northern QPAM must submit to an audit
conducted every two years. . .'' and that ``[e]ach audit must cover the
preceding consecutive twelve (12) month period. The first audit must
cover the period from March 5, 2025 (at the end of the period of
protection granted under PTE 2016-11), through March 4, 2026, and must
be completed by September 4, 2026.''
48. The Applicant requests changes to the audit periods under the
exemption due to the delay in publishing the final exemption. The
Applicant states that the Department has previously allowed the
independent auditor a year to complete its audit for other financial
institutions in similar exemptions.
Department's Response: The Department agrees to modify the audit
period for purposes of consistency with other similarly situated
financial institutions. Therefore, the audit requirement is modified so
that the first audit covers a consecutive 12-month period starting on
March 5, 2026. The second audit must cover the consecutive 12-month
period starting on March 5, 2028. In the event that the Department
grants exemptive relief to the Applicant for an additional 4-year
period, the next audit would cover the period from March 5, 2030,
through March 4, 2031, and have a required completion date of September
4, 2031.
Comment 18--Modification of Section III(i)(3) of the Proposed Exemption
49. Section III(i)(3) provides that the auditor's engagement must
specifically require the auditor to determine whether each Northern
QPAM has developed, implemented, maintained, and followed the Policies
in accordance with the conditions of this exemption, and has developed
and implemented the Training. The Applicant requests that the word
``developed'' be removed in the two instances where it appears. The
Applicant states that it does not understand how the auditor would test
for development of the Policies after the initial audit period.
Department's Response: The Department declines to make the
[[Page 38819]]
requested changes. By including a statement of the audit's intended
purpose and required determinations in the auditor's agreement, the
Applicant ensures that both the auditor and the Northern QPAMs have a
clear understanding of the purpose and expectations of the audit
process. Among other things, part of this process includes confirmation
that each Northern QPAM has developed Policies and Training in
accordance with the conditions of the exemption. Though, currently, the
Applicant has identified four specific entities that operate as
Northern QPAMs, there may be new entities that serve as Northern QPAMs
after the initial audit period. Future audits would serve to confirm
that these new Northern QPAMs have, among other things, developed
Policies in accordance with the conditions of this exemption. Further,
the Policies and Training of the existing Northern QPAMs, as well as
future Northern QPAMs, may develop and evolve over time.
Comment 19--Modification of Section III(i)(7) of the Proposed Exemption
50. Section III(i)(7), which relates to the certification of the
Audit, provides, in part that ``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.'' The Applicant requests that Section III(i)(7) be
revised, in pertinent part, to read ``. . . must also include the
signatory's determination that, to the best of such signatory's
knowledge at the time, the Policies and Training in effect at the time
of signing are adequate. . . .''
Department's Response: The Department has made the requested
revision, and notes that under Section I(h) of the exemption ``the best
of the signatory's knowledge'' refers, among other things, to the
actual knowledge of the party and the knowledge which they would have
had if they had conducted their reasonable due diligence required under
the circumstances into the relevant subject matter.
Comment 20--Modification of Section III(i)(8) of the Proposed Exemption
51. This section provides, in part, that ``Northern's Board of
Directors must be provided a copy of each Audit Report, and a senior
executive officer with a direct reporting line to the highest-ranking
legal compliance officer of Northern must review the Audit Report for
each Northern QPAM and certify in writing, under penalty of perjury,
that such officer has reviewed each Audit Report.''
The Applicant states that the highest-ranking compliance and legal
functions are separate functions of the Applicant. The Applicant
requests that the provision be revised to state ``Northern's Board of
Directors must be provided a copy of each Audit Report, and a senior
executive officer with a direct reporting line to the highest-ranking
compliance officer or highest-ranking legal officer of Northern must
review the Audit Report for each Northern QPAM and certify in writing,
under penalty of perjury, that such officer has reviewed each Audit
Report.''
Department's Response: The Department concurs with the Applicant's
request and adopts the revision to the condition.
Comment 21--Modification of Section III(j)(2) of the Proposed Exemption
52. Section III(j)(2) of the Proposed Exemption states, in
pertinent part, that ``[t]hroughout the Exemption Period, with respect
to any arrangement, agreement, or contract between a Northern QPAM and
a Covered Plan, each Northern QPAM agrees and warrants. . . . [t]o
indemnify and hold harmless the Covered Plan for any actual losses
resulting directly from the Northern QPAM's violation of any conditions
of this exemption, a Northern 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 Northern
QPAM; or any claim arising out of the failure of such Northern QPAM to
qualify for the exemptive relief provided by PTE 84-14 as a result of a
violation of section I(g) of PTE 84-14 other than the Conviction.''
53. The Applicant requests that the Department revert to the
contractual provisions required to be agreed to in Covered Plan client
contracts under PTE 2016-11,\20\ because the Applicant states that it
will have already provided these contractual provisions to Covered
Plans twice before the new exemption is finalized. In this regard,
Section I(i)(7) of PTE 2016-11 requires Northern QPAMs ``[t]o indemnify
and hold harmless the ERISA-covered plan or IRA for any damages
resulting from a violation of applicable laws, a breach of contract, or
any claim arising out of the failure of such Northern QPAM to qualify
for the exemptive relief provided by PTE 84-14 as a result of a
violation of Section I(g) of PTE 84-14 other than the Conviction.''
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\20\ The condition in PTE 2016-11 containing Northern Trust's
required contractual agreements and warranties is Section I(i)(7).
---------------------------------------------------------------------------
Department's Response: The Department declines the Applicant's
request. The indemnification and make-whole language in Section
III(j)(2) of the Proposed Exemption is substantially similar to the
indemnification and make-whole language found in parallel provisions of
the most recent exemptions from the restrictions of Section I(g) of PTE
84-14.\21\ Since PTE 2016-11 was originally granted, the Department's
indemnification and make-whole condition has evolved as the Department
has sought to clarify what losses should be covered if a QPAM were to
lose the ability to rely on PTE 84-14. Among other things, the
Department has sought to clarify that a violation of a condition of an
individual exemption for relief from the restrictions of Section I(g)
of PTE 84-14 will trigger a QPAM's indemnification and make-whole
obligation for any actual losses that are the direct result of the loss
of relief.
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\21\ See e.g., Section III(j)(2) of PTE 2025-01 at
---------------------------------------------------------------------------
Comment 22--Modification of Section III(m) of the Proposed Exemption
54. The Applicant requests that the first sentence of Section
III(m) of the Proposed Exemption be revised to add ``or a senior legal
professional'' so that the revised sentence reads ``[w]ithin 60 days
after the date of publication of the exemption, each Northern QPAM must
designate a senior compliance officer or a senior legal professional
(i.e., the Compliance Officer) to be responsible for compliance with
the Policies and Training requirements. . . .''
Department's Response: The Department concurs with the Applicant's
request.
Comment 23--Modification of Section III(q) of the Proposed Exemption
55. The Applicant requests that Section III(q) be modified so that
the phrase ``or its affiliates'' be removed from the end of the
condition since the definition of ``Northern'' in Section I(d) of the
Proposed Exemption already includes affiliates. The revised condition
would read, ``[a] Northern QPAM will not fail to meet the terms of this
exemption, solely because a different Northern QPAM fails to satisfy a
condition for relief under this exemption, described in sections
III(c), (d), (h), (i), (j), (k), (l), (m), (n), and (o) or if the
independent auditor described in section III(i) fails to comply with a
provision of the exemption, other than the requirement described in
section
[[Page 38820]]
III(i)(11), provided that such failure did not result from any actions
or inactions of Northern.''
Department's Response: The Department concurs with the Applicant's
request.
Comment 24--Modification of Section III(r) of the Proposed Exemption
56. The Applicant requests the deletion of the condition in Section
III(r) of the Proposed Exemption, which states ``[e]ach Northern QPAM
imposes internal procedures, controls, and protocols to reduce the
likelihood of any recurrence of conduct that is the subject of the
Conviction.'' The Applicant states that it does not have a presence in
France. The Applicant states that the Conviction relates to an isolated
incident with respect to a legacy account from a novel acquisition in a
country in which the Applicant does not do business. The Applicant has
previously represented that NTFS is not engaged in asset management
activities for, and does not act as a fiduciary of, any ERISA plan or
IRA. Furthermore, the Applicant states that NTFS has confirmed that it
operates based on internal policies and procedures of Northern and is
subject to internal audit to ascertain compliance.
Department's Response: The Department declines to delete Section
III(r). Section III(r) is intended to require Northern, not each
Northern QPAM, to impose its internal corporate procedures, controls
and protocols on its convicted affiliate, NTFS, to reduce the
likelihood of any recurrence of the conduct that is the subject of the
Conviction. Accordingly, the Department has modified the language to
read ``Northern imposes its internal procedures, controls, and
protocols on NTFS to reduce the likelihood of any recurrence of conduct
that is the subject of the Conviction.''
Comment 25--Modification of Section III(t) of the Proposed Exemption
57. The Applicant requests deletion of the condition in Section
III(t), which provides that, ``[r]elief in this exemption will
terminate on the date that is 12 months following the date that a U.S.
regulatory authority makes a final decision that Northern or an
affiliate failed to comply in all material respects with any
requirement imposed by such regulatory authority in connection with the
Convictions.'' The Applicant states that the Conviction is the result
of a French court's decision and, as a result, the Applicant does not
understand what U.S. regulatory issue would be addressed by this
condition. The Applicant states that to its knowledge, the Department
is the only regulatory agency in the U.S. that is focused on the
implications of the Conviction. At a minimum, the Applicant requests
that ``or an affiliate'' be removed from Section III(t). The Applicant
states that the definition of ``Northern'' in the Proposed Exemption
includes affiliates.
Department's Response: The Department declines the Applicant's
request to delete the condition. While at present the Department is not
aware of other U.S. regulators that may have an interest in the outcome
of the Convictions, the Department is not certain that will always be
the case, and the Applicant has not otherwise made a compelling
argument that the condition is not relevant. The Department is removing
``or an affiliate'' because these entities are already included within
the term ``Northern.''
Other Revisions and Notes
58. On its own motion, the Department reordered Section III to
correct omissions and duplications in the alphanumeric order of the
conditions. The Department also made several minor, non-substantive
revisions that are intended to clarify the exemption and/or correct
scrivener's errors. Further, the Department notes that the Applicant
submitted a comment with respect to Section III(h)(1)(i), which it
later withdrew.
Conclusion
59. The Department has carefully considered the commenters'
requests. After giving full consideration to the entire record,
including the comments, the Department has determined to grant the
exemption subject to the modifications and clarifications described
herein. In granting this exemption, the Department has relied on the
representations of the Applicant. If any material statement in the
Application, final exemption or the Applicant's comment is not, or may
no longer be, completely and factually accurate, the Applicant and
recipients of the exemptive relief provided herein must immediately
alert the Department.\22\
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\22\ The Representations stated herein are based on the
Applicant's representations provided in the Exemption Application
and do not reflect factual findings or opinions of the Department
unless indicated otherwise. The Department notes that the
availability of this exemption is subject to the express condition
that the material facts and representations contained in application
D-12101 are true and complete at all times, and accurately describe
all material terms of the transactions covered by the exemption. If
there is any material change in a transaction covered by the
exemption, or in a material fact or representation described in the
application, the exemption will cease to apply as of the date of the
change. Materiality is determined solely by the Department.
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Publicly Available Information
60. The complete application file (D-12101) 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 reachable by telephone at
(202) 693-8673. 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 January 21, 2025, at 90 FR 7174.
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) and/or Code section 4975(c)(2) does not
relieve a fiduciary or other party in interest or disqualified person
from certain other provisions of ERISA and/or the Code, including 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 participants
and beneficiaries of the plan and in a prudent fashion in accordance
with ERISA section 404(a)(1)(B); nor does it affect the requirement of
Code section 401(a) that the plan must operate for the exclusive
benefit of the employees of the employer maintaining the plan and their
beneficiaries;
(2) As required by ERISA section 408(a), the Department hereby
finds that the exemption is (1) administratively feasible for the
Department, (2) in the interests of affected plans and of their
participants and beneficiaries, and (3) protective of the rights of
participants and beneficiaries of such plans;
(3) The 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 of determining 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
[[Page 38821]]
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) and Code section 4975(c)(2) in accordance with the
Department's exemption procedures regulation.\23\
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\23\ 29 CFR part 2570, subpart B (75 FR 66637, 66644, October
27, 2011). Effective December 31, 1978, section 102 of
Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996),
transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested by the Applicant to the Secretary
of Labor. Therefore, this notice of proposed exemption is issued
solely by the Department. For purposes of this exemption, references
to ERISA section 406, unless otherwise specified, should be read to
refer as well to the corresponding provisions of Code section 4975.
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Exemption
Section I. Definitions
(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 to be entered in another court
of competent jurisdiction.
(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 Northern
relies on PTE 84-14, or with respect to which Northern 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 Northern
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.
(c) The term ``Exemption Period'' means the period beginning on the
earlier of September 5, 2025 or the date the exemption is published in
the Federal Register and ending on March 4, 2030.
(d) The term ``Northern'' means Northern Trust Corporation,
together with its current and future affiliates.
(e) The term ``Northern QPAM'' means a ``qualified professional
asset manager'' (as defined in PTE 84-14 section VI(a)) \24\ that
relies on the relief provided by PTE 84-14 and with respect to which
NTFS is a current or future ``affiliate'' (as defined in PTE 84-14
section VI(d)); and the Northern QPAMs do not and must not include
NTFS.
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\24\ 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.
---------------------------------------------------------------------------
(f) The term ``NTFS'' means Northern Trust Fiduciary Services
(Guernsey) Limited, an affiliate of Northern (as defined in PTE 84-14
section VI(c)) located in Guernsey.
(g) The terms ``participate,'' and ``participate in,'' when used to
describe a person's role in the criminal conduct described in this
exemption, refer not only to a person's active participation in the
misconduct of NTFS that is the subject of the Conviction, but also
includes the knowing or tacit approval of the misconduct underlying the
Conviction or knowledge of such conduct without taking active steps to
prohibit it, including reporting the conduct to such individual's
supervisors, and to Northern's board of directors.
(h) Wherever found, any reference in this exemption to ``the best
knowledge'' of a party, ``best of [a party's] knowledge,'' and similar
formulations of the ``best knowledge'' standard, will be deemed to
refer to the actual knowledge of the party and the knowledge which they
would have had if they had conducted their reasonable due diligence
required under the circumstances into the relevant subject matter. If a
condition of the exemption requires an individual to provide
certification pursuant to their ``best knowledge,'' then such
individual, in order to make such certification, must perform their
reasonable due diligence required under the circumstances to determine
whether the information such individual is certifying is complete and
accurate in all respects. Furthermore, with respect to an entity other
than a natural person, the ``best knowledge'' of the entity includes
matters that are known to the directors and officers of the entity or
should be known to such individuals upon the exercise of such
individuals' due diligence required under the circumstances.
Section II. Covered Transactions
Certain entities with specified relationships to NTFS (i.e., the
Northern QPAMs, as defined above) are not precluded from relying on the
exemptive relief provided by Prohibited Transaction Class Exemption 84-
14 (PTE 84-14),\25\ notwithstanding the Conviction (as defined
above),\26\ during the Exemption Period, provided that the conditions
in section III are satisfied.
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\25\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430,
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), as
amended at 75 FR 38837 (July 6, 2010), as amended at 89 FR 23090
(April 3, 2024), and as corrected at 89 FR 65779 (August 13, 2024).
\26\ Section I(g) of PTE 84-14 generally provides that ``a QPAM
is ineligible to rely on this exemption for 10 years following: . .
. [a] Criminal Conviction, as defined in Section VI(r). . . .''
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Section III. Conditions
(a) The Northern QPAMs (including their officers, directors, agents
other than NTFS, and employees of such Northern QPAMs) did not know of,
have reason to know of, or participate in the criminal conduct of NTFS
that is the subject of the Conviction. Further, any other party engaged
on behalf of the Northern QPAMs 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.
(b) The Northern QPAMs (including their officers, directors, agents
other than NTFS, and employees of such Northern QPAMs) did not receive
direct compensation, or knowingly receive indirect compensation, in
connection with the criminal conduct that is the subject of the
Conviction. Further, any other party engaged on behalf of the Northern
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 that is the subject of the Conviction.
(c) The Northern QPAMs will not employ or knowingly engage any of
the individuals that participated in the criminal conduct that is the
subject of the Conviction.
(d) At all times during the Exemption Period, no Northern QPAM will
use its authority or influence to direct an ``investment fund,'' (as
defined in PTE 84-14 section VI(b)) that is subject to ERISA or the
Code and managed by such Northern QPAM in reliance on PTE 84-14, or
with respect to which a Northern QPAM 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 NTFS or engage NTFS to
provide any service to such investment fund, for a direct or indirect
fee borne by such investment fund, regardless of whether such
transaction or service may otherwise be within the
[[Page 38822]]
scope of relief provided by an administrative or statutory exemption.
(e) Any failure of the Northern QPAMs to satisfy PTE 84-14 section
I(g) arose solely from the Conviction.
(f) No Northern QPAM exercised 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 a Northern QPAM or its affiliates to directly or indirectly
profit from the criminal conduct that is the subject of the Conviction.
(g) NTFS has not provided and will not provide discretionary asset
management services to Covered Plans, nor will it otherwise 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.
(h)(1) Each Northern QPAM will continue to implement, maintain,
adjust (to the extent necessary), and follow written policies (the
Policies) requiring and reasonably designed to ensure that:
(i) The asset management decisions of each Northern QPAM are
conducted independently of the management and business activities of
Northern, including NTFS and Northern's non-asset management
affiliates;
(ii) The Northern QPAM 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 violations of these duties and provisions with
respect to Covered Plans;
(iii) The Northern 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 Northern QPAM to
regulators, including but not limited to, the Department of Labor, the
Department of the Treasury, the Department of Justice, and the Pension
Benefit Guaranty Corporation, on behalf of 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 Northern QPAM's knowledge at the time, the
Northern 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;
(vi) The Northern QPAM complies with the terms of this exemption;
and
(vii) Any violation of, or failure to comply with, an item in
subparagraph (ii) through (vi), is corrected promptly upon discovery,
and any such violation or compliance failure not promptly corrected is
reported, upon discovering the failure to promptly correct, in writing,
to the Chief Risk Officer, Chief Compliance Officer and the General
Counsel (or their functional equivalent) of the relevant Northern QPAM,
and an appropriate fiduciary of any affected Covered Plan where such
fiduciary is independent of Northern; however, with respect to any
Covered Plan sponsored by an ``affiliate'' (as defined in PTE 84-14
section VI(d)) of Northern or beneficially owned by an employee of
Northern or its affiliates, such fiduciary does not need to be
independent of Northern. A Northern QPAM will not be treated as having
failed to develop, implement, maintain, or follow the Policies,
provided that it corrects any instance of noncompliance when discovered
or when it reasonably should have known of the noncompliance (whichever
is earlier), and provided that it adheres to the reporting requirements
set forth in this subparagraph (vii).
(2) Each Northern QPAM must continue to implement a program of
training (the Training), conducted at least annually during the
Exemption Period, for all relevant Northern QPAM asset/portfolio
management, trading, legal, compliance, and internal audit personnel
during the Exemption Period. The Training may be conducted
electronically and must: (a) be set forth in the Policies and at a
minimum, cover the Policies, ERISA and Code compliance (including
applicable fiduciary duties and the prohibited transaction provisions),
ethical conduct, the consequences for not complying with the conditions
of this temporary exemption (including any loss of exemptive relief
provided herein), and prompt reporting of wrongdoing; (b) be conducted
by a professional who has been prudently selected and who has
appropriate training and proficiency with ERISA and the Code to perform
the tasks required by this exemption; and (c) be verified, through in-
training knowledge checks, ``graduation'' tests, and/or other
technological tools designed to confirm that personnel fully and in
good faith participate in the Training.
(i)(1) Each Northern QPAM must submit to an audit conducted every
two years 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 Northern QPAM's
compliance with the Policies and Training conditions described herein.
The audit requirement must be incorporated in the Policies. Each audit
must cover the preceding consecutive twelve (12) month period. The
first audit must cover the period from March 5, 2026 through March 4,
2027, and must be completed by September 4, 2027. The second audit must
cover the period from March 5, 2028, through March 4, 2029, and must be
completed by September 4, 2029. In the event that the Department grants
additional exemptive relief to the Applicant after the expiration of
this exemption, the next audit would cover the period from March 5,
2030, through March 4, 2031, and have a required completion date of
September 4, 2031.
(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, each Northern QPAM and, if
applicable, Northern, 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 each Northern QPAM has developed, implemented,
maintained, and followed the Policies in accordance with the conditions
of this exemption, and has developed and implemented the Training, as
required herein.
(4) The auditor's engagement must specifically require the auditor
to test each Northern QPAM's operational compliance with the Policies
and Training conditions. In this regard, the auditor must test, for
each QPAM, a sample of the QPAM's transactions involving Covered Plans.
The sample must include transactions that are sufficient in size,
number and nature to afford the auditor a reasonable basis to determine
the QPAM's operational compliance with the Policies and Training.
(5) For each audit, on or before the end of the relevant period for
completing the audit described in section III(i)(1), the auditor must
issue a written report (the Audit Report) to Northern and the Northern
QPAM to which the audit applies that describes the procedures performed
by the auditor
[[Page 38823]]
during the course of its examination. At its discretion, the auditor
may issue a single consolidated Audit Report that covers all the
Northern QPAMs. The Audit Report must include the auditor's specific
determinations regarding:
(i) the adequacy of each Northern QPAM's Policies and Training;
each Northern QPAM's compliance with the Policies and Training
conditions; the need, if any, to strengthen such Policies and Training;
and any instance of the respective Northern QPAM's noncompliance with
the written Policies and Training described in section III(h) above.
The Northern QPAM 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 of the respective Northern
QPAM. Any action taken, or the plan of action to be taken, by the
respective Northern QPAM 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 the respective Northern 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 Northern QPAM
has complied with the requirements under this subparagraph must be
based on evidence that the particular Northern 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
(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 by the auditor, as required by
section III(i)(3) and (4) above; and
(ii) The adequacy of the most recent Exemption Review described in
section III(m).
(6) The auditor must notify the respective Northern 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 each Audit Report, the general counsel, or one
of the three most senior executive officers of the line of business
engaged in discretionary asset management services through the Northern
QPAM with respect to which the Audit Report applies must certify in
writing, under penalty of perjury, that the officer has reviewed the
Audit Report and this exemption and that to the best of such officer's
knowledge at the time, the Northern QPAM has addressed, corrected or
remedied any noncompliance and inadequacy, or has an appropriate
written plan to address any inadequacy regarding the Policies and
Training identified in the Audit Report. The certification must also
include the signatory's determination that, to the best of such
signatory's knowledge, 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 who participated in the
criminal conduct that is the subject of the Conviction may provide the
certification required by this exemption, unless the person took active
documented steps to stop the misconduct underlying the Conviction.
(8) Northern's Board of Directors must be provided a copy of each
Audit Report, and a senior executive officer with a direct reporting
line to the highest-ranking compliance officer or highest-ranking legal
officer of Northern must review the Audit Report for each Northern QPAM
and certify in writing, under penalty of perjury, that such officer has
reviewed each Audit Report. With respect to this subsection (8), such
certifying senior executive officer must not have known of, had reason
to know of, or participated in, any misconduct underlying the
Conviction, unless such person took active documented steps to stop the
misconduct underlying the Conviction.
(9) Each Northern QPAM provides its certified Audit Report, by
electronic mail to [email protected]. This delivery must take place no
later than forty-five (45) days following completion of the Audit
Report. The Audit Report will be made part of the public record
regarding this exemption. Furthermore, each Northern QPAM 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) Each Northern QPAM and the auditor must submit to [email protected] any engagement agreement(s) executed pursuant to the
engagement of the auditor under this 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.
(12) Northern 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 Northern.
(j) Throughout the Exemption Period, with respect to any
arrangement, agreement, or contract between a Northern QPAM and a
Covered Plan, each Northern QPAM 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 in accordance with applicable rules under ERISA
and the Code); 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 for any actual
losses resulting directly from the Northern QPAM's violation of any
conditions of this exemption, a Northern 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 Northern QPAM; or any claim arising out of the failure of such
Northern QPAM to qualify for the exemptive relief provided by PTE 84-14
as a result of a violation of section I(g) of PTE 84-14 other than the
Conviction. Actual losses include, but are not limited to, 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 as a result of a Northern QPAM's inability to rely upon
the relief in the QPAM Exemption;
[[Page 38824]]
(3) Not to require (or otherwise cause) the Covered Plan to waive,
limit, or qualify the liability of the Northern QPAM 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 the Northern 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 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 such
restrictions must be applicable to all such investors in the pooled
fund on equal terms 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 the Northern QPAM 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 the Northern QPAM and its affiliates, or damages arising from acts
outside the control of the Northern QPAM; and
(7) Within 60 calendar days after this exemption's effective date,
each Northern QPAM must provide a notice of its obligations under this
section III(j) to each Covered Plan, including for avoidance of doubt
the definition of actual losses as provided in clause (2) above. For
Covered Plans that enter into a written asset or investment management
agreement with a Northern QPAM on or after 60 calendar days from this
exemption's effective date, the Northern QPAM must agree to its
obligations under this section III(j) in an updated investment
management agreement between the Northern 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 2016-11
that meets the terms of this condition. This condition will also be met
where the Northern QPAM has already agreed to the same obligations
required by this section III(j) in an updated investment management
agreement between the Northern QPAM and a Covered Plan.
(k) Within 60 days after the effective date of this exemption, each
Northern QPAM provides notice of the exemption as published in the
Federal Register, along with a separate summary describing the facts
that led to the Conviction (the Summary), which has been submitted to
the Department, and a prominently displayed statement (the Statement)
that the Conviction results in a failure to meet a condition in PTE 84-
14 to each sponsor and beneficial owner of a Covered Plan that has
entered into a written asset or investment management agreement with
the Northern QPAM. All prospective Covered Plan clients that enter into
a written asset or investment management agreement with the Northern
QPAM (including a participation or subscription agreement in a pooled
fund managed by an Northern QPAM) after a date that is 60 days after
the effective date of this exemption must receive the proposed and
final exemptions with the Summary and the Statement prior to, or
contemporaneously with, the client's receipt of a written asset
management agreement from the Northern QPAM (for avoidance of doubt,
all Covered Plan clients of an Northern QPAM during the Exemption
Period must receive the disclosures described in this section by the
later of (i) 60 days after the effective date of the exemption or (ii)
the date that a Covered Plan client enters into a written asset or
investment management agreement with an Northern QPAM). Disclosures
required under this paragraph (k) may be delivered electronically
(including by an email that has a link to this exemption.
Notwithstanding the above paragraph, a Northern QPAM will not violate
the condition solely because a Covered Plan refuses to sign an updated
investment management agreement.
(l) The Northern QPAMs must comply with each condition of PTE 84-
14, as amended, with the sole exceptions of the violations of PTE 84-14
section I(g) that are attributable to the Conviction. If an affiliate
of the Northern QPAM (as defined in section VI(d) of PTE 84-14) is
convicted of a crime described in PTE 84-14 section I(g) (other than
the Conviction) during the Exemption Period, this exemption will
terminate immediately.
(m)(1) Within 60 days after the date of publication of the
exemption, each Northern QPAM must designate a senior compliance
officer or a senior legal professional (i.e., the Compliance Officer)
to be responsible for compliance with the Policies and Training
requirements described herein. No person who participated in the
criminal conduct that is the subject of the Conviction, 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 each twelve-month
period comprising the Exemption Period (each an Exemption Review), to
determine the adequacy and effectiveness of the Northern QPAM's
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 direct reporting line to
the highest-ranking corporate officer in charge of legal compliance for
asset management.
(2) With respect to the Exemption Review, the following conditions
must be met:
(i) The Exemption Review must include a review of the Northern
QPAM'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 twelve-month period under review; the most
recent Audit Report issued pursuant to this exemption; any material
change in the relevant business activities of the Northern QPAM; and
any change to ERISA, the Code, or regulations related to fiduciary
duties and the prohibited
[[Page 38825]]
transaction provisions that may be applicable to the activities of the
Northern QPAM;
(ii) The Compliance Officer prepares a written report for the
Exemption Review (an Exemption Report) that (A) summarizes their
material activities during the twelve-month period under review; (B)
sets forth any instance of noncompliance discovered during the twelve-
month period under review, 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 twelve-month period under review and any
prior period, and any related correction taken to date, has been
identified in the Exemption Report; and (D) the Northern QPAM 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 the Northern QPAM; the head of compliance and the general
counsel (or their functional equivalent) of the Northern QPAM; and must
be made unconditionally available to the independent auditor described
above; and
(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) Each Northern QPAM will maintain records necessary to
demonstrate that the conditions of this exemption have been met, for
six (6) years following the date of any transaction for which the
Northern QPAM relies upon the relief in the exemption.
(o) Within 60 days after the effective date of the exemption, each
Northern 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 such Northern 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 180 days
following the end of the calendar year during which the Policies were
changed. If the Northern QPAM 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. 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.
(p) A Northern QPAM will not fail to meet the terms of this
exemption, solely because a different Northern QPAM fails to satisfy a
condition for relief under this exemption, described in sections
III(c), (d), (h), (i), (j), (k), (l), (m), (n), and (o) or if the
independent auditor described in section III(i) fails to comply with a
provision of the exemption, other than the requirement described in
section III(i)(11), provided that such failure did not result from any
actions or inactions of Northern.
(q) Northern imposes its internal procedures, controls, and
protocols on NTFS to reduce the likelihood of any recurrence of conduct
that is the subject of the Conviction.
(r) All the material facts and representations set forth in the
Summary of Facts and Representations are true and accurate at all
times.
(s) With respect to an asset manager that becomes an Northern QPAM
after the effective date of the exemption by virtue of being acquired
(in whole or in part) by Northern or a subsidiary or affiliate of
Northern (a ``newly-acquired Northern QPAM''), the newly-acquired
Northern QPAM would not be precluded from relying on the exemptive
relief provided by PTE 84-14 notwithstanding the Conviction as of the
closing date for the acquisition; however, the operative terms of the
exemption shall not apply to the newly-acquired Northern QPAM until a
date that is six (6) months after the closing date for the acquisition.
To that end, the newly acquired Northern QPAM will initially submit to
an audit pursuant to section III(i) of this exemption as of the first
audit period that begins following the closing date for the
acquisition. The period covered by the audit must begin on the date on
which the Northern QPAM was acquired.
(t) Relief in this exemption will terminate on the date that is 12
months following the date that a U.S. regulatory authority makes a
final decision that Northern failed to comply in all material respects
with any requirement imposed by such regulatory authority in connection
with the Conviction.
(u) Each Northern QPAM 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.
Exemption dates: The exemption will be in effect during the period
beginning on the earlier of September 5, 2025 or the date the exemption
is published in the Federal Register; and ending on March 4, 2030.
Signed at Washington, DC.
Christopher Motta,
Acting Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2025-15280 Filed 8-11-25; 8:45 am]
BILLING CODE 4510-29-P