70562 Federal Register / Vol. 81, No. 197 / Wednesday, October 12, 2016 / Notices

DEPARTMENT OF LABOR comments received will be available for Proposed Temporary Exemption public inspection in the Public The Department is considering Employee Benefits Security Documents Room of the Employee granting a temporary exemption under Administration Benefits Security Administration, U.S. the authority of section 408(a) of the Department of Labor, Room N–1515, Employee Retirement Income Security Proposed Exemptions From Certain 200 Constitution Avenue NW., Prohibited Transaction Restrictions Act of 1974, as amended, (ERISA or the Washington, DC 20210. Act) and section 4975(c)(2) of the AGENCY: Employee Benefits Security Warning: All comments will be made Internal Revenue Code of 1986, as Administration, Labor. available to the public. Do not include amended (the Code), and in accordance ACTION: Notice of proposed exemptions. any personally identifiable information with the procedures set forth in 29 CFR (such as Social Security number, name, part 2570, subpart B (76 FR 66637, SUMMARY: This document contains address, or other contact information) or 66644, October 27, 2011).2 notices of pendency before the confidential business information that Section I: Covered Transactions Department of Labor (the Department) of you do not want publicly disclosed. All proposed exemptions from certain of the comments may be posted on the Internet If the proposed temporary exemption prohibited transaction restrictions of the and can be retrieved by most Internet is granted, certain entities with Employee Retirement Income Security search engines. specified relationships to Royal Bank of Act of 1974 (ERISA or the Act) and/or Canada Trust Company (Bahamas) SUPPLEMENTARY INFORMATION: the Internal Revenue Code of 1986 (the Limited (hereinafter, the RBC QPAMs, Code). This notice includes the Notice to Interested Persons as further defined in Section II(b)) shall following proposed exemptions: D– not be precluded from relying on the 11868, Royal Bank of Canada (together Notice of the proposed exemptions exemptive relief provided by Prohibited with its current and future affiliates, will be provided to all interested Transaction Exemption (PTE) 84–14,3 RBC or the Applicant); D–11875, persons in the manner agreed upon by notwithstanding a judgment of Northern Trust Corporation (together the applicant and the Department conviction against Royal Bank of with its current and future affiliates, within 15 days of the date of publication Canada Trust Company (Bahamas) Northern or the Applicant; and D– in the Federal Register. Such notice Limited for aiding and abetting tax 11879, Proposed Extension of PTE shall include a copy of the notice of fraud, to be entered in France in the 2015–15 involving Deutsche Bank AG proposed exemption as published in the District Court of Paris (the Conviction, (Deutsche Bank). Federal Register and shall inform as further defined in Section II(a)),4 for DATES: All interested persons are invited interested persons of their right to a period of up to twelve months to submit written comments or requests comment and to request a hearing beginning on the date of the Conviction for a hearing on the pending (where appropriate). (the Conviction Date), provided that the exemptions, unless otherwise stated in The proposed exemptions were following conditions are satisfied: the Notice of Proposed Exemption, requested in applications filed pursuant (a) The RBC QPAMs (including their within 45 days from the date of to section 408(a) of the Act and/or officers, directors, agents other than publication of this Federal Register section 4975(c)(2) of the Code, and in RBC, and employees of such RBC Notice. accordance with procedures set forth in QPAMs) did not know of, have reason 29 CFR part 2570, subpart B (76 FR to know of, or participate in the ADDRESSES: Comments and requests for 66637, 66644, October 27, 2011).1 criminal conduct of RBCTC Bahamas a hearing should state: (1) The name, Effective December 31, 1978, section that is the subject of the Conviction (for address, and telephone number of the 102 of Reorganization Plan No. 4 of purposes of this paragraph (a), person making the comment or request, 1978, 5 U.S.C. App. 1 (1996), transferred ‘‘participate in’’ includes the knowing and (2) the nature of the person’s the authority of the Secretary of the or tacit approval of the misconduct interest in the exemption and the Treasury to issue exemptions of the type underlying the Conviction); manner in which the person would be requested to the Secretary of Labor. (b) The RBC QPAMs (including their adversely affected by the exemption. A Therefore, these notices of proposed officers, directors, agents other than request for a hearing must also state the exemption are issued solely by the RBC, and employees of such RBC issues to be addressed and include a Department. QPAMs) did not receive direct general description of the evidence to be compensation, or knowingly receive The applications contain presented at the hearing. indirect compensation, in connection representations with regard to the All written comments and requests for with the criminal conduct that is the proposed exemptions which are a hearing (at least three copies) should subject of the Conviction; be sent to the Employee Benefits summarized below. Interested persons are referred to the applications on file Security Administration (EBSA), Office 2 For purposes of this proposed temporary of Exemption Determinations, U.S. with the Department for a complete exemption, references to section 406 of Title I of the Department of Labor, 200 Constitution statement of the facts and Act, unless otherwise specified, should be read to Avenue NW., Suite 400, Washington, representations. refer as well to the corresponding provisions of section 4975 of the Code. DC 20210. Attention: Application No. Royal Bank of Canada (Together With 3 49 FR 9494 (March 13, 1984), as corrected at 50 ll, stated in each Notice of Proposed Its Current and Future Affiliates, RBC FR 41430 (October 10, 1985), as amended at 70 FR Exemption. Interested persons are also or the Applicant), Located in Toronto, 49305 (August 23, 2005), and as amended at 75 FR invited to submit comments and/or 38837 (July 6, 2010). Ontario, Canada 4 hearing requests to EBSA via email or Section I(g) of PTE 84–14 generally provides [Exemption Application No. D–11868] that ‘‘[n]either the QPAM nor any affiliate thereof FAX. Any such comments or requests . . . nor any owner . . . of a 5 percent or more interest should be sent either by email to: in the QPAM is a person who within the 10 years [email protected], or by FAX to 1 The Department has considered exemption immediately preceding the transaction has been applications received prior to December 27, 2011 either convicted or released from imprisonment, (202) 693–8474 by the end of the under the exemption procedures set forth in 29 CFR whichever is later, as a result of’’ certain felonies scheduled comment period. The part 2570, subpart B (55 FR 32836, 32847, August including income tax evasion, and aiding and applications for exemption and the 10, 1990). abetting tax evasion.

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(c) The RBC QPAMs will not employ on behalf of ERISA-covered plans or agreement, or contract between an RBC or knowingly engage any of the IRAs are materially accurate and QPAM and an ERISA-covered plan or individuals that participated in the complete, to the best of such QPAM’s IRA for which an RBC QPAM provides criminal conduct that is the subject of knowledge at that time; asset management or other discretionary the Conviction (for purposes of this (v) The RBC QPAM does not make fiduciary services, each RBC QPAM paragraph (c), ‘‘participated in’’ material misrepresentations or omit agrees: includes the knowing or tacit approval material information in its (1) To comply with ERISA and the of the misconduct underlying the communications with such regulators Code, as applicable with respect to such Conviction); with respect to ERISA-covered plans or ERISA-covered plan or IRA; to refrain (d) An RBC QPAM will not use its IRAs, or make material from engaging in prohibited transactions authority or influence to direct an misrepresentations or omit material that are not otherwise exempt (and to ‘‘investment fund,’’ (as defined in information in its communications with promptly correct any inadvertent Section VI(b) of PTE 84–14) that is ERISA-covered plan and IRA clients; prohibited transactions); and to comply subject to ERISA or the Code and (vi) The RBC QPAM complies with with the standards of prudence and managed by such RBC QPAM, to enter the terms of this temporary exemption, loyalty set forth in section 404 of ERISA into any transaction with RBCTC if granted; and with respect to each such ERISA- Bahamas or engage RBCTC Bahamas to (vii) Any violation of, or failure to covered plan and IRA; comply with, an item in subparagraph provide any service to such investment (2) Not to require (or otherwise cause) (ii) through (vi), is corrected promptly fund, for a direct or indirect fee borne the ERISA-covered plan or IRA to upon discovery, and any such violation by such investment fund, regardless of waive, limit, or qualify the liability of or compliance failure not promptly whether such transaction or service may the RBC QPAM for violating ERISA or corrected is reported, upon discovering otherwise be within the scope of relief the Code or engaging in prohibited the failure to promptly correct, in provided by an administrative or transactions; writing, to appropriate corporate statutory exemption; (3) Not to require the ERISA-covered (e) Any failure of the RBC QPAMs to officers, the head of compliance and the General Counsel (or their functional plan or IRA (or sponsor of such ERISA- satisfy Section I(g) of PTE 84–14 arose covered plan or beneficial owner of solely from the Conviction; equivalent) of the relevant RBC QPAM, and an appropriate fiduciary of any such IRA) to indemnify the RBC QPAM (f) No entities holding assets that for violating ERISA or engaging in constitute the assets of any plan subject affected ERISA-covered plan or IRA where such fiduciary is independent of prohibited transactions, except for to Part 4 of Title I of ERISA (an ERISA- violations or prohibited transactions covered plan) or section 4975 of the RBC; however, with respect to any ERISA-covered plan or IRA sponsored caused by an error, misrepresentation, Code (an IRA) were involved in the or misconduct of a plan fiduciary or criminal conduct that is the subject of by an ‘‘affiliate’’ (as defined in Section VI(d) of PTE 84–14) of RBC or other party hired by the plan fiduciary the Conviction; who is independent of RBC; (g) RBCTC Bahamas has not provided beneficially owned by an employee of nor will provide discretionary asset RBC or its affiliates, such fiduciary does (4) Not to restrict the ability of such management services to ERISA-covered not need to be independent of RBC. An ERISA-covered plan or IRA to terminate plans or IRAs, or otherwise will act as RBC QPAM will not be treated as having or withdraw from its arrangement with a fiduciary with respect to ERISA- failed to develop, implement, maintain, the RBC QPAM (including any covered plan and IRA assets; or follow the Policies, provided that it investment in a separately managed (h)(1) Each RBC QPAM must corrects any instance of noncompliance account or pooled fund subject to ERISA immediately develop, implement, promptly when discovered or when it and managed by such QPAM), with the maintain, and follow written policies reasonably should have known of the exception of reasonable restrictions, (the Policies) requiring and reasonably noncompliance (whichever is earlier), appropriately disclosed in advance, that designed to ensure that: and provided that it adheres to the are specifically designed to ensure (i) The asset management decisions of reporting requirements set forth in this equitable treatment of all investors in a the RBC QPAM are conducted subparagraph (vii); pooled fund in the event such independently of the management and (2) Each RBC QPAM must withdrawal or termination may have business activities of RBC, including immediately develop and implement a adverse consequences for all other RBCTC Bahamas; program of training (the Training), investors as a result of an actual lack of (ii) The RBC QPAM fully complies conducted at least annually, for all liquidity of the underlying assets, with ERISA’s fiduciary duties and with relevant RBC QPAM asset/portfolio provided that such restrictions are ERISA and the Code’s prohibited management, trading, legal, compliance, applied consistently and in like manner transaction provisions, and does not and internal audit personnel. The to all such investors; knowingly participate in any violations Training must be set forth in the (5) Not to impose any fees, penalties, of these duties and provisions with Policies and at a minimum, cover the or charges for such termination or respect to ERISA-covered plans and Policies, ERISA and Code compliance withdrawal with the exception of IRAs; (including applicable fiduciary duties reasonable fees, appropriately disclosed (iii) The RBC QPAM does not and the prohibited transaction in advance, that are specifically knowingly participate in any other provisions), ethical conduct, the designed to prevent generally person’s violation of ERISA or the Code consequences for not complying with recognized abusive investment practices with respect to ERISA-covered plans the conditions of this temporary or specifically designed to ensure and IRAs; exemption, if granted (including any equitable treatment of all investors in a (iv) Any filings or statements made by loss of exemptive relief provided pooled fund in the event such the RBC QPAM to regulators, including herein), and prompt reporting of withdrawal or termination may have but not limited to, the Department of wrongdoing; adverse consequences for all other Labor, the Department of the Treasury, (i) Effective as of the effective date of investors, provided that such fees are the Department of Justice, and the this temporary exemption, if granted, applied consistently and in like manner Pension Benefit Guaranty Corporation, with respect to any arrangement, to all such investors;

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(6) Not to include exculpatory (as defined in section VI(a) 5 of PTE 84– proposed exemption have been provisions disclaiming or otherwise 14) that relies on the relief provided by specifically designed to permit plans to limiting liability of the RBC QPAM for PTE 84–14 and with respect to which terminate their relationships in an a violation of such agreement’s terms; RBCTC Bahamas is a current or future orderly and cost effective fashion in the and ‘‘affiliate’’ (as defined in section VI(d) of event of an additional conviction or a (7) To indemnify and hold harmless PTE 84–14); determination that it is otherwise the ERISA-covered plan or IRA for any (c) The term ‘‘RBCTC Bahamas’’ prudent for a plan to terminate its damages resulting from a violation of means Royal Bank of Canada Trust relationship with an entity covered by applicable laws, a breach of contract, or Company (Bahamas) Limited, a the proposed exemption. Bahamian ‘‘affiliate’’ of RBC (as defined any claim arising out of the failure of Summary of Facts and Representations such RBC QPAM to qualify for the in section VI(c) of PTE 84–14); exemptive relief provided by PTE 84–14 (d) The terms ‘‘ERISA-covered plan’’ Background as a result of a violation of Section I(g) and ‘‘IRA’’ mean, respectively, a plan 1. The Royal Bank of Canada (together of PTE 84–14 other than the Conviction. subject to Part 4 of Title I of ERISA and with its current and future affiliates, Within six (6) months of the date of a plan subject to section 4975 of the RBC or the Applicant) is a Canadian publication of a notice of temporary Code; and corporation headquartered in Toronto, (e) The term ‘‘RBC’’ means Royal exemption in the Federal Register, if Ontario. RBC is Canada’s largest bank Bank of Canada, together with its granted, each RBC QPAM will: Provide and one of the largest banks in the current and future affiliates. a notice of its obligations under this world, with approximately 78,000 Effective Date: This proposed Section I(i) to each ERISA-covered plan employees in offices through Canada, temporary exemption, if granted, will be and IRA for which an RBC QPAM the United States, and 38 other effective for the period beginning on the provides asset management or other countries. RBC provides personal and Conviction Date until the earlier of: The discretionary fiduciary services; and commercial banks, wealth management date that is twelve months following the Separately warrant in writing to each services, insurance, investor services, Conviction Date; or the effective date of such ERISA-covered plan and IRA its and capital markets products and a final agency action made by the obligations under subparagraph (1) of services on a global basis. As of October Department in connection with an this Section I(i); 31, 2014, RBC had approximately application for long-term exemptive CAD$457 billion in assets under (j) The RBC QPAMs comply with each relief for the covered transactions management and CAD$4.6 trillion in condition of PTE 84–14, as amended, described herein. with the sole exceptions of the Department’s Comment: The assets under administration and equity violations of Section I(g) of PTE 84–14 Department is publishing this proposed attributable to shareholders of that are attributable to the Conviction; temporary exemption in order to protect CAD$52.7 billion. 2. RBC owns RBC Capital Markets, (k) Each RBC QPAM will maintain ERISA-covered plans and IRAs from LLC, a U.S. registered broker-dealer and records necessary to demonstrate that certain costs and/or investment losses a U.S. registered investment adviser. the conditions of this temporary that may arise to the extent entities with RBC also owns RBC Global Asset exemption, if granted, have been met, a corporate relationship to RBCTC Management (U.S.) Inc., a U.S. for six (6) years following the date of Bahamas lose their ability to rely on registered investment adviser, as well as any transaction for which such RBC PTE 84–14 as of the Conviction Date, as several other registered investment QPAM relies upon the relief in the described below. temporary exemption, if granted; The proposed exemption, if granted, adviser affiliates in the United States (l) During the effective period of this would provide relief from certain of the and around the world. 3. Royal Bank of Canada Trust temporary exemption, if granted, neither restrictions set forth in sections 406 and Company (Bahamas) Limited (RBCTC RBC nor any affiliate enters into a 407 of ERISA. No relief from a violation Bahamas) is a wholly owned subsidiary Deferred Prosecution Agreement (a of any other law would be provided by of RBC located in the Bahamas, and is DPA) or a Non-Prosecution Agreement this exemption, if granted, including regulated by the Central Bank of the (an NPA) with the U.S Department of any criminal conviction described Bahamas. RBCTC Bahamas currently Justice, in connection with conduct herein. provides trust and company described in Section I(g) of PTE 84–14 Furthermore, the Department cautions management services in all major or section 411 of ERISA; and that the relief in this proposed currencies to international clients. (m) An RBC QPAM will not fail to exemption, if granted, would terminate immediately if, among other things, an RBCTC Bahamas currently employs 16 meet the terms of this temporary full-time equivalents and 5 contractors, exemption, if granted, solely because a entity within the RBC corporate structure is convicted of a crime and has reported revenues of USD different RBC QPAM fails to satisfy a $5,143,861 in fiscal year 2015. As of the condition for relief under this temporary described in Section I(g) of PTE 84–14 (other than the Conviction) during the second quarter of 2016, RBCTC exemption, if granted, described in Bahamas has reported total assets under Sections I(c), (d), (h), (i), (j), and (k). effective period of the exemption. While such an entity could apply for a new custody of $2.5 billion, which includes Section II: Definitions exemption in that circumstance, the cash, real estate, art, securities, and interests in privately held companies. (a) The term ‘‘Conviction’’ means the Department would not be obligated to grant the exemption. The terms of this RBCTC Bahamas is not engaged in asset potential judgment of conviction against management activities and does not act RBCTC Bahamas for aiding and abetting as a fiduciary of any plans subject to tax fraud to be entered in France in the 5 In general terms, a QPAM is an independent fiduciary that is a bank, savings and loan Part 4 of Title I of ERISA (ERISA- District Court of Paris, French Special association, insurance company, or investment covered plans) or section 4975 of the Prosecutor No. 1120392066, French adviser that meets certain equity or net worth Code (IRAs). Investigative Judge No. JIRSIF/11/12; requirements and other licensure requirements and that has acknowledged in a written management 4. RBCTC Bahamas trust and (b) The term ‘‘RBC QPAM’’ means a agreement that it is a fiduciary with respect to each company management services include ‘‘qualified professional asset manager’’ plan that has retained the QPAM. ongoing interaction with trusts’ settlors

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and beneficiaries, investment managers Investigation for Tax Fraud trustee, deeds which are governed by and advisors, and settlors’ legal counsel, 7. The Applicant has applied for an and punishable under Articles 121–2, among others. RBCTC Bahamas also exemption in relation to a potential 121–6, 121–7, 321–1, 321–3, 321–12 of may appoint corporate directors judgment of conviction against RBCTC the French Criminal Code and Articles (entities wholly owned by RBCTC Bahamas for aiding and abetting tax 1741 et 1745 of the French General Tax Bahamas) for some of the underlying fraud, to be entered in France in the Code. holding entities owned by the trusts for District Court of Paris, French Special 9. According to the Applicant, the which RBCTC Bahamas acts as trustee. Prosecutor No. 1120392066, French pertinent facts that underlie these These entities hold assets (which could Investigative Judge No. JIRSIF/11/12 charges, as set out in the Referral Order, are as follows: on February 23, 1998, include cash marketable securities, (the Conviction). The facts forming the Daniel Wildenstein established a privately held companies, art, yachts, basis of the Conviction reach back discretionary trust in the Bahamas and other property). several years and involve investigations called the Delta Trust. The Delta Trust by French prosecutors. In January 2012, 5. Among RBCTC Bahamas’s services was designed to be revocable up to the RBCTC Bahamas was summoned to is providing directors for corporations point of Daniel Wildenstein’s death, appear before a French Judge of created by their clients. Such RBCTC then irrevocable thereafter. The Delta Instruction (the Investigative Judge) Bahamas personnel perform the usual Trust was settled with works of art. concerning an investigation into non- duties of corporate directors. Moreover, Royal Bank of Scotland was the initial payment of French inheritance taxes by RBCTC Bahamas must properly keep the trustee of the Delta Trust. In early 2001, Guy Wildenstein and Alec Daniel accounts, as they are subject to internal Royal Bank of Scotland was replaced as Armand Wildenstein (the Wildensteins) trustee by Coutts Trust Holdings audit to ascertain that proper following the death in 2001 of family Limited, which was succeeded by management is in place. As a result, patriarch Daniel Wildenstein. RBCTC Coutts Trustees (Bahamas) Limited. On RBCTC Bahamas provides trust and Bahamas was placed under judicial October 21, 2001, Daniel Wildenstein company accounting each year, investigation, and in December 2013, died in Paris. On April 28, 2002, Guy variously including upon request, the Investigative Judge referred the case Wildenstein and his brother, Alec among other things, an account of all to the French national prosecutor of Wildenstein Sr., filed an inheritance tax monies received and distributed. In financial crimes (the Special Prosecutor) statement in relation to the estate of addition, at the request of a client, for a review and recommendation. In their father, Daniel Wildenstein, as RBCTC Bahamas will, among other January 2015, the Special Prosecutor required by French tax laws. Guy things, assist in the appointment of submitted a recommendation that Wildenstein and Alec Wildenstein Sr. investment advisors and proposed RBCTC Bahamas and several others be did not disclose, in this inheritance tax investment houses and assist in charged with complicity in the statement, the existence of the Delta communication with legal advisors, Wildensteins’ alleged tax fraud and Trust or the existence of the assets investment advisors and corporate money laundering. formation agents. Further, as requested, 8. On April 9, 2015, the Paris Court therein. RBCTC Bahamas was appointed trustee in November of 2004, three years RBCTC Bahamas will, among other of Appeal (the Court) for the District after Daniel Wildenstein’s death and things, exercise all duties, Court of Paris issued an Order of more than two years after Guy responsibilities and powers as set out in Dismissal and Referral before the Wildenstein and Alec Wildenstein Sr. the documentation governing RBCTC Criminal Court (the Referral Order). In had filed their allegedly false Bahamas’s appointment as trustee and the Referral Order, RBCTC Bahamas is charged with complicity in the alleged inheritance tax statement. attend to all day to day administrative 10. The Applicant represents that, tax fraud of the Wildensteins with issues. according to the French authorities, the respect to taxes allegedly owed to 6. Over the last several years, RBCTC existence of the Delta Trust as well as France on assets held in a Bahamian Bahamas’s operations have been the assets of the Delta Trust should have trust for which RBCTC Bahamas has reduced in scope. On November 4, 2015, been disclosed to the French authorities served as successor trustee since 2004.6 RBCTC Bahamas announced that it had by Guy Wildenstein and by Alec Specifically, the Court found that the entered into a purchase and sale Wildenstein Sr. when they filed their investigation produced sufficient inheritance tax statement in 2002.7 An agreement with SMP Partners Group to charges against RBCTC Bahamas for inheritance tax would have followed in sell its Trust, Custody and Fund having, in the Bahamas, beginning on Administration businesses in the relation to these assets. November 19, 2004, aided and abetted 11. The Referral Order provides that Caribbean. This follows the tax fraud committed in Paris by Daniel announcement in November 2014 that RBCTC Bahamas actually knew, or Wildenstein’s heirs by deliberately should have known, that Daniel RBC would be exiting a number of its concealing a portion of the sums subject Wealth Management businesses in the Wildenstein was of French nationality, to French taxation on Daniel and that he died in France. The Referral Caribbean. Upon completion of the sale Wildenstein’s estate, in particular the and orderly transfer of the structures Order also provides that, at the least, works of art placed in the ‘‘Delta Trust’’ RBCTC should have investigated in and assets to new providers, RBCTC of which RBCTC Bahamas was the Bahamas will surrender its trust license greater detail the facts in relation to Daniel Wildenstein’s residency and, back to the Central Bank of the 6 The Referral Order charges both of the Bahamas. The Applicant anticipates that Wildensteins with multiple counts of tax fraud, likewise, the tax consequences of that this process will be completed in the notably for failing to disclose, and pay taxes on, assets held in various trusts following the death of 7 The authorities allege that this disclosure next 12 to 24 months. RBC represents Daniel Wildenstein. The Wildensteins, both of should have occurred because the assets in the that, even if the sale is completed, whom are among the beneficiaries of the trust for Delta Trust were initially revocable (i.e., the assets ongoing operations will still be which RBCTC Bahamas has served as trustee since in trust could be revoked by Daniel Wildenstein up necessary to support the remaining 2004, have been charged with failing to report and to the time of his death). As such, the authorities pay inheritance taxes on the assets held in that trust state that the assets in the Delta Trust belonged to assets. As a result, the requested following the death in 2001 of Daniel Wildenstein, Daniel Wildenstein’s estate and were therefore exemption will still be required. and again in an amended filing made in 2008. taxable under French tax laws.

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residency. In addition, the Referral 2570, subpart B (76 FR 66637, 66644, position to influence its policies, Order provides that the Delta Trust did October 27, 2011). maintain a high standard of integrity.15 not operate as a discretionary trust for 14. Class Prohibited Transaction Accordingly, in the event that RBCTC is purposes of French tax law, which Exemption 84–14 (PTE 84–14) 10 convicted of the crimes alleged in the would have generally required the exempts certain prohibited transactions Referral Order, QPAMs with certain trustee to have control over the between a party in interest and an corporate relationships to RBCTC, as management of the trust’s assets. Among ‘‘investment fund’’ (as defined in well as their client ERISA-covered plans other things,8 the Referral Order Section VI(b) of that exemption) 11 in and IRAs will no longer be able to rely describes the existence of a management which a plan has an interest, if the on PTE 84–14 without an additional agreement between the trustee and the investment manager satisfies the individual exemption issued by the Wildenstein art gallery in New York as definition of ‘‘qualified professional Department. well as to the role played by the gallery asset manager’’ (QPAM) and satisfies The RBC QPAMs and the Failure To as further evidence that the Delta Trust additional conditions for the exemption. Comply With PTE 84–14 remained under the Wildenstein PTE 84–14 was developed and granted family’s control before and after Daniel based on the essential premise that 16. Certain current and future Wildenstein’s death. Under the terms of broad relief could be afforded for all ‘‘affiliates’’ of RBCTC Bahamas, as that the management agreement, the types of transactions in which a plan term is defined in section VI(d) of PTE Wildenstein gallery was retained by the engages only if the commitments and 84–14, may act as QPAMs in reliance on Delta Trust trustee to assist and to the investments of plan assets and the PTE 84–14 (these entities are advise upon the management of the negotiations leading thereto are the sole collectively referred to as the ‘‘RBC collection of art in trust. Finally, the responsibility of an independent, QPAMs’’). The primary U.S. bank and Referral Order points out that RBCTC discretionary, manager.12 U.S. registered adviser affiliates in Bahamas filed an amended declaration 15. However, Section I(g) of PTE 84– which RBC owns a significant interest, with the Internal Revenue Service to 14 prevents an entity that may directly or indirectly, include the declare the paintings in the Delta Trust otherwise meet the definition of following: (1) RBC Global Asset which were present on U.S. territory at ‘‘QPAM’’ from utilizing the exemptive Management (U.S.) Inc.; (2) RBC Global the time of Daniel Wildenstein’s death, relief provided by PTE 84–14, for itself Asset Management (UK) Limited; (3) even though the Delta Trust was and its client plans, if that entity or an RBC Capital Markets, LLC; and (4) purportedly discretionary and ‘‘affiliate’’ 13 thereof or any owner, BlueBay Asset Management LLP. The irrevocable. direct or indirect, of a 5 percent or more Applicant also represents that there are 12. RBC contests it liability for aiding interest in the QPAM has, within 10 other affiliated managers that could and abetting tax evasion. The trial years immediately preceding the meet the definition of ‘‘QPAM’’ in the commenced on January 4, 2016. On transaction, been either convicted or future, but which do not currently have January 6, 2016, the Paris Criminal released from imprisonment, whichever ERISA or IRA clients. Additionally, Court suspended the proceeding to is later, as a result of certain specified there are other managers that are not probe the trial’s constitutionality. The criminal activity described in that currently registered as investment Applicant represents that the trial is section.14 The Department notes that advisers under the Investment Advisers scheduled to resume on September 22, Section I(g) was included in PTE 84–14, Act of 1940 but could become registered 2016, and that the conviction date (if in part, based on the expectation that a investment advisers in the future while there is a conviction) is expected to be QPAM, and those who may be in a managing ERISA and IRA assets and on or after October 14, 2016. seek to use PTE 84–14 to facilitate 10 49 FR 9494 (March 13, 1984), as corrected at certain transactions. Significance of Class PTE 84–14 and the 50 FR 41430 (October 10, 1985), as amended at 70 17. RBC explains that the RBC Violation of Condition I(g) of PTE 84–14 FR 49305 (August 23, 2005), and as amended at 75 QPAMs provide asset management FR 38837 (July 6, 2010). 13. The Department notes that the 11 An ‘‘investment fund’’ includes single services to thousands of ERISA-covered rules set forth in section 406 of the customer and pooled separate accounts maintained plans and IRAs. In managing these Employee Retirement Income Security by an insurance company, individual trusts and assets, the RBC QPAMs regularly rely on Act of 1974, as amended (ERISA) and common, collective or group trusts maintained by PTE 84–14 for, among other things, section 4975(c) of the Internal Revenue a bank, and any other account or fund to the extent that the disposition of its assets (whether or not in global fixed income, global equities, Code of 1986, as amended (the Code) the custody of the QPAM) is subject to the futures, options, swaps and other proscribe certain ‘‘prohibited discretionary authority of the QPAM. derivatives, alternative funds, including transactions’’ between plans and related 12 See 75 FR 38837, 38839 (July 6, 2010). hedge funds, and similar instruments parties with respect to those plans, 13 Section VI(d) of PTE 84–14 defines the term and strategies. The issuing documents known as ‘‘parties in interest.’’ 9 Under ‘‘affiliate’’ for purposes of Section I(g) as ‘‘(1) Any person directly or indirectly through one or more for many instruments contain deemed the authority of section 408(a) of ERISA intermediaries, controlling, controlled by, or under representations regarding reliance, at and section 4975(c)(2) of the Code, the common control with the person, (2) Any director least partially, on PTE 84–14. Department has the authority to grant of, relative of, or partner in, any such person, (3) 18. According to the Applicant, the exemptions from such ‘‘prohibited Any corporation, partnership, trust or investment management businesses that unincorporated enterprise of which such person is transactions’’ in accordance with the an officer, director, or a 5 percent or more partner are operated out of the RBC QPAMs are procedures set forth in 29 CFR part or owner, and (4) Any employee or officer of the separate from RBCTC Bahamas, and person who—(A) Is a highly compensated employee from the non-investment management 8 The Applicant notes that the French authorities (as defined in Section 4975(e)(2)(H) of the Code) or business activities of RBCTC Bahamas point to a ‘‘Letter of Wishes,’’ which Daniel officer (earning 10 percent or more of the yearly Wildenstein delivered to the then trustee, as wages of such person), or (B) Has direct or indirect that are the subject of criminal charges evidence that the assets of the Delta Trust remained authority, responsibility or control regarding the under French law. The Applicant states under Daniel Wildenstein’s control during his custody, management or disposition of plan assets.’’ that RBC QPAMs have dedicated lifetime. 14 For purposes of Section I(g) of PTE 84–14, a systems, management, risk and 9 For purposes of the Summary of Facts and person shall be deemed to have been ‘‘convicted’’ Representations, references to specific provisions of from the date of the judgment of the trial court, compliance officers. RBC represents that Title I of ERISA, unless otherwise specified, refer regardless of whether that judgment stands on also to the corresponding provisions of the Code. appeal. 15 See 47 FR 56945, 56947 (December 21, 1982).

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the investment management businesses Statutory Findings—In the Interests of from pooled funds, which would in turn of the RBC QPAMs are subject to Affected Plans and IRAs frustrate the QPAMs’ efforts to policies and procedures, and RBC 22. The Applicant states that an effectively manage the pooled funds’ QPAM personnel engage in training, exemption will be in the interest of the assets and harm remaining plan designed to ensure that such businesses affected ERISA-covered plans and IRAs investors by increasing the expense understand and abide by their fiduciary and their participants and beneficiaries. ratios of the investment funds. 26. The Applicant believes that, duties in accordance with applicable According to the Applicant, there are depending on the strategy, the cost of law. numerous transactions entered into by 19. According to RBC, the policies liquidating assets in connection with RBC QPAMs on behalf of their ERISA- and procedures create information transitioning clients to another manager covered plan and IRA clients that barriers designed to prevent employees could be significant. Furthermore, require the RBC QPAMs to meet the of the RBC QPAMs from gaining access transaction costs may be higher in times conditions in PTE 84–14. According to to inside information that an affiliate of significant market volatility, RBC, these include contracts entered may have acquired or developed in especially with respect to certain connection with the investment into by RBC QPAMs on behalf of or as strategies. banking, treasury services or other investment adviser for ERISA-covered Fixed Income. The Applicant states investor services business activities. plans, collective trusts and other funds that RBC QPAMs rely on PTE 84–14 These policies and procedures apply to subject to ERISA for certain outstanding when buying and selling fixed income employees, officers, and directors of the transactions, including, but not limited products. As of June 30, 2015, the total RBC QPAMs. The Applicant also to: The purchase and sale of debt and portfolio of accounts managed by the maintains an employee hotline for equity securities, and asset-backed RBC QPAMs that were invested in fixed employees to express any concerns of securities; the purchase and sale of income products was approximately wrongdoing anonymously. commodities; real estate financing and $4.86 billion in market value. Of that leasing arrangements; and certain total, approximately $2.82 billion Request for Relief derivative transactions such as futures, consisted of ERISA-covered assets, and 20. At the time of this proposed options, swaps, and forwards. approximately $2.04 billion consisted of temporary exemption, RBCTC 23. The Applicant states that, in the public plan assets. According to the (Bahamas) has not been convicted and event that the RBC QPAMs can no Applicant, those accounts are invested therefore its conduct has not been longer rely on PTE 84–14, in, for example, the following determined to be criminal.16 Moreover, counterparties to the above transactions instruments pursuant to various fixed RBCTC (Bahamas) maintains that it could seek to terminate their contracts, income strategies: Investment-grade engaged in no criminal conduct and it resulting in significant losses to their bonds, leveraged finance instruments, is mounting a defense in the French ERISA-covered plan clients. emerging market sovereign debt, proceeding. Nevertheless, the Applicant Furthermore, according to RBC, in the emerging market corporate debt, states that if the Paris Criminal Court event the Applicant no longer qualifies convertible bonds, multi-asset credit issues a Conviction of RBCTC Bahamas, for relief under the PTE 84–14, many instruments, and short-duration the RBC QPAMs will be in violation of derivatives transactions and other government bonds. Section I(g) of PTE 84–14. In the event contractual agreements automatically Costs of Liquidating Fixed Income. that the condition in Section I(g) of PTE and immediately could be terminated According to the Applicant, if RBC 84–14 is violated, those asset managers without notice or action. QPAMs could no longer rely on PTE 84– can no longer rely on PTE 84–14 24. The Applicant states that, without 14, a typical ERISA-covered plan or IRA without a separate individual prohibited an exemption to continue to rely on PTE client of the RBC QPAMs could suffer transaction exemption. Therefore, the 84–14, ERISA-covered plan and IRA different liquidation costs depending on Applicant has requested an exemption clients of RBC QPAMs may be required the strategy employed within fixed to allow the RBC QPAMs to continue to to seek other investment managers, at income. For example, investment grade use PTE 84–14, notwithstanding such significant disruption and cost. RBC bonds and emerging market sovereign Conviction.17 states that the process of transitioning to debt could be liquidated for a cost of a new manager typically is lengthy, and Statutory Findings—Administratively between 25–50 basis points, not likely would involve numerous steps Feasible including reinvestment costs. Leveraged each of which could last several finance and emerging market corporate 21. The Applicant states that the months—including retaining a debt may be more difficult to liquidate proposed exemption is administratively consultant, engaging in the request for and costs may range from 50–150 basis feasible because it does not require any proposals, negotiating contracts, and points, not including reinvestment monitoring by the Department. ultimately transitioning assets, as well costs. The costs of liquidating Furthermore, the exemption’s limited as the transaction-related expenses convertible bonds could be between 50– effective duration provides the incurred in connection with the 75 basis points, and costs of liquidating Department the opportunity to make its purchase of securities. multi-asset credit could be between 35– determination whether or not long-term 25. Furthermore, the Applicant states, 100 basis points, not including exemptive relief is warranted, without many of the investments of ERISA- reinvestment costs. causing sudden and potentially costly covered plan and IRA clients managed harm to ERISA-covered plans and IRAs. by RBC QPAMs could be difficult to Statutory Findings—Protective of the transition to a new investment manager, Rights of Participants of Affected Plans 16 The Applicant represents that there is an and the transition of certain strategies, and IRAs ongoing regulatory investigation into the matter in Hong Kong, but the Applicant is not aware of any such as transitioning from a stable value 27. The Applicant proposed certain indication that this investigation is leading to fund, could create significant disruption conditions it believes are protective of potential criminal indictments in Hong Kong. for 40l(k) plans. The Applicant the rights of participants and 17 The Department notes that, in the event that maintains that RBC QPAMs’ inability to beneficiaries of ERISA-covered plans RBCTC Bahamas is not convicted, the RBC QPAMs may continue to rely on PTE 84–14 without rely upon PTE 84–14 could result in and IRAs with respect to the additional exemptive relief. significant, unplanned redemptions transactions described herein. The

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Department has determined to revise or tacit approval of the misconduct Department of the Treasury, the certain of those conditions, and to add underlying the Conviction. Further, the Department of Justice, and the Pension certain new conditions, in order to make RBC QPAM will not use its authority or Benefit Guaranty Corporation, on behalf its required finding that the requested influence to direct an ‘‘investment of ERISA-covered plans or IRAs are exemption is protective of the rights of fund,’’ (as defined in Section VI(b) of materially accurate and complete, to the participants and beneficiaries of affected PTE 84–14) that is subject to ERISA or best of such QPAM’s knowledge at that plans and IRAs. In this regard, the the Code and managed by such RBC time; the RBC QPAM does not make Department has tentatively determined QPAM, to enter into any transaction material misrepresentations or omit that the following conditions adequately with RBCTC Bahamas or engage RBCTC material information in its protect the rights of participants and Bahamas to provide any service to such communications with such regulators beneficiaries of affected plans and IRAs investment fund, for a direct or indirect with respect to ERISA-covered plans or with respect to the transactions that fee borne by such investment fund, IRAs, or make material would be covered by this temporary regardless of whether such transaction misrepresentations or omit material exemption, if granted. or service may otherwise be within the information in its communications with 28. Several of these conditions scope of relief provided by an ERISA-covered plan and IRA clients; highlight the Department’s expectation administrative or statutory exemption. and the RBC QPAM complies with the that the affected RBC QPAMs were not 30. The RBC QPAMs must comply terms of this temporary exemption, if involved in the misconduct by RBCTC with each condition of PTE 84–14, as granted. Any violation of, or failure to Bahamas that is the subject of the amended, with the sole exceptions of comply with these items is corrected Conviction.18 For example, relief under the violation of Section I(g) of PTE 84– promptly upon discovery, and any such this proposed exemption is only 14 that is attributable to the Conviction. violation or compliance failure not available to the extent: (1) RBC QPAMs, Further, any failure of the RBC QPAMs promptly corrected is reported, upon including their officers, directors, agents to satisfy Section I(g) of PTE 84–14 arose discovering the failure to promptly other than RBC, and employees, did not solely from the Conviction. correct, in writing, to appropriate know of, have reason to know of, or 31. No relief will be provided by the corporate officers, the head of participate in the criminal conduct of temporary exemption, if granted, to the compliance and the General Counsel (or RBCTC Bahamas that is the subject of extent that any entities holding assets their functional equivalent) of the the Conviction (for purposes of this that constitute the assets of an ERISA- relevant RBC QPAM, and an appropriate requirement, ‘‘participated in’’ includes covered plan or IRA were involved in fiduciary of any affected ERISA-covered the knowing or tacit approval of the the criminal conduct that is the subject plan or IRA where such fiduciary is misconduct underlying the of the Conviction. Further, no relief will independent of RBC. Conviction); 19 (2) any failure of those be provided to the extent RBCTC 33. The Department has also imposed QPAMs to satisfy Section I(g) of PTE Bahamas provides any discretionary a condition that requires each RBC 84–14 arose solely from the Conviction; asset management services to ERISA- QPAM to immediately develop and and (3) the RBC QPAMs (including their covered plans or IRAs, or otherwise acts implement a program of training (the officers, directors, agents other than as a fiduciary with respect to ERISA- Training), for all relevant RBC QPAM RBC, and employees of such RBC covered plan and IRA assets. asset/portfolio management, trading, QPAMs) did not receive direct 32. The Department believes that legal, compliance, and internal audit compensation, or knowingly receive robust policies and training are personnel. The Training must be set indirect compensation, in connection warranted where, as here, alleged forth in the Policies and at a minimum, with the criminal conduct that is the criminal misconduct has occurred cover the Policies, ERISA and Code within a corporate organization that is subject of the Conviction. compliance (including applicable 29. The Department expects the RBC affiliated with one or more QPAMs fiduciary duties and the prohibited QPAMs to rigorously ensure that the managing plan investments in reliance transaction provisions), ethical conduct, individuals associated with the criminal on PTE 84–14. Therefore, this proposed the consequences for not complying conduct of RBCTC Bahamas will not be temporary exemption, if granted, with the conditions of this temporary employed or knowingly engaged by requires that each RBC QPAM must exemption, if granted (including any such QPAMs. In this regard, the immediately develop, implement, loss of exemptive relief provided temporary exemption, if granted as maintain, and follow written policies herein), and prompt reporting of (the Policies) requiring and reasonably proposed, mandates that the RBC wrongdoing. designed to ensure that: The asset QPAMs will not employ or knowingly 34. This temporary exemption, if management decisions of the RBC engage any of the individuals that granted, requires RBC QPAMs to enter QPAM are conducted independently of participated in criminal conduct that is into certain contractual obligations in the management and business activities the subject of the Conviction. For connection with the provision of of RBC, including RBCTC Bahamas; the purposes of this requirement, services to their clients. It is the RBC QPAM fully complies with ERISA’s ‘‘participated in’’ includes the knowing Department’s view that the condition for fiduciary duties and with ERISA and the exemptive relief requiring these Code’s prohibited transaction contractual obligations is essential to 18 The Department notes that, at the time of publication of this proposed temporary exemption, provisions, and does not knowingly the Department’s ability to make its RBCTC Bahamas has not been convicted. In the participate in any violations of these findings that the proposed temporary event that RBCTC Bahamas is not convicted, the duties and provisions with respect to exemption is protective of the rights of RBC QPAMs may continue to rely on PTE 84–14 ERISA-covered plans and IRAs; the RBC the participants and beneficiaries of without additional exemptive relief. 19 The Applicant represents that, while certain QPAM does not knowingly participate ERISA-covered and IRA plan clients of other entities in the RBC corporate family were in any other person’s violation of ERISA RBC QPAMs under section 408(a) of generally aware of RBCTC (Bahamas)’s or the Code with respect to ERISA- ERISA. In this regard, Section I(i) of the responsibilities, including the administration of covered plans and IRAs; any filings or proposed temporary exemption various trusts, no such entity was involved in the day-to-day operations of the trusts and, the alleged statements made by the RBC QPAM to provides that, as of the effective date of misconduct did not relate to the asset management regulators, including but not limited to, this temporary exemption, if granted, services provided by the RBC QPAMs. the Department of Labor, the with respect to any arrangement,

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agreement, or contract between a RBC investors in a pooled fund in the event the terms of this proposed exemption, if QPAM and an ERISA-covered plan or such withdrawal or termination may granted, any criminal conviction not IRA for which a RBC QPAM provides have adverse consequences for all other expressly described herein, but asset management or other discretionary investors, provided that such fees are otherwise described in Section I(g) of fiduciary services, each RBC QPAM applied consistently and in like manner PTE 84–14 and attributable to the must agree: To comply with ERISA and to all such investors. Furthermore, any applicant for purposes of PTE 84–14, the Code, as applicable with respect to contract, agreement or arrangement would result in the applicant’s loss of such ERISA-covered plan or IRA, and between an RBC QPAM and its ERISA- this exemption, if granted. covered plan or IRA client must not refrain from engaging in prohibited Summary transactions that are not otherwise contain exculpatory provisions exempt (and to promptly correct any disclaiming or otherwise limiting 39. Given the revised and new inadvertent prohibited transactions), liability of the RBC QPAM for a conditions described above, the and to comply with the standards of violation of such agreement’s terms. Department has tentatively determined prudence and loyalty set forth in section 35. Within six (6) months of the date that the relief sought by the Applicants 404 of ERISA with respect to each such of publication of a notice of temporary satisfies the statutory requirements for ERISA-covered plan and IRA; to exemption in the Federal Register, if an exemption under section 408(a) of indemnify and hold harmless the granted, each RBC QPAM will: Provide ERISA. a notice of its obligations under Section ERISA-covered plan or IRA for any Notice to Interested Persons damages resulting from a violation of I(i) to each ERISA-covered plan and IRA applicable laws, a breach of contract, or for which the RBC QPAM provides asset Written comments and requests for a any claim arising out of the failure of management or other discretionary public hearing on the proposed such RBC QPAM to qualify for the fiduciary services; and separately temporary exemption should be exemptive relief provided by PTE 84–14 warrant in writing to each such ERISA- submitted to the Department within as a result of a violation of Section I(g) covered plan and IRA its obligations seven (7) days from the date of of PTE 84–14 other than the Conviction; under subparagraph (1) of Section I(i). publication of this Federal Register not to require (or otherwise cause) the 36. Each RBC QPAM must maintain Notice. Given the short comment ERISA-covered plan or IRA to waive, records necessary to demonstrate that period, the Department will consider limit, or qualify the liability of the RBC the conditions of this temporary comments received after such date, in QPAM for violating ERISA or the Code exemption, if granted, have been met for connection with its consideration of or engaging in prohibited transactions; six (6) years following the date of any more permanent relief. transaction for which such RBC QPAM not to require the ERISA-covered plan Warning: Do not include any relies upon the relief in the temporary or IRA (or sponsor of such ERISA- personally identifiable information covered plan or beneficial owner of exemption. 37. Furthermore, the proposed (such as name, address, or other contact such IRA) to indemnify the RBC QPAM temporary exemption mandates that, information) or confidential business for violating ERISA or engaging in during the effective period of this information that you do not want prohibited transactions, except for temporary exemption, if granted, neither publicly disclosed. All comments may violations or prohibited transactions RBCTC Bahamas nor any affiliate enters be posted on the Internet and can be caused by an error, misrepresentation, into a Deferred Prosecution Agreement retrieved by most Internet search or misconduct of a plan fiduciary or (a DPA) or a Non-Prosecution engines. other party hired by the plan fiduciary Agreement (an NPA) with the who is independent of RBC; not to FOR FURTHER INFORMATION CONTACT: Ms. Department of Justice, in connection restrict the ability of such ERISA- Anna Mpras Vaughan of the with conduct described in section I(g) of covered plan or IRA to terminate or Department, telephone (202) 693–8565. PTE 84–14 or section 411 of ERISA. The withdraw from its arrangement with the (This is not a toll-free number.) Applicant represents that, with the RBC QPAM (including any investment exception of an investigation for LIBOR Northern Trust Corporation (Together in a separately managed account or manipulation, RBC is not the subject of With Its Current and Future Affiliates, pooled fund subject to ERISA and any current investigation involving Northern or the Applicant), Located in managed by such QPAM), with the criminal authorities.20 Furthermore, the Chicago, Illinois exception of reasonable restrictions, Applicant represents that RBC currently appropriately disclosed in advance, that [Exemption Application No. D–11875] does not have a reasonable basis to are specifically designed to ensure believe that there are any pending Proposed Temporary Exemption equitable treatment of all investors in a criminal investigations involving RBC pooled fund in the event such The Department is considering or any of its affiliated companies that withdrawal or termination may have granting a temporary exemption under would cause a reasonable plan or IRA adverse consequences for all other the authority of section 408(a) of the customer not to hire or retain the investors as a result of an actual lack of Employee Retirement Income Security institution as a QPAM. liquidity of the underlying assets, Act of 1974, as amended, (ERISA or the 38. The proposed exemption, if provided that such restrictions are Act) and section 4975(c)(2) of the granted, would provide relief from applied consistently and in like manner Internal Revenue Code of 1986, as certain of the restrictions set forth in to all such investors; and not to impose amended (the Code), and in accordance Section 406 and 407 of ERISA. Such a any fees, penalties, or charges for such with the procedures set forth in 29 CFR granted exemption would not provide termination or withdrawal with the part 2570, subpart B (76 FR 66637, relief from any other violation of law, 21 exception of reasonable fees, 66644, October 27, 2011). including any criminal conviction not appropriately disclosed in advance, that expressly described herein. Pursuant to are specifically designed to prevent 21 For purposes of this proposed temporary exemption, references to section 406 of Title I of the generally recognized abusive investment 20 The Applicant states that RBC has been the Act, unless otherwise specified, should be read to practices or specifically designed to subject of demands for information from various refer as well to the corresponding provisions of ensure equitable treatment of all governmental and regulatory authorities. section 4975 of the Code.

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Section I: Covered Transactions such investment fund, for a direct or (vii) Any violation of, or failure to If the proposed temporary exemption indirect fee borne by such investment comply with, an item in subparagraph is granted, certain entities with fund, regardless of whether such (ii) through (vi), is corrected promptly specified relationships to Northern transaction or service may otherwise be upon discovery, and any such violation Trust Fiduciary Services (Guernsey) ltd. within the scope of relief provided by or compliance failure not promptly (hereinafter, the Northern QPAMs, as an administrative or statutory corrected is reported, upon discovering further defined in Section II(b)) will not exemption; the failure to promptly correct, in be precluded from relying on the (e) Any failure of the Northern writing, to appropriate corporate exemptive relief provided by Prohibited QPAMs to satisfy Section I(g) of PTE officers, the head of compliance and the Transaction Class Exemption 84–14 84–14 arose solely from the Conviction; General Counsel (or their functional (PTE 84–14),22 notwithstanding a (f) No entities holding assets that equivalent) of the relevant Northern judgment of conviction against Northern constitute the assets of any plan subject QPAM, and an appropriate fiduciary of Trust Fiduciary Services (Guernsey) ltd. to Part 4 of Title I of ERISA (an ERISA- any affected ERISA-covered plan or IRA to be entered in France in the District covered plan) or section 4975 of the where such fiduciary is independent of Court of Paris, for aiding and abetting Code (an IRA) were involved in the Northern; however, with respect to any tax fraud (the Conviction, as further criminal conduct that is the subject of ERISA-covered plan or IRA sponsored defined in Section II(a)),23 for a period the Conviction; by an ‘‘affiliate’’ (as defined in Section of up to twelve months beginning on the (g) NTFS has not provided nor will VI(d) of PTE 84–14) of Northern or date of the Conviction (the Conviction provide discretionary asset management beneficially owned by an employee of Date), provided that the following services to ERISA-covered plans or Northern or its affiliates, such fiduciary conditions are satisfied: IRAs, or otherwise will act as a fiduciary does not need to be independent of (a) The Northern QPAMs (including with respect to ERISA-covered plan and Northern. A Northern QPAM will not be their officers, directors, agents other IRA assets; treated as having failed to develop, than Northern, and employees of such (h)(1) Each Northern QPAM must implement, maintain, or follow the Northern QPAMs) did not know of, have immediately develop, implement, Policies, provided that it corrects any reason to know of, or participate in the maintain, and follow written policies instance of noncompliance promptly criminal conduct of NTFS that is the (the Policies) requiring and reasonably when discovered or when it reasonably subject of the Conviction (for purposes designed to ensure that: should have known of the of this paragraph (a), ‘‘participate in’’ (i) The asset management decisions of noncompliance (whichever is earlier), includes the knowing or tacit approval the Northern QPAM are conducted and provided that it adheres to the of the misconduct underlying the independently of the management and reporting requirements set forth in this Conviction); business activities of Northern, subparagraph (vii); (b) The Northern QPAMs (including including NTFS and Northern’s non- (2) Each Northern QPAM must their officers, directors, agents other asset management affiliates; immediately develop and implement a than Northern, and employees of such (ii) The Northern QPAM fully program of training (the Training), Northern QPAMs) did not receive direct complies with ERISA’s fiduciary duties conducted at least annually, for all compensation, or knowingly receive and with ERISA and the Code’s relevant Northern QPAM asset/portfolio indirect compensation, in connection prohibited transaction provisions, and management, trading, legal, compliance, with the criminal conduct that is the does not knowingly participate in any and internal audit personnel. The subject of the Conviction; violations of these duties and provisions Training must be set forth in the (c) The Northern QPAMs will not with respect to ERISA-covered plans Policies and at a minimum, cover the employ or knowingly engage any of the and IRAs; Policies, ERISA and Code compliance individuals that participated in the (iii) The Northern QPAM does not (including applicable fiduciary duties criminal conduct that is the subject of knowingly participate in any other and the prohibited transaction the Conviction (for purposes of this person’s violation of ERISA or the Code provisions), ethical conduct, the paragraph (c), ‘‘participated in’’ with respect to ERISA-covered plans consequences for not complying with includes the knowing or tacit approval and IRAs; the conditions of this temporary of the misconduct underlying the (iv) Any filings or statements made by exemption, if granted (including any Conviction); the Northern QPAM to regulators, loss of exemptive relief provided (d) A Northern QPAM will not use its including but not limited to, the herein), and prompt reporting of authority or influence to direct an Department of Labor, the Department of wrongdoing; ‘‘investment fund,’’ (as defined in the Treasury, the Department of Justice, (i) Effective as of the effective date of Section VI(b) of PTE 84–14) that is and the Pension Benefit Guaranty this temporary exemption, if granted, subject to ERISA or the Code and Corporation, on behalf of ERISA- with respect to any arrangement, managed by such Northern QPAM, to covered plans or IRAs are materially agreement, or contract between a enter into any transaction with NTFS or accurate and complete, to the best of Northern QPAM and an ERISA-covered engage NTFS to provide any service to such QPAM’s knowledge at that time; plan or IRA for which a Northern QPAM (v) The Northern QPAM does not provides asset management or other 22 49 FR 9494 (March 13, 1984), as corrected at make material misrepresentations or discretionary fiduciary services, each 50 FR 41430 (October 10, 1985), as amended at 70 omit material information in its Northern QPAM agrees: FR 49305 (August 23, 2005), and as amended at 75 communications with such regulators (1) To comply with ERISA and the FR 38837 (July 6, 2010). with respect to ERISA-covered plans or Code, as applicable with respect to such 23 Section I(g) of PTE 84–14 generally provides that ‘‘[n]either the QPAM nor any affiliate thereof IRAs, or make material ERISA-covered plan or IRA; to refrain . . . nor any owner . . . of a 5 percent or more misrepresentations or omit material from engaging in prohibited transactions interest in the QPAM is a person who within the information in its communications with that are not otherwise exempt (and to 10 years immediately preceding the transaction has ERISA-covered plan and IRA clients; promptly correct any inadvertent been either convicted or released from prohibited transactions); and to comply imprisonment, whichever is later, as a result of’’ (vi) The Northern QPAM complies certain felonies including income tax evasion, and with the terms of this temporary with the standards of prudence and aiding and abetting tax evasion. exemption, if granted; and loyalty set forth in section 404 of ERISA

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with respect to each such ERISA- exemption in the Federal Register, if an affiliate’’ of Northern (as defined in covered plan and IRA; granted, each Northern QPAM will: section VI(c) of PTE 84–14) located in (2) Not to require (or otherwise cause) Provide a notice of its obligations under Guernsey; the ERISA-covered plan or IRA to this Section I(i) to each ERISA-covered (d) The terms ‘‘ERISA-covered plan’’ waive, limit, or qualify the liability of plan and IRA for which a Northern and ‘‘IRA’’ mean, respectively, a plan the Northern QPAM for violating ERISA QPAM provides asset management or subject to Part 4 of Title I of ERISA and or the Code or engaging in prohibited other discretionary fiduciary services; a plan subject to section 4975 of the transactions; and separately warrant in writing to Code; and (3) Not to require the ERISA-covered each such ERISA-covered plan and IRA (e) The term ‘‘Northern’’ means plan or IRA (or sponsor of such ERISA- its obligations under subparagraph (1) of Northern Trust Corporation, together covered plan or beneficial owner of this Section I(i); with its current and future affiliates. such IRA) to indemnify the Northern (j) The Northern QPAMs comply with Effective Date: This proposed QPAM for violating ERISA or engaging each condition of PTE 84–14, as temporary exemption, if granted, will be in prohibited transactions, except for amended, with the sole exceptions of effective for the period beginning on the violations or prohibited transactions the violations of Section I(g) of PTE 84– Conviction Date until the earlier of: The caused by an error, misrepresentation, 14 that are attributable to the date that is twelve months following the or misconduct of a plan fiduciary or Conviction; Conviction Date; or the effective date of other party hired by the plan fiduciary (k) Each Northern QPAM will a final agency action made by the who is independent of Northern; maintain records necessary to Department in connection with an (4) Not to restrict the ability of such demonstrate that the conditions of this application for long-term exemptive ERISA-covered plan or IRA to terminate temporary exemption, if granted, have relief for the covered transactions or withdraw from its arrangement with been met, for six (6) years following the described herein. the Northern QPAM (including any date of any transaction for which such Department’s Comment: The investment in a separately managed Northern QPAM relies upon the relief in Department is publishing this proposed account or pooled fund subject to ERISA the temporary exemption, if granted; temporary exemption in order to protect and managed by such QPAM), with the (l) During the effective period of this ERISA-covered plans and IRAs from exception of reasonable restrictions, temporary exemption, if granted, neither certain costs and/or investment losses appropriately disclosed in advance, that Northern nor any affiliate enters into a that may arise to the extent entities with are specifically designed to ensure Deferred Prosecution Agreement (a a corporate relationship to NTFS lose equitable treatment of all investors in a DPA) or a Non-Prosecution Agreement their ability to rely on PTE 84–14 as of pooled fund in the event such (an NPA) with the U.S Department of the Conviction Date, as described below. withdrawal or termination may have Justice, in connection with conduct The proposed exemption, if granted, adverse consequences for all other described in Section I(g) of PTE 84–14 would provide relief from certain of the investors as a result of an actual lack of or section 411 of ERISA; and restrictions set forth in sections 406 and liquidity of the underlying assets, (m) A Northern QPAM will not fail to 407 of ERISA. No relief from a violation provided that such restrictions are meet the terms of this temporary of any other law would be provided by applied consistently and in like manner exemption, if granted, solely because a this exemption, if granted, including to all such investors; different Northern QPAM fails to satisfy any criminal conviction described (5) Not to impose any fees, penalties, a condition for relief under this herein. or charges for such termination or temporary exemption, if granted, Furthermore, the Department cautions withdrawal with the exception of described in Sections I(c), (d), (h), (i), (j), that the relief in this proposed reasonable fees, appropriately disclosed and (k). exemption, if granted, would terminate in advance, that are specifically immediately if, among other things, an Section II: Definitions designed to prevent generally entity within the Northern corporate recognized abusive investment practices (a) The term ‘‘Conviction’’ means the structure is convicted of a crime or specifically designed to ensure potential judgment of conviction against described in Section I(g) of PTE 84–14 equitable treatment of all investors in a NTFS for aiding and abetting tax fraud (other than the Conviction) during the pooled fund in the event such to be entered in France in the District effective period of the exemption. While withdrawal or termination may have Court of Paris, French Special such an entity could apply for a new adverse consequences for all other Prosecutor No. 1120392066, French exemption in that circumstance, the investors, provided that such fees are Investigative Judge No. JIRSIF/11/12; Department would not be obligated to applied consistently and in like manner (b) The term ‘‘Northern QPAM’’ grant the exemption. The terms of this to all such investors; means a ‘‘qualified professional asset proposed exemption have been (6) Not to include exculpatory manager’’ (as defined in section VI(a) 24 specifically designed to permit plans to provisions disclaiming or otherwise of PTE 84–14) that relies on the relief terminate their relationships in an limiting liability of the Northern QPAM provided by PTE 84–14 and with orderly and cost effective fashion in the for a violation of such agreement’s respect to which NTFS is a current or event of an additional conviction or a terms; and future ‘‘affiliate’’ (as defined in section determination that it is otherwise (7) To indemnify and hold harmless VI(d) of PTE 84–14); prudent for a plan to terminate its the ERISA-covered plan or IRA for any (c) The term ‘‘NTFS’’ means Northern relationship with an entity covered by damages resulting from a violation of Trust Fiduciary Services (Guernsey) ltd., the proposed exemption. applicable laws, a breach of contract, or any claim arising out of the failure of 24 In general terms, a QPAM is an independent Summary of Facts and Representations such Northern QPAM to qualify for the fiduciary that is a bank, savings and loan Background exemptive relief provided by PTE 84–14 association, insurance company, or investment as a result of a violation of Section I(g) adviser that meets certain equity or net worth 1. Northern Trust Corporation requirements and other licensure requirements and of PTE 84–14 other than the Conviction. that has acknowledged in a written management (together with its current and future Within six (6) months of the date of agreement that it is a fiduciary with respect to each affiliates, Northern or the Applicant) is publication of a notice of temporary plan that has retained the QPAM. a financial holding company that

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provides investment management, asset which includes cash, real estate, art, aiding and abetting tax fraud, to be and fund administration, fiduciary, and securities, and interests in privately entered in France in the District Court banking services for corporations, held companies. NTFS is not engaged in of Paris, French Special Prosecutor No. institutions, and affluent individuals. asset management activities for, and 1120392066, French Investigative Judge Northern conducts business through does not act as a fiduciary of, any ERISA No. JIRSIF/11/12 (the Conviction). The various U.S. and non-U.S. subsidiaries, plan or IRA. facts forming the basis of the Conviction including The Northern Trust Company 5. The trust and company reach back several years and involve (the Bank), an Illinois bank management and administration investigations by French prosecutors. In headquartered in Chicago, Illinois. services provided by NTFS include 2010, French prosecutors opened 2. The Bank was founded in 1889 and ongoing interaction with the settlor and judicial investigations questioning conducts its business through its U.S. beneficiaries, investment managers and whether Guy Wildenstein and Alec operations, its branches in Toronto, advisors, and the settlor’s legal counsel, Daniel Armand Wildenstein (the London, Australia, Beijing, the Cayman among others. NTFS also may appoint Wildensteins), heirs to a set of trusts Islands and Singapore, as well as individual directors that are personnel established by family patriarch Daniel various U.S. and non-U.S. subsidiaries. of NTFS, if required, or more commonly Wildenstein, had engaged in money The Bank is a member of the Federal corporate directors (entities wholly laundering, bankruptcy-related fraud, Reserve System, its deposits are insured owned by NTFS) to act as the directors forgery and/or tax evasion in connection by the Federal Deposit Insurance of some of the underlying holding with their decision not to include trust Corporation and it is subject to companies owned by the trusts for assets in French tax filings made regulation by both such entities, as well which NTFS acts as trustee. These following Daniel Wildenstein’s death in as the Division of Banking of the Illinois companies hold assets (which could 2001. NTFS, as successor trustee to the Department of Financial and include cash, marketable securities, trusts, was itself investigated by French Professional Regulation. privately held companies, art, real estate prosecutors. As of December 31, 2015, Northern and other property). 8. On April 9, 2015, the investigating had a total of 16,200 active employees, 6. The services provided by NTFS authorities for the District Court of Paris including 7,990 employees of the Bank. may include the provision of corporate issued an Order of Partial Discharge and As of the same date, Northern had secretarial support for companies Referral before the Criminal Court (the consolidated assets of approximately created by its clients. In addition, NTFS Referral Order). The Referral Order $117 billion. Of that consolidated figure, is required to keep the accounts of the charges both Guy and Alec Wildenstein approximately $116 billion are assets of trusts to which it is appointed, and may with several counts of tax fraud for the Bank. In addition, as of December also maintain the financial records of failing to disclose, and pay taxes on, 31, 2015, Northern had assets under the asset holding companies it assets held in various trusts following custody of approximately $6.1 trillion, administers. the 2001 death of their father, Daniel and assets under management of Financial information may be Wildenstein. One of eight defendants in approximately $875 billion. provided to the settlor or beneficiaries the Referral Order, NTFS is charged 3. The Bank has a significant trust and on request, to the extent permitted by with violations of Articles 121–2, 121– custody business and acts as trustee for applicable law and the documentation 6, and 121–7 of the French Criminal employee benefit plans subject to Part 4 governing NTFS’ appointment. Code, and Articles 1741 et 1745 of the of Title I of ERISA (ERISA-covered In addition, at the request of a client French General Tax Code for alleged plans), individual retirement accounts or based on their fiduciary powers as complicity in the Wildensteins’ alleged subject to section 4975 of the Code trustee, NTFS will, among other things, tax fraud based on assets held in trust (IRAs) and other accounts subject to act as directed or discretionary trustee, for certain beneficiaries, including the ERISA or Section 4975 of the Code. The appoint investment advisers or Wildensteins. The portion of the case Bank also maintains ERISA-governed managers, and exercise all duties, relevant to NTFS relates to assets held collective investment trusts and other responsibilities and powers as set out in in two Guernsey trusts for which NTFS commingled vehicles for investment of the documentation governing NTFS’s served as successor trustee since pension assets. Northern also has a appointment and attend to all day to 1999: 25 the ‘‘1989 Sonstrust’’ (the Sons number of direct and indirect subsidiary day administrative issues. Trust) and the ‘‘1989 Davidtrust’’ (the registered investment advisers that are NTFS operates based on internal David Trust). The trusts include subject to the Investment Advisers Act policies and procedures of the Northern, properties located in Kenya, the British of 1940 and that provide discretionary and is subject to internal audit to Virgin Islands, 740 Madison Avenue investment management services to ascertain compliance. NTFS is managed and 19 East 64th Street in New York ERISA and IRA customers. by a board of directors, which meets at City, shares of Wildenstein and Co Inc., 4. Northern Trust Fiduciary Services least quarterly. In addition, the board and of various art galleries. The French (Guernsey) ltd. (NTFS) is an indirect has delegated certain powers to an authorities state that their investigation wholly-owned subsidiary of Northern. Acceptance Committee for produced sufficient information to NTFS is incorporated in Guernsey, and consideration of new business, a allege that NTFS, in Guernsey, is regulated by the Guernsey Financial Fiduciary Committee for the review of beginning in September 1999, aided and Services Commission. NTFS currently the companies’ fiduciary activities, a abetted tax fraud committed in Paris by provides trust and company Discretionary Committee for Daniel Wildenstein’s heirs through the management and administration consideration of the exercise of alleged concealment of a portion of the services to international clients. NTFS discretionary powers by NTFS as trustee assets that the French state are subject currently employs 22.6 full-time and a Risk Committee for consideration to French estate taxes owed by the equivalents, and has reported revenues and management of risks. Wildensteins. of GBP 5 million (approximately $7 Investigation for Tax Fraud 9. According to the Applicant, the million) in fiscal year 2015. As of the pertinent facts that underlie these second quarter of 2016, NTFS reported 7. The Applicant has applied for an total assets under trusteeship of GBP 32 exemption in relation to a potential 25 Northern acquired Baring Trustees (Guernsey) billion (approximately $ 42 billion), judgment of conviction against NTFS for Limited in 2005, and thereafter renamed it NTFS.

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charges, as set out in the Referral Order, • The protector permitted certain exempts certain prohibited transactions are as follows: On February 23, 1989, financial flows debited from the Sons between a party in interest and an Daniel Wildenstein established two Trust bank account without the trustee’s ‘‘investment fund’’ (as defined in irrevocable and discretionary trusts in consent, and these money flows were Section VI(b) of that exemption) 28 in Bermuda, the Sons Trust and the David later re-characterized as loans. which a plan has an interest, if the Trust. Bermuda Trust Company Limited • The trusts operated abnormally and investment manager satisfies the was appointed as trustee. The Sons there was some commingling between definition of ‘‘qualified professional Trust was incorporated for the benefit of the trusts’ assets and Daniel asset manager’’ (QPAM) and satisfies the children of Daniel Wildenstein, Guy Wildenstein’s assets. additional conditions for the exemption. and Alec, and of his second wife, Sylvia • The trustee’s fees were too low in PTE 84–14 was developed and granted Roth-Wildenstein. The David Trust was relation to the value of the assets in the based on the essential premise that incorporated for the benefit of the trusts, and the assets were actually broad relief could be afforded for all grandchildren of Daniel Wildenstein. In managed by companies without types of transactions in which a plan September 1999, Baring Trustees supervision by the trustee. engages only if the commitments and (Guernsey) Limited became the trustee 12. NTFS contests its liability for the investments of plan assets and the of these two trusts, replacing Baring aiding and abetting tax evasion. The negotiations leading thereto are the sole Brothers (Guernsey) Limited, which had trial commenced on January 4, 2016. On responsibility of an independent, been the trustee since 1990, replacing January 6, 2016, the Criminal Court of discretionary, manager.29 Bermuda Trust Company Limited. The Paris suspended the proceeding to probe 16. However, Section I(g) of PTE 84– Applicant states that, in 2005, following the trial’s constitutionality. The trial 14 prevents an entity that may the purchase of Baring’s financial resumed on September 22, 2016. The otherwise meet the definition of institutions group by the Northern Trust Applicant expects the trial to end on ‘‘QPAM’’ from utilizing the exemptive group, Baring Trustees (Guernsey) October 20, 2016. relief provided by PTE 84–14, for itself Limited became Northern Trust 13. The Applicant represents that on and its client plans, if that entity or an Fiduciary Services (Guernsey) Limited. the last day of trial, the court will ‘‘affiliate’’ 30 thereof or any owner, On October 21, 2001, Daniel announce when it will render its direct or indirect, of a 5 percent or more Wildenstein died in Paris. On April 28, decision (generally a few weeks later). interest in the QPAM has, within 10 2002, Guy Wildenstein and his brother, The Applicant states that the parties years immediately preceding the Alec Wildenstein Sr., filed an will have 10 days from the conviction transaction, been either convicted or inheritance tax statement in relation to ruling/decision date to lodge an appeal. released from imprisonment, whichever their father Daniel Wildenstein’s estate. Further, the Applicant states that if is later, as a result of certain specified The statement did not identify the Sons appeals are lodged, any criminal criminal activity described in that Trust and the David Trust or the assets judgment issued after the trial will section.31 The Department notes that held by these trusts. remain non-final until the appellate Section I(g) was included in PTE 84–14, 10. The Applicant represents that, process concludes. In addition, the in part, based on the expectation that a according to the French authorities, the Applicant states that if none of the QPAM, and those who may be in a existence of the Sons Trust and David parties lodges an appeal, the criminal position to influence its policies, Trust, as well as the assets of these judgment will be final. maintain a high standard of integrity.32 trusts, should have been disclosed by Significance of Class PTE 84–14 and the Accordingly, in the event that NTFS is the Wildensteins when they filed their Violation of Condition I(g) of PTE 84–14 convicted of the crimes alleged in the inheritance tax statement. The French Referral Order, certain Northern asset 14. The Department notes that the state that these assets are subject to managers that rely on the relief rules set forth in section 406 of the French taxes, and that an inheritance Employee Retirement Income Security 28 tax would have been imposed on these An ‘‘investment fund’’ includes single Act of 1974, as amended (ERISA) and customer and pooled separate accounts maintained assets. section 4975(c) of the Internal Revenue by an insurance company, individual trusts and 11. The Applicant represents that the Code of 1986, as amended (the Code) common, collective or group trusts maintained by French authorities’ position is that the a bank, and any other account or fund to the extent proscribe certain ‘‘prohibited Sons Trust and David Trust contained that the disposition of its assets (whether or not in transactions’’ between plans and related the custody of the QPAM) is subject to the assets that the Wildensteins were parties with respect to those plans, discretionary authority of the QPAM. required to identify because the trusts 29 known as ‘‘parties in interest.’’ 26 Under See 75 FR 38837, 38839 (July 6, 2010). are, in their view, non-discretionary. In 30 the authority of section 408(a) of ERISA Section VI(d) of PTE 84–14 defines the term this regard, the Referral Order describes ‘‘affiliate’’ for purposes of Section I(g) as ‘‘(1) Any and section 4975(c)(2) of the Code, the the following allegations made by the person directly or indirectly through one or more Department has the authority to grant intermediaries, controlling, controlled by, or under French prosecutor: exemptions from such ‘‘prohibited common control with the person, (2) Any director • The assets placed within the trusts transactions’’ in accordance with the of, relative of, or partner in, any such person, (3) are held by companies, and the trustee Any corporation, partnership, trust or procedures set forth in 29 CFR part does not have sufficient control of the unincorporated enterprise of which such person is 2570, subpart B (76 FR 66637, 66644, an officer, director, or a 5 percent or more partner companies or the assets. or owner, and (4) Any employee or officer of the • October 27, 2011). Daniel Wildenstein was co-trustee, 15. Class Prohibited Transaction person who—(A) Is a highly compensated employee (as defined in Section 4975(e)(2)(H) of the Code) or and during his lifetime he could have Exemption 84–14 (PTE 84–14) 27 asked the trustee to distribute all of the officer (earning 10 percent or more of the yearly wages of such person), or (B) Has direct or indirect trusts’ assets to the beneficiaries. 26 For purposes of the Summary of Facts and authority, responsibility or control regarding the • In addition to naming a trustee, the Representations, references to specific provisions of custody, management or disposition of plan assets.’’ trust deeds also named an individual to Title I of ERISA, unless otherwise specified, refer 31 For purposes of Section I(g) of PTE 84–14, a fulfill the role of ‘‘protector’’ of the also to the corresponding provisions of the Code. person shall be deemed to have been ‘‘convicted’’ 27 49 FR 9494 (March 13, 1984), as corrected at from the date of the judgment of the trial court, trusts, a Wildenstein family attorney 50 FR 41430 (October 10, 1985), as amended at 70 regardless of whether that judgment stands on who was financially dependent upon FR 49305 (August 23, 2005), and as amended at 75 appeal. the family. FR 38837 (July 6, 2010). 32 See 47 FR 56945, 56947 (December 21, 1982).

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provided by PTE 84–14 (the Northern Applicant states that Northern’s review Minimum Standards for Customer Due QPAMs) and with respect to which of the files has not identified any Diligence for its clients as a critical part NTFS is a current or future ‘‘affiliate’’ wrongdoing on the part of current or of its Global AML/Economic Sanctions (as defined in section VI(d) of PTE 84– former NTFS staff, nor are any current Compliance Program. 14), as well as their client ERISA- or former NTFS (or Baring Trustees 21. The Applicant represents that it covered plans and IRAs will no longer (Guernsey) Limited) employees among has new systems for evaluating new be able to rely on PTE 84–14 without an the six individuals charged by the clients or acquisitions. Northern additional individual exemption issued French prosecutors in connection with represents that it assesses the money by the Department. the Wildenstein business. 19. The Applicant represents that new laundering and related risks of each new Northern QPAMs policies, procedures and training came client relationship. Northern represents 17. The investment management into effect since Northern’s acquisition that it has developed a Global Anti- businesses that are operated out of the of Baring Trustees (Guernsey) Limited Money Laundering & Combating the Northern QPAMs are separate from in 2005, several years after the events Financing of Terrorism Risk Rating NTFS, and from the activities of NTFS that are the subject of the French Policy & Methodology to evaluate new that are the subject of criminal charges prosecution occurred. Upon becoming a client/business relationships and assess under French law. The Northern part of the Northern organization, their money laundering risk and related QPAMs have dedicated systems, Baring Trustees (Guernsey) Limited was risks. In addition, Northern represents management, risk and compliance renamed NTFS and became subject to that it utilizes a Client Relationship officers. The investment management Northern’s own internal control Form to collect the information businesses of the Northern QPAMs are procedures designed to prevent necessary to assess the client risk rating. subject to codes of conduct, and improper activities. The Applicant Clients will initially be risk rated during Northern QPAM personnel engage in represents that NTFS has complied (and the client take-on process and training, designed to ensure that such will continue to comply) with all subsequently as the client profile businesses understand and abide by applicable legal and regulatory changes. their fiduciary duties in accordance requirements, including but not limited with applicable law. The codes of to requirements potentially linked to the Request for Relief conduct create information barriers alleged conduct underlying the charges 22. At the time of this proposed designed to prevent employees of the against NTFS. temporary exemption, NTFS has not Northern QPAMs from gaining access to The Applicant further represents that been convicted and therefore its inside information that an affiliate may resources dedicated to maintaining risk have acquired or developed in and compliance procedures have been conduct has not been determined to be connection with the investment enhanced significantly since Northern’s criminal. Moreover, NTFS maintains banking, treasury services or other acquisition of Baring Trustees that it engaged in no criminal conduct investor services business activities. (Guernsey) Limited in 2005. Hundreds and it is mounting a defense in the These codes of conduct apply to of new risk and compliance personnel French proceeding. Nevertheless, the employees, officers and directors of the have been hired by Northern in that Applicant states that if the Paris Northern QPAMs. The Applicant also period. For example, according to the Criminal Court issues a Conviction of maintains an employee hotline for Applicant, at the time of the acquisition NTFS, the Northern QPAMs will be in employees to anonymously express any of Baring Trustees (Guernsey) Limited violation of Section I(g) of PTE 84–14. concerns of wrongdoing. (and the Wildenstein relationship) in In the event that the condition in 2005, Northern had five full-time Section I(g) of PTE 84–14 is violated, the Changes Made by Northern Since Its equivalent employees handling Northern QPAMs can no longer rely on Acquisition of Baring Trustees compliance with anti-money laundering PTE 84–14 without a separate (Guernsey) Limited (‘‘AML’’) regulations; as of December 31, individual prohibited transaction 18. The Applicant represents that all 2015 that number had increased to 78 exemption. Therefore, the Applicant has personnel involved in taking on the full-time equivalent employees. requested an exemption to allow the Wildenstein business or that had any 20. The Applicant represents that it Northern QPAMs to continue to use PTE dealings with such matters at the time maintains a system of internal controls 84–14, notwithstanding such of the alleged misconduct have long to ensure ongoing compliance with Conviction.34 since left NTFS, either before or around AML and know-your-client related the time of the Northern acquisition of regulations. According to the Applicant, Statutory Findings—Administratively Baring Trustees (Guernsey) Limited in one of the key controls is the Feasible 2005 or some years before the criminal implementation of risk-based, 23. The Applicant states that the 33 trial started. Furthermore, the comprehensive customer due diligence proposed exemption is administratively policies, procedures and processes for feasible because it does not require any 33 The Applicant represents that no NTFS all customers, particularly those that employees (or former employees of Baring Trustees monitoring by the Department. present a high risk for money Furthermore, the exemption’s limited (Guernsey) Limited) were investigated or charged, laundering or terrorist financing. nor were any other corporate entities related to effective duration provides the Northern has also adopted Global NTFS investigated or charged. The Applicant states Department the opportunity to make its that the individual who appears to have been the determination whether or not long-term primary contact for the Wildenstein business after Wildenstein business, or dealing with matters even NTFS acquired Baring Trustees (Guernsey) Limited potentially related to the alleged misconduct, have exemptive relief is warranted, without was Nigel de La Rue (a former employee of Baring long since left the company, many before or around causing sudden and potentially costly Trustees (Guernsey) Limited) who is not charged in the time of the Northern acquisition of Baring harm to ERISA-covered plans and IRAs. the French proceeding and who left NTFS in Trustees (Guernsey) Limited in 2005. In addition, January 2006, shortly after the acquisition. Further, the Applicant represents that others departed NTFS the Applicant represents that other individuals at in the years thereafter, before the criminal charge 34 The Department notes that, in the event that Baring Trustees (Guernsey) Limited and NTFS was levied. The Applicant confirms that none of NTFS is not convicted, the Northern QPAMs may assisted in managing the Wildenstein accounts, and these persons is employed by NTFS or other continue to rely on PTE 84–14 without additional that all personnel involved in taking on the Northern affiliates today. exemptive relief.

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Statutory Findings—In the Interests of 14 could result in significant, Conviction.35 For example, relief under Affected Plans and IRAs unplanned redemptions from pooled this proposed exemption is only 24. The Applicant states that an funds, which would in turn frustrate the available to the extent: (1) Northern exemption will be in the interest of the QPAMs’ efforts to effectively manage QPAMs, including their officers, affected ERISA-covered plans and IRAs the pooled funds’ assets and harm directors, agents other than Northern, and their participants and beneficiaries. remaining plan investors by increasing and employees, did not know of, have According to the Applicant, there are the expense ratios of the investment reason to know of, or participate in the numerous transactions entered into by funds. criminal conduct of NTFS that is the Northern QPAMs on behalf of their 28. The Applicant believes that, subject of the Conviction (for purposes ERISA-covered plan and IRA clients depending on the strategy, the cost of of this requirement, ‘‘participated in’’ that require the Northern QPAMs to liquidating assets in connection with includes the knowing or tacit approval of the misconduct underlying the meet the conditions in PTE 84–14. transitioning clients to another manager Conviction); (2) any failure of those According to Northern, these include could be significant. Furthermore, QPAMs to satisfy Section I(g) of PTE contracts entered into by Northern transaction costs may be higher in times 84–14 arose solely from the Conviction; QPAMs on behalf of or as investment of significant market volatility, and (3) the Northern QPAMs (including adviser for ERISA-covered plans, especially with respect to certain their officers, directors, agents other collective trusts and other funds subject strategies. than Northern, and employees of such to ERISA for certain outstanding 29. Costs of Liquidating Fixed Income. Northern QPAMs) did not receive direct transactions, including, but not limited According to the Applicant, if Northern compensation, or knowingly receive to: the purchase and sale of debt and QPAMs could no longer rely on PTE 84– 14, a typical ERISA-covered plan or IRA indirect compensation, in connection equity securities, and asset-backed with the criminal conduct that is the securities; the purchase and sale of client of the Northern QPAMs could suffer different liquidation costs subject of the Conviction. commodities; real estate financing and 32. The Department expects the leasing arrangements; and certain depending on the strategy employed within fixed income. For example, Northern QPAMs to rigorously ensure derivative transactions such as swaps that the individuals associated with the and forwards. investment grade bonds and emerging market sovereign debt could be criminal conduct of NTFS will not be 25. The Applicant states that, in the employed or knowingly engaged by event that the Northern QPAMs can no liquidated for a cost of between 25–50 basis points, not including reinvestment such QPAMs. In this regard, the longer rely on PTE 84–14, temporary exemption, if granted as counterparties to the above transactions costs. Leveraged finance and emerging market corporate debt may be more proposed, mandates that the Northern could seek to terminate their contracts, QPAMs will not employ or knowingly resulting in significant losses to their difficult to liquidate and costs may range from 50–150 basis points, not engage any of the individuals that ERISA-covered plan clients. participated in criminal conduct that is including reinvestment costs. The costs Furthermore, according to Northern, in the subject of the Conviction. For of liquidating convertible bonds could the event the Applicant no longer purposes of this requirement, be between 50–75 basis points, and qualifies for relief under the PTE 84–14, ‘‘participated in’’ includes the knowing costs of liquidating multi-asset credit many derivatives transactions and other or tacit approval of the misconduct could be between 35–100 basis points, contractual agreements automatically underlying the Conviction. Further, the not including reinvestment costs. and immediately could be terminated Northern QPAM will not use its without notice or action. Statutory Findings—Protective of the authority or influence to direct an 26. The Applicant states that, without Rights of Participants of Affected Plans ‘‘investment fund,’’ (as defined in an exemption to continue to rely on PTE and IRAs Section VI(b) of PTE 84–14) that is 84–14, ERISA-covered plan and IRA subject to ERISA or the Code and 30. The Applicant proposed certain clients of Northern QPAMs may be managed by such Northern QPAM, to conditions it believes are protective of required to seek other investment enter into any transaction with NTFS or the rights of participants and managers, at significant disruption and engage NTFS to provide any service to beneficiaries of ERISA-covered plans cost. Northern states that the process of such investment fund, for a direct or and IRAs with respect to the covered transitioning to a new manager typically indirect fee borne by such investment transactions described herein. The is lengthy, and likely would involve fund, regardless of whether such Department has determined to revise numerous steps each of which could transaction or service may otherwise be certain of those conditions, and to add last several months—including retaining within the scope of relief provided by a consultant, engaging in the request for certain new conditions, in order to make an administrative or statutory proposals, negotiating contracts, and its required finding that the requested exemption. ultimately transitioning assets, as well exemption is protective of the rights of 33. The Northern QPAMs must as the transaction-related expenses participants and beneficiaries of affected comply with each condition of PTE 84– incurred in connection with the plans and IRAs. In this regard, the 14, as amended, with the sole purchase of securities. Department has tentatively determined exceptions of the violation of Section 27. Furthermore, the Applicant states, that the following conditions adequately I(g) of PTE 84–14 that is attributable to many of the investments of ERISA- protect the rights of participants and the Conviction. Further, any failure of covered plan and IRA clients managed beneficiaries of affected plans and IRAs the Northern QPAMs to satisfy Section by Northern QPAMs could be difficult with respect to the transactions that I(g) of PTE 84–14 arose solely from the to transition to a new investment would be covered by this temporary Conviction. manager, and the transition of certain exemption, if granted. strategies, such as transitioning from a 31. Several of these conditions 35 The Department notes that, at the time of stable value fund, could create highlight the Department’s expectation publication of this proposed temporary exemption, significant disruption for 40l(k) plans. that the affected Northern QPAMs were NTFS has not been convicted. In the event that not involved in the misconduct by NTFS is not convicted, the Northern QPAMs may The Applicant maintains that Northern continue to rely on PTE 84–14 without additional QPAMs’ inability to rely upon PTE 84– NTFS that is the subject of the exemptive relief.

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34. No relief will be provided by the promptly corrected is reported, upon failure of such Northern QPAM to temporary exemption, if granted, to the discovering the failure to promptly qualify for the exemptive relief provided extent that any entities holding assets correct, in writing, to appropriate by PTE 84–14 as a result of a violation that constitute the assets of an ERISA- corporate officers, the head of of Section I(g) of PTE 84–14 other than covered plan or IRA were involved in compliance and the General Counsel (or the Conviction; not to require (or the criminal conduct that is the subject their functional equivalent) of the otherwise cause) the ERISA-covered of the Conviction. Further, no relief will relevant Northern QPAM, and an plan or IRA to waive, limit, or qualify be provided to the extent NTFS appropriate fiduciary of any affected the liability of the Northern QPAM for provides any discretionary asset ERISA-covered plan or IRA where such violating ERISA or the Code or engaging management services to ERISA-covered fiduciary is independent of Northern. in prohibited transactions; not to require plans or IRAs, or otherwise acts as a 36. The Department has also imposed the ERISA-covered plan or IRA (or fiduciary with respect to ERISA-covered a condition that requires each Northern sponsor of such ERISA-covered plan or plan and IRA assets. QPAM to immediately develop and beneficial owner of such IRA) to 35. The Department believes that implement a program of training (the indemnify the Northern QPAM for robust policies and training are Training), for all relevant Northern violating ERISA or engaging in warranted where, as here, alleged QPAM asset/portfolio management, prohibited transactions, except for criminal misconduct has occurred trading, legal, compliance, and internal violations or prohibited transactions within a corporate organization that is audit personnel. The Training must be caused by an error, misrepresentation, set forth in the Policies and at a affiliated with one or more QPAMs or misconduct of a plan fiduciary or minimum, cover the Policies, ERISA managing plan investments in reliance other party hired by the plan fiduciary and Code compliance (including on PTE 84–14. Therefore, this proposed who is independent of Northern; not to applicable fiduciary duties and the temporary exemption, if granted, restrict the ability of such ERISA- prohibited transaction provisions), requires that each Northern QPAM must covered plan or IRA to terminate or ethical conduct, the consequences of not immediately develop, implement, withdraw from its arrangement with the complying with the conditions of this maintain, and follow written policies Northern QPAM (including any temporary exemption, if granted (the Policies) requiring and reasonably investment in a separately managed (including any loss of exemptive relief designed to ensure that: The asset account or pooled fund subject to ERISA provided herein), and prompt reporting and managed by such QPAM), with the management decisions of the Northern of wrongdoing. QPAM are conducted independently of exception of reasonable restrictions, 37. This temporary exemption, if appropriately disclosed in advance, that the management and business activities granted, requires Northern QPAMs to of Northern, including NTFS and any are specifically designed to ensure enter into certain contractual obligations equitable treatment of all investors in a non-asset management activities of in connection with the provision of pooled fund in the event such Northern; the Northern QPAM fully services to their clients. It is the withdrawal or termination may have complies with ERISA’s fiduciary duties Department’s view that the condition for adverse consequences for all other and with ERISA and the Code’s exemptive relief requiring these investors as a result of an actual lack of prohibited transaction provisions, and contractual obligations is essential to liquidity of the underlying assets, does not knowingly participate in any the Department’s ability to make its provided that such restrictions are violations of these duties and provisions findings that the proposed temporary applied consistently and in like manner with respect to ERISA-covered plans exemption is protective of the rights of to all such investors; and not to impose and IRAs; the Northern QPAM does not the participants and beneficiaries of any fees, penalties, or charges for such knowingly participate in any other ERISA-covered and IRA plan clients of person’s violation of ERISA or the Code Northern QPAMs under section 408(a) termination or withdrawal with the with respect to ERISA-covered plans of ERISA. In this regard, Section I(i) of exception of reasonable fees, and IRAs; any filings or statements the proposed temporary exemption appropriately disclosed in advance, that made by the Northern QPAM to provides that, as of the effective date of are specifically designed to prevent regulators, including but not limited to, this temporary exemption, if granted, generally recognized abusive investment the Department of Labor, the with respect to any arrangement, practices or specifically designed to Department of the Treasury, the agreement, or contract between a ensure equitable treatment of all Department of Justice, and the Pension Northern QPAM and an ERISA-covered investors in a pooled fund in the event Benefit Guaranty Corporation, on behalf plan or IRA for which a Northern QPAM such withdrawal or termination may of ERISA-covered plans or IRAs are provides asset management or other have adverse consequences for all other materially accurate and complete, to the discretionary fiduciary services, each investors, provided that such fees are best of such QPAM’s knowledge at that Northern QPAM must agree: To comply applied consistently and in like manner time; the Northern QPAM does not with ERISA and the Code, as applicable to all such investors. Furthermore, any make material misrepresentations or with respect to such ERISA-covered contract, agreement or arrangement omit material information in its plan or IRA, and refrain from engaging between a Northern QPAM and its communications with such regulators in prohibited transactions that are not ERISA-covered plan or IRA client must with respect to ERISA-covered plans or otherwise exempt (and to promptly not contain exculpatory provisions IRAs, or make material correct any inadvertent prohibited disclaiming or otherwise limiting misrepresentations or omit material transactions), and to comply with the liability of the Northern QPAM for a information in its communications with standards of prudence and loyalty set violation of such agreement’s terms. ERISA-covered plan and IRA clients; forth in section 404 of ERISA with 38. Within six (6) months of the date and the Northern QPAM complies with respect to each such ERISA-covered of publication of a notice of temporary the terms of this temporary exemption, plan and IRA; to indemnify and hold exemption in the Federal Register, if if granted. Any violation of, or failure to harmless the ERISA-covered plan or IRA granted, each Northern QPAM will: comply with these items is corrected for any damages resulting from a Provide a notice of its obligations under promptly upon discovery, and any such violation of applicable laws, a breach of Section I(i) to each ERISA-covered plan violation or compliance failure not contract, or any claim arising out of the and IRA for which the Northern QPAM

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provides asset management or other retrieved by most Internet search (c) The DB QPAMs (including their discretionary fiduciary services; and engines. officers, directors, agents other than Separately warrant in writing to each FOR FURTHER INFORMATION CONTACT: Ms. Deutsche Bank, and employees of such such ERISA-covered plan and IRA its Anna Mpras Vaughan of the DB QPAMs) did not receive direct obligations under subparagraph (1) of Department, telephone (202) 693–8565. compensation, or knowingly receive Section I(i). (This is not a toll-free number.) indirect compensation, in connection 39. Each Northern QPAM must with the criminal conduct that is the maintain records necessary to Proposed Extension of PTE 2015–15 subject of the Conviction; demonstrate that the conditions of this Involving Deutsche Bank AG (Deutsche (d) A DB QPAM will not use its temporary exemption, if granted, have Bank), Located in Frankfurt, Germany authority or influence to direct an been met for six (6) years following the [Exemption Application No. D–11879] ‘‘investment fund’’ (as defined in date of any transaction for which such Section VI(b) of PTE 84–14) that is Proposed Exemption Northern QPAM relies upon the relief in subject to ERISA and managed by such the temporary exemption. The Department is considering DB QPAM to enter into any transaction 40. Furthermore, the proposed granting an exemption under the with DSK or engage DSK to provide temporary exemption mandates that, authority of section 408(a) of the additional services to such investment during the effective period of this Employee Retirement Income Security fund, for a direct or indirect fee borne temporary exemption, if granted, neither Act of 1974, as amended (ERISA or the by such investment fund regardless of NTFS nor any affiliate enters into a Act) and section 4975(c)(2) of the whether such transactions or services Deferred Prosecution Agreement (a Internal Revenue Code of 1986, as may otherwise be within the scope of DPA) or a Non-Prosecution Agreement amended (the Code) and in accordance relief provided by an administrative or (an NPA) with the Department of with the procedures set forth in 29 CFR statutory exemption; (e)(1) Each DB QPAM maintains and Justice, in connection with conduct part 2570, subpart B (76 FR 66637, 36 follows written policies (the Policies) described in section I(g) of PTE 84–14 66644, October 27, 2011). requiring and reasonably designed to or section 411 of ERISA. The Applicant Section I: Covered Transactions ensure that: (i) The asset management represents that, to the best of its If the Proposed Extension is granted, decisions of the DB QPAM are knowledge, Northern has not, within the certain asset managers with specified conducted independently of Deutsche past 13 years, been convicted of any relationships to Deutsche Bank Bank’s management and business crime described in section 411 of (hereinafter, the DB QPAMs, as further activities; (ii) the DB QPAM fully ERISA, nor has it been under defined in Section II(b)) shall not be complies with ERISA’s fiduciary duties investigation for any such crime. precluded from relying on the and ERISA and the Code’s prohibited Furthermore, the Applicant represents exemptive relief provided by Prohibited transaction provisions and does not that Northern currently does not have a Transaction Exemption (PTE) 84–14,37 knowingly participate in any violations reasonable basis to believe that there are notwithstanding a judgment of of these duties and provisions with any pending criminal investigations conviction against Deutsche Securities respect to ERISA-covered plans and involving Northern or any of its Korea Co., a South Korean affiliate of IRAs; (iii) the DB QPAM does not affiliated companies that would cause a Deutsche Bank (hereinafter, DSK, as knowingly participate in any other reasonable plan or IRA customer not to further defined in Section II(c)), entered person’s violation of ERISA or the Code hire or retain the institution as a QPAM. on January 25, 2016 (the Korean with respect to ERISA-covered plans Summary Conviction, as further defined in and IRAs; (iv) any filings or statements Section II(a)),38 provided that the made by the DB QPAM to regulators, 41. Given the revised and new following conditions are satisfied: including but not limited to, the conditions described above, the (a) The DB QPAMs (including their Department of Labor, the Department of Department has tentatively determined officers, directors, agents other than the Treasury, the Department of Justice, that the relief sought by the Applicants Deutsche Bank, and employees of such and the Pension Benefit Guaranty satisfies the statutory requirements for DB QPAMs) did not know of, have Corporation, on behalf of ERISA- an exemption under section 408(a) of reason to know of, or participate in the covered plans or IRAs are materially ERISA. criminal conduct of DSK that is the accurate and complete, to the best of Notice to Interested Persons subject of the Korean Conviction; such DB QPAM’s knowledge at that (b) Any failure of the DB QPAMs to time; (v) the DB QPAM does not make Written comments and requests for a satisfy Section I(g) of PTE 84–14 arose material misrepresentations or omit public hearing on the proposed solely from the Korean Conviction; material information in its temporary exemption should be communications with such regulators submitted to the Department within 36 For purposes of this proposed exemption, with respect to ERISA-covered plans or seven (7) days from the date of references to the provisions of Title I of the Act, IRAs, or make material publication of this Federal Register unless otherwise specified, refer also to the misrepresentations or omit material Notice. Given the short comment corresponding provisions of the Code. information in its communications with 37 49 FR 9494 (March 13, 1984), as corrected at period, the Department will consider 50 FR 41430 (October 10, 1985), as amended at 70 ERISA-covered plan and IRA clients; comments received after such date, in FR 49305 (August 23, 2005), and as amended at 75 (vi) the DB QPAM complies with the connection with its consideration of FR 38837 (July 6, 2010). terms of this exemption, if granted; and more permanent relief. 38 Section I(g) of PTE 84–14 generally provides (vii) any violations of or failure to that ‘‘[n]either the QPAM nor any affiliate thereof Warning: Do not include any . . . nor any owner . . . of a 5 percent or more comply with items (ii) through (vi) are personally identifiable information interest in the QPAM is a person who within the corrected promptly upon discovery and (such as name, address, or other contact 10 years immediately preceding the transaction has any such violations or compliance information) or confidential business been either convicted or released from failures not promptly corrected are imprisonment, whichever is later, as a result of’’ information that you do not want certain felonies including income tax evasion and reported, upon discovering the failure to publicly disclosed. All comments may conspiracy or attempt to commit income tax promptly correct, in writing to be posted on the Internet and can be evasion. appropriate corporate officers, the head

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of Compliance and the General Counsel including, but not limited to: Its a lack of evidence that the DB QPAM of the relevant DB QPAM (or their computer systems, business records, has violated ERISA; functional equivalent), the independent transactional data, workplace locations, (6) The auditor shall notify the auditor responsible for reviewing training materials, and personnel; respective DB QPAM of any instances of compliance with the Policies, and an (3) The auditor’s engagement must noncompliance identified by the auditor appropriate fiduciary of any affected specifically require the auditor to within five (5) business days after such ERISA-covered plan or IRA that is determine whether each DB QPAM has noncompliance is identified by the independent of Deutsche Bank; developed, implemented, maintained, auditor, regardless of whether the audit however, with respect to any ERISA- and followed Policies in accordance has been completed as of that date; covered plan or IRA sponsored by an with the conditions of this Proposed (7) With respect to each Audit Report, ‘‘affiliate’’ (as defined in Section VI(d) of Extension, if granted, and developed the General Counsel or one of the three PTE 84–14) of Deutsche Bank or and implemented the Training, as most senior executive officers of the DB beneficially owned by an employee of required herein; QPAM to which the Audit Report Deutsche Bank or its affiliates, such (4) The auditor’s engagement shall applies certifies in writing, under fiduciary does not need to be specifically require the auditor to test penalty of perjury, that the officer has independent of Deutsche Bank. DB each DB QPAM’s operational reviewed the Audit Report and this QPAMs will not be treated as having compliance with the Policies and Proposed Extension, if granted; failed to develop, implement, maintain, Training. In this regard, the auditor addressed, corrected, or remedied any or follow the Policies, provided that must test a sample of the QPAM’s inadequacies identified in the Audit they correct any instances of transactions involving ERIXA-covered Report; and determined that the Policies noncompliance promptly when plans and IRAs sufficient in size and and Training in effect at the time of discovered or when they reasonably nature to afford the auditor a reasonable signing are adequate to ensure should have known of the basis to determine the operational compliance with the conditions of this noncompliance (whichever is earlier), compliance with the Policies and Proposed Extension and with the and provided that they adhere to the Training; applicable provisions of ERISA and the reporting requirements set forth in this (5) On or before the end of the period Code; item (vii); described in Section I(f)(1) for (8) An executive officer of Deutsche (2) Each DB QPAM maintains and completing the audit, the auditor must Bank reviews the Audit Report for each follows a program of training (the issue a written report (the Audit Report) DB QPAM and certifies in writing, Training), conducted during the to Deutsche Bank and the DB QPAM to under penalty of perjury, that such effective period of this exemption, if which the audit applies that describes officer has reviewed each Audit Report; granted, for relevant DB QPAM asset the procedures performed by the auditor (9) Each DB QPAM provides its management, legal, compliance, and during the course of its examination. certified Audit Report to the internal audit personnel; the Training The Audit Report must include the Department’s Office of Exemption must be set forth in the Policies and, at auditor’s specific determinations Determinations (OED), 200 Constitution a minimum, cover the Policies, ERISA regarding the adequacy of, and Avenue NW., Suite 400, Washington, and Code compliance (including compliance with, the Policies and DC 20210, no later than 30 days applicable fiduciary duties and the Training; the auditor’s following its completion, and each DB prohibited transaction provisions) and recommendations (if any) with respect QPAM makes its Audit Report ethical conduct, the consequences for to strengthening such Policies and unconditionally available for not complying with the conditions of Training; and any instances of the examination by any duly authorized this Proposed Extension, (including the respective DB QPAM’s noncompliance employee or representative of the loss of the exemptive relief provided with the written Policies and Training Department, other relevant regulators, therein), and prompt reporting of described in paragraph (e) above. Any and any fiduciary of an ERISA-covered wrongdoing; determinations made by the auditor plan or IRA, the assets of which are (f)(1) Each DB QPAM submits to an regarding the adequacy of the Policies managed by such DB QPAM; audit conducted by an independent and Training and the auditor’s (10) Each DB QPAM and the auditor auditor, who has been prudently recommendations (if any) with respect will submit to OED (A) any engagement selected and who has appropriate to strengthening the Policies and agreement(s) entered into pursuant to technical training and proficiency with Training of the respective DB QPAM the engagement of the auditor under this ERISA and the Code to evaluate the must be promptly addressed by such DB Proposed Extension, and (B) any adequacy of, and compliance with, the QPAM, and any actions taken by such engagement agreement entered into with Policies and Training described herein; DB QPAM to address such any other entities retained in connection the audit requirement must be recommendations must be included in with such QPAM’s compliance with the incorporated in the Policies. The audit an addendum to the Audit Report. Any Training or Policies conditions of this must cover the period of time during determinations by the auditor that the Proposed Extension, no later than three which this Proposed Extension, if respective DB QPAM has maintained (3) months after the date of the Korean granted, is effective, and must be and followed sufficient Policies and Conviction (and one month after the completed no later than three (3) Training shall not be based solely or in execution of any agreement thereafter); months after the period to which the substantial part on an absence of (11) The auditor shall provide OED, audit applies; evidence indicating noncompliance. In upon request, all of the workpapers (2) To the extent necessary for the this last regard, any finding that the DB created and utilized in the course of the auditor, in its sole opinion, to complete QPAM has complied with the audit, including, but not limited to: The its audit and comply with the requirements under this subsection audit plan, audit testing, identification conditions for relief described herein, must be based on evidence that of any instances of noncompliance by and as permitted by law, each DB demonstrates the DB QPAM has actually the relevant DB QPAM, and an QPAM and, if applicable, Deutsche maintained and followed the Policies explanation of any corrective or Bank, will grant the auditor and Training required by this Proposed remedial actions taken by the applicable unconditional access to its business, Extension, if granted, and not solely on DB QPAM; and

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(12) Deutsche Bank must notify the applied consistently and in like manner South Korea’s Financial Investment Department at least 30 days prior to any to all such investors. Within two (2) Services and Capital Markets Act for substitution of an auditor, except that months of the date of publication of a spot/futures-linked market price no such replacement will meet the notice of exemption in the Federal manipulation; requirements of this paragraph unless Register, if granted, each DB QPAM will (b) The term ‘‘DB QPAM’’ means a and until Deutsche Bank demonstrates provide a notice to such effect to each ‘‘qualified professional asset manager’’ to the Department’s satisfaction that ERISA-covered plan or IRA for which a (as defined in section VI(a) 39 of PTE 84– such new auditor is independent of DB QPAM provides asset management 14) that relies on the relief provided by Deutsche Bank, experienced in the or other discretionary fiduciary services, PTE 84–14 and with respect to which matters that are the subject of the unless such notice was previously DSK is a current or future ‘‘affiliate’’ (as Proposed Extension, and capable of provided consistent with PTE 2015–15; defined in section VI(d) of PTE 84–14). making the determinations required of (h) Each DB QPAM will maintain For purposes of this Proposed this Proposed Extension. records necessary to demonstrate that Extension, if granted, Deutsche Bank Notwithstanding the above, this audit the conditions of this Proposed Securities, Inc. (DBSI), including all requirement will be deemed met to the Extension, if granted, have been met, for entities over which it exercises control; extent the Department issues more six (6) years following the date of any and Deutsche Bank AG, including all of permanent relief that expressly revises transaction for which such DB QPAM its branches, are excluded from the this paragraph (f), and the terms of such relies upon the relief in the Proposed definition of a DB QPAM; and new audit requirement have been met; Extension; (c) The term ‘‘DSK’’ means Deutsche (g) With respect to each ERISA- (i) The DB QPAMs comply with each Securities Korea Co., a South Korean covered plan or IRA for which a DB condition of PTE 84–14, as amended, ‘‘affiliate’’ of Deutsche Bank (as the term QPAM provides asset management or with the sole exception of the violation ‘‘affiliate’’ is defined in section VI(c) of other discretionary fiduciary services, of Section I(g) that is attributable to the PTE 84–14). each DB QPAM agrees: (1) To comply Korean Conviction; Effective Date: If granted, this with ERISA and the Code, as applicable (j) The DB QPAMs will not employ Proposed Extension will be effective for with respect to such ERISA-covered any of the individuals that engaged in the period beginning October 24, 2016 plan or IRA, and refrain from engaging the spot/futures-linked market and ending on the earlier of: April 23, in prohibited transactions that are not manipulation activities that led to the 2017 or the effective date of a final otherwise exempt; (2) not to waive, Korean Conviction; agency action made by the Department limit, or qualify the liability of the DB (k) Deutsche Bank disgorged all of its in connection with Exemption QPAM for violating ERISA or the Code profits generated by the spot/futures- Application No. D–11856.40 or engaging in prohibited transactions; linked market manipulation activities of Summary of Facts and Representations (3) not to require the ERISA-covered DSK personnel that led to the Korean plan or IRA (or sponsor of such ERISA- Conviction; Background covered plan or beneficial owner of (l) Deutsche Bank imposes internal 1. On October 11, 2011, Deutsche such IRA) to indemnify the DB QPAM procedures, controls, and protocols on Bank AG (Deutsche Bank) submitted for violating ERISA or engaging in DSK designed to reduce the likelihood Exemption Application No. D–11696 prohibited transactions, except for of any recurrence of the conduct that is (the First Request), to allow certain asset violations or prohibited transactions the subject of the Korean Conviction, to managers with specified relationships to caused by an error, misrepresentation, the extent permitted by local law; Deutsche Bank (the DB QPAMs) to or misconduct of a plan fiduciary or (m) DSK has not, and will not, continue to utilize the relief set forth in other party hired by the plan fiduciary provide fiduciary or QPAM services to Prohibited Transaction Exemption (PTE) who is independent of Deutsche Bank; ERISA-covered Plans or IRAs, and will 84–14,41 notwithstanding the failure of (4) not to restrict the ability of such not otherwise exercise discretionary those entities to meet the requirement ERISA-covered plan or IRA to terminate control over plan assets; set forth in Section I(g) of PTE 84–14 as or withdraw from its arrangement with (n) No DB QPAM is a subsidiary of a result of the pending conviction in the DB QPAM, with the exception of DSK, and DSK is not a subsidiary of any Seoul Central District Court (the Korean reasonable restrictions, appropriately DB QPAM; Court), against Deutsche Securities disclosed in advance, that are (o) The criminal conduct of DSK that Korea Co. (DSK) for spot/futures-linked specifically designed to ensure equitable is the subject of the Korean Conviction market price manipulation (the Korean treatment of all investors in a pooled did not directly or indirectly involve the Conviction).42 While the Department fund in the event such withdrawal or assets of any plan subject to Part 4 of termination may have adverse Title I of ERISA or section 4975 of the 39 In general terms, a QPAM is an independent consequences for all other investors, Code; and fiduciary that is a bank, savings and loan provided that such restrictions are (p) A DB QPAM will not fail to meet association, insurance company, or investment applied consistently and in like manner the terms of this Proposed Extension adviser that meets certain equity or net worth requirements and other licensure requirements and to all such investors; and (5) not to solely because a different DB QPAM that has acknowledged in a written management impose any fees, penalties, or charges fails to satisfy the conditions for relief agreement that it is a fiduciary with respect to each for such termination or withdrawal with under this Proposed Extension plan that has retained the QPAM. the exception of reasonable fees, described in Sections I(d), (e), (f), (g), 40 In this regard, as noted below, the Applicant appropriately disclosed in advance, that (h), (i) and (j). has requested substantially similar relief to the are specifically designed to prevent relief described herein, but on a more permanent Section II: Definitions basis. generally recognized abusive investment 41 49 FR 9494 (March 13, 1984), as corrected at practices or specifically designed to (a) The term ‘‘Korean Conviction’’ 50 FR 41430 (October 10, 1985), as amended at 70 ensure equitable treatment of all means the judgment of conviction FR 49305 (August 23, 2005), and as amended at 75 investors in a pooled fund in the event against DSK entered on January 25, FR 38837 (July 6, 2010). 42 Section I(g) generally provides that ‘‘[n]either such withdrawal or termination may 2016, in Seoul Central District Court, the QPAM nor any affiliate thereof . . . nor any have adverse consequences for all other relating to charges filed against DSK owner . . . of a 5 percent or more interest in the investors, provided that such fees are under Articles 176, 443, and 448 of Continued

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was considering the First Request, 2015–15 is effective from January 25, 6. The Department has tentatively Deutsche Investment Management 2016 until October 24, 2016. determined that this Proposed Americas Inc. (DIMA) and the current 4. The Department now proposes to Extension is sufficient to protect and future asset management affiliates temporarily extend the relief (the affected plans and IRAs in light of the of Deutsche Bank, submitted Exemption Proposed Extension) provided in PTE conditions herein and the temporary Application No. D–11856 (the Second 2015–15 from October 24, 2016 until the nature of this extension, if granted. The Request) to allow the DB QPAMs to earlier of April 23, 2017, or the effective conditions described herein are continue to rely on PTE 84–14 for a date of an exemption that is granted in essentially the same conditions set forth period of ten years, notwithstanding respect of Exemption Application No. in PTE 2015–15. For example, each DB both the Korean Conviction and the D–11856, if any. The Proposed QPAM must continue to maintain and anticipated criminal conviction of a Extension, if granted, will enable the follow the robust written policies (the Deutsche Bank affiliate, DB Group Department to accommodate a more Policies) and training requirements (the Services UK Limited, for one count of complete review of the voluminous Training) developed under PTE 2015– wire fraud in connection with its records submitted in connection with 15. The Policies, which are described in alleged role in manipulating LIBOR. the Second Request and consider more detail in the operative language of whether or not a longer term exemption 2. In a letter dated July 16, 2015, the the Proposed Extension below, are is appropriate. Department informed DIMA and generally designed to, among other Deutsche Bank that it was tentatively Statutory Findings things: Ensure the independence of the denying the Second Request, upon DB QPAMs from Deutsche Bank and its 5. The Department is proposing this other affiliates such as DSK; require the tentatively determining that the extension based on the same findings requested exemption was not in the strict legal compliance of the DB the Department made regarding PTE QPAMs with ERISA, the Code and the interest of affected plans and IRAs, and 2015–15. In this regard, the Department prohibited transaction rules; ensure not protective of those plans and IRAs. has tentatively determined that limited truthfulness and transparency with The Department held a Tentative Denial exemptive relief is in the interest of respect to statements made by DB conference with representatives of ERISA-covered plans and IRAs managed QPAMs to regulators; and ensure Deutsche Bank on November 9, 2015 by the DB QPAMs. The Department is compliance with the terms of this and has since requested and received concerned that, absent such relief, plans exemption, if granted. The Training, additional information in respect of the and IRAs would incur costs in: which is also described in more detail Second Request. Searching for new managers; issuing in the operative language of the 3. Although the Department requests for proposals; conducting due Proposed Extension below, is designed tentatively denied the Second Request, diligence (including meetings with to cover the Policies, ERISA and Code the First Request, which requested an potential managers and credit analysts); compliance, ethical conduct, the exemption from Section I(g) of PTE 84– seeking investment committee consequences for not complying with 14 in connection with only the Korean approvals and negotiating; and/or the conditions of this Proposed Conviction, was still pending with the drafting new investment management Extension, and prompt reporting of Department. When the Korean agreements, investment guidelines and wrongdoing. Conviction appeared imminent, the related trading documentation with Department published a proposed broker-dealers and other counterparties. In order to verify the DB QPAMs’ temporary exemption (the First Deutsche Bank has suggested that the compliance with the Policies and Proposal) in the Federal Register at 80 selection of new managers could Training requirements of the Proposed FR 51314. As noted in the preamble to potentially take several months or Extension, and the conditions for relief, the proposed exemption, affected plans longer, resulting in a number of each DB QPAM must submit to an audit and IRAs may have incurred substantial collateral costs including the conducted by an independent auditor, harm absent such relief; DB QPAMs opportunity costs of missed prudently selected, who has appropriate were not aware of, and did not investments, lower returns from technical training and proficiency with participate in, the conduct that gave rise investing in cash pending long term ERISA to evaluate the adequacy of, and to the Korean Conviction; and the reinvestment, fewer trading compliance with, the Policies and conditions set forth in the exemption counterparties and more limited or Training, and the conditions for relief represented significant enhancements costly temporary investment described herein. Furthermore, to the for plans and IRAs with assets managed alternatives. extent necessary for the auditor, in its by certain DB QPAMs. The Department is also taking into sole opinion, to complete its audit and consideration Deutsche Bank’s prior comply with the conditions for relief The Department finalized the First representations that: ERISA-covered described herein, each DB QPAM and, Proposal on September 4, 2015, with an plans and IRAs would incur direct if applicable, Deutsche Bank, must grant effective period of nine months transaction costs in liquidating and the auditor unconditional access to its following the Korean Conviction (PTE business, including, but not limited to: 43 reinvesting their portfolios, ranging 2015–15, 80 FR 53574). The Korean from 2.5 to 25 basis points (excluding Its computer systems, business records, Conviction was entered by the Korean core real estate), resulting in transactional data, workplace locations, Court on January 25, 2016. As such, PTE approximately $5 to $7 million in training materials, and personnel. The expenses; and liquidating certain direct auditor’s engagement shall specifically QPAM is a person who within the 10 years real estate portfolios may result in require the auditor to determine immediately preceding the transaction has been either convicted or released from imprisonment, portfolio discounts of 10–20% of gross whether each DB QPAM has developed, whichever is later, as a result of’’ certain felonies asset value, along with 30 to 100 basis implemented, maintained, and followed including income tax evasion and conspiracy or points in direct transaction costs, Policies in accordance with the attempt to commit income tax evasion. resulting in an estimated total cost to conditions of this Proposed Extension, if 43 For a more complete statement of the facts and representations concerning Deutsche Bank, DSK, plan investors of between $281 million granted, and developed and and the circumstances surrounding the Korean and $723 million, depending on the implemented the Training, as required Conviction, refer to the First Proposal. liquidation period. herein, and it shall specifically require

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the auditor to test each DB QPAM’s substitution of the auditor, and must only as a sub-advisor to the investment operational compliance with the demonstrate to the Department’s fund. Policies and Training. satisfaction that the replacement auditor Lastly, regarding the DB QPAMs, Furthermore, the auditor must issue a is independent of Deutsche Bank, relief under this Proposed Extension, if written report (the Audit Report) to experienced in the matters that are the granted, is only available to the extent Deutsche Bank and the DB QPAM to subject of the Proposed Extension, and the QPAMs covered by this Proposed which the audit applies that describes capable of making the determinations Extension, as defined in Section II of the procedures performed by the auditor required of this Proposed Extension. this Extension, including their officers, during the course of its examination. Under the terms of the Proposed directors, agents other than Deutsche The Audit Report must include the Extension, if granted, the DB QPAMs Bank, and employees, did not know of, auditor’s specific determinations must agree to certain terms and have reason to know of, or participate in regarding: The adequacy of, and undertakings with each ERISA-covered the criminal conduct of DSK that is the compliance with, the Policies and plan or IRA for which a DB QPAM subject of the Korean Conviction; any Training; the auditor’s provides asset management or other failure of those QPAMs to satisfy recommendations (if any) with respect discretionary fiduciary services, Section I(g) of PTE 84–14 arose solely to strengthening such Policies and including, generally: (1) Compliance from the Korean Conviction; such Training; and any instances of the with ERISA and the Code and avoidance QPAMs did not directly receive respective DB QPAM’s noncompliance of non-exempt prohibited transactions; compensation, or knowingly receive with the written Policies and Training (2) not to waive, limit, or qualify certain indirect compensation, in connection described above. Furthermore, any liabilities of the DB QPAM; (3) not to with, the criminal conduct that is the determination by the auditor regarding require indemnification of the DB subject of the Korean Conviction; and the adequacy of the Policies and QPAM for violating ERISA or engaging none of those QPAMs will use its Training and the auditor’s in prohibited transactions; and (4) with authority or influence to direct an recommendations (if any) with respect minor exceptions, not to restrict the to strengthening the Policies and ability of ERISA-covered plan or IRA ‘‘investment fund’’ (as defined in Training of the respective DB QPAM clients to terminate or withdraw from Section VI(b) of PTE 84–14) that is must be promptly addressed by such DB their arrangement with the DB QPAM subject to ERISA and managed by such QPAM, and any actions taken by such or, to impose any fees, penalties, or DB QPAM to enter into any transaction DB QPAM to address such charges for such termination or with DSK, or engage DSK to provide recommendations must be included in withdrawal. Each DB QPAM will additional services to such investment an addendum to the Audit Report. The provide a notice describing the above- fund, for a direct or indirect fee borne auditor is required to notify the described terms and undertakings to by such investment fund, regardless of respective DB QPAM of any instances of each such ERISA-covered plan or IRA whether such transactions or services noncompliance identified by the within two (2) months of the date of may otherwise be within the scope of auditor. The General Counsel or one of publication of a notice of extension in relief provided by an administrative or the three most senior executive officers the Federal Register, if granted, unless statutory exemption. of the DB QPAM to which the Audit such notice was previously provided Regarding conditions herein directed Report applies must certify in writing, consistent with PTE 2015–15. at Deutsche Bank, prior to engaging in under penalty of perjury, that the officer Under the terms of this Proposed a transaction covered by this Proposed has reviewed the Audit Report and, if Extension, each DB QPAM must: Extension, if granted, Deutsche Bank granted, this Proposed Extension; Maintain records necessary to must have previously disgorged all of its addressed, corrected, or remedied any demonstrate that the conditions herein profits generated from exercising inadequacies identified in the Audit have been met, for six (6) years derivative positions and put options in Report; and determined that the Policies following the date of any transaction for connection with the activity associated and Training in effect at the time of which such DB QPAM relies upon the with the Korean Conviction. Deutsche signing are adequate to ensure relief in the Proposed Extension, if Bank must have also previously compliance with the conditions of the granted; comply with each condition of imposed internal procedures, controls, Proposed Extension and with the PTE 84–14, as amended, with the sole and protocols on DSK designed to applicable provisions of ERISA and the exception of the violation of Section I(g) reduce the likelihood of any recurrence Code. Moreover, an executive officer of that is attributable to the Korean of the conduct that is the subject of the Deutsche Bank must review the Audit Conviction; ensure that none of the Korean Conviction, to the extent Report for each DB QPAM and certify in individuals that engaged in the conduct permitted by local law. writing, under penalty of perjury, that that led to the Korean Conviction are Regarding conditions herein aimed at such officer has reviewed each Audit employed by the DB QPAM; and DSK, DSK may not provide fiduciary Report. provide a notice of the Proposed services to ERISA-covered Plans or The audit must: Span the period of Extension, and if granted, a notice of IRAs, or otherwise exercise time covered by this Proposed final extension of PTE 2015–15, along discretionary control over plan assets. Extension, if granted; be completed with a separate summary (which has Further, none of the DB QPAMs may be within three months days from the end been submitted to the Department) subsidiaries of DSK, and DSK may not of the period to which it relates; and be describing the facts that led to the be a subsidiary of any of the DB QPAMs. submitted to the Department within 30 Korean Conviction, and a prominently Finally, the criminal conduct of DSK days from date the audit is completed. displayed statement that the Korean that is the subject of the Korean These requirements may be enhanced or Conviction results in a failure to meet a Conviction must not have directly or changed if subsequent exemptive relief condition in PTE 84–14 to each sponsor indirectly involved the assets of any is granted. The DB QPAMs must give of an ERISA-covered plan and each plan subject to Part 4 of Title I of ERISA the Department copies of the auditor’s beneficial owner of an IRA invested in or section 4975 of the Code. workpapers upon request. In addition, an investment fund managed by a DB Deutsche Bank must notify the QPAM, or the sponsor of an investment The Proposed Extension, if granted, Department at least 30 days prior to any fund in any case where a DB QPAM acts will not apply to Deutsche Bank

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Securities, Inc. (DBSI).44 Section I(a) of is administratively feasible. In this Notice to Interested Persons PTE 2015–15, as well as this Proposed regard, this Proposed Extension, if Written comments and requests for a Extension, requires that ‘‘DB QPAMs granted, would not require the public hearing on the Proposed (including their officers, directors, Department’s oversight because DSK Extension should be submitted to the agents other than Deutsche Bank, and does not provide any fiduciary or Department within seven (7) days from employees of such DB QPAMs) did not QPAM services to ERISA-covered plans the date of publication of this Federal know of, have reason to know of, or and IRAs and that no ERISA or IRA Register Notice. Given the short participate in the criminal conduct of assets were involved in the Korean comment period, the Department will DSK that is the subject of the Conviction. Furthermore, compliance consider comments received after such Conviction.’’ In a letter to the with the terms of the Proposed date, in connection with its Department dated July 15, 2016, Extension and of PTE 2015–15 will be consideration of more permanent relief. Deutsche Bank raised the possibility validated through an audit performed by Warning: Do not include any 45 that an individual, while employed at a qualified, independent auditor. personally identifiable information DBSI, may have known or had reason to (such as name, address, or other contact know of the criminal conduct of DSK 8. The proposed exemption, if granted, would provide relief from information) or confidential business that is the subject of the Korean information that you do not want Conviction. In a letter to the Department certain of the restrictions set forth in Section 406 and 407 of ERISA. Such a publicly disclosed. All comments may dated August 19, 2016, Deutsche Bank be posted on the Internet and can be further clarified that ‘‘there is no granted exemption would not provide relief from any other violation of law, retrieved by most Internet search evidence that anyone at DBSI other than engines. Mr. Ripley knew in advance of the including any criminal conviction not trades conducted by the Absolute expressly described herein. Pursuant to FOR FURTHER INFORMATION CONTACT: Strategy Group on November 11, 2010.’’ the terms of this proposed exemption, if Scott Ness of the Department, telephone Deutsche Bank states that it had granted, any criminal conviction not (202) 693–8561. (This is not a toll-free previously interpreted Section I(a) of expressly described herein, but number.) otherwise described in Section I(g) of PTE 2015–15 as requiring only that ‘‘any General Information current director, officer or employee did PTE 84–14 and attributable to the not know of, have reason to know of, or applicant for purposes of PTE 84–14, The attention of interested persons is participate in the conduct.’’ The would result in the applicant’s loss of directed to the following: Department notes that Deutsche Bank this exemption, if granted. (1) The fact that a transaction is the did not raise any interpretive questions subject of an exemption under section Interested persons are directed to the 408(a) of the Act and/or section regarding Section I(a) of PTE 2015–15, First Proposal, the Facts and or express any concerns regarding 4975(c)(2) of the Code does not relieve Representations of which are a fiduciary or other party in interest or DBSI’s possible noncompliance, during incorporated herein, for a more detailed the comment period for PTE 2015–15. disqualified person from certain other description of the Department’s views provisions of the Act and/or the Code, Nor did Deutsche Bank seek a technical regarding the scope of relief and the correction or other remedy to address including any prohibited transaction adequacy of the conditions contained provisions to which the exemption does such concerns between the time that herein. PTE 2015–15 was granted and the date not apply and the general fiduciary of the Korean Conviction. The Effective Dates responsibility provisions of section 404 Department notes that a period of of the Act, which, among other things, approximately nine months passed 9. This Proposed Extension, if require a fiduciary to discharge his before Deutsche Bank raised an granted, will be effective from October duties respecting the plan solely in the interpretive question regarding Section 24, 2016 until the earlier of April 23, interest of the participants and I(a) of PTE 2015–15. Accordingly, the 2017 or the effective date of a final beneficiaries of the plan and in a Department is excluding DBSI from the agency action made by the Department prudent fashion in accordance with relief described in this Proposed in connection with Exemption section 404(a)(1)(b) of the Act; nor does Extension. Application No. D–11856. Fiduciaries of it affect the requirement of section The Proposed Extension, if granted, ERISA-covered plans and IRAs with 401(a) of the Code that the plan must will also not apply with respect to assets managed by a DB QPAM should operate for the exclusive benefit of the Deutsche Bank AG (the parent entity) or be aware that, if this Proposed employees of the employer maintaining any of its branches. The Applicant Extension is not granted, DB QPAMs the plan and their beneficiaries; represents that neither Deutsche Bank may only rely on the relief provided in (2) Before an exemption may be AG nor its branches have relied on the PTE 84–14 until October 23, 2016. If the granted under section 408(a) of the Act relief provided by PTE 84–14 since the Department grants this Proposed and/or section 4975(c)(2) of the Code, date of the Korean Conviction. Extension, but makes a final decision the Department must find that the 7. The Department has tentatively not to propose the Second Request, the exemption is administratively feasible, determined that the Proposed Extension DB QPAMs will be unable to rely on the in the interests of the plan and of its relief set forth in PTE 84–14, as of April participants and beneficiaries, and 44 The Applicant represents that DBSI has not 24, 2017. ERISA-covered plan and IRA protective of the rights of participants relied on the relief provided by PTE 84–14 since the fiduciaries should take note that, as and beneficiaries of the plan; date of the Korean Conviction. described above, the conditions for PTE (3) The proposed exemptions, if 45 The Applicant identifies the individual as Mr. John Ripley, a senior global manager in DBSI who 2015–15 and this Proposed Extension granted, will be supplemental to, and was based in the United States and who was a require DB QPAMs to agree not to not in derogation of, any other functional supervisor over the employees of DSK restrict the ability of each ERISA- provisions of the Act and/or the Code, that were prosecuted for market manipulation. covered plan or IRA client to terminate including statutory or administrative Furthermore, the Applicant states that Mr. Ripley was terminated by DBSI for ‘‘loss of confidence’’ in or withdraw from its arrangement with exemptions and transitional rules. that he could have exercised more care and been the DB QPAM, with certain limited Furthermore, the fact that a transaction more proactive in reviewing the trades at issue. exceptions. is subject to an administrative or

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statutory exemption is not dispositive of representations contained in each Signed at Washington, DC, this 5th day of whether the transaction is in fact a application are true and complete, and October, 2016. prohibited transaction; and that each application accurately Lyssa E. Hall, (4) The proposed exemptions, if describes all material terms of the Director, Office of Exemption Determinations, transaction which is the subject of the Employee Benefits Security Administration, granted, will be subject to the express U.S. Department of Labor. condition that the material facts and exemption. [FR Doc. 2016–24595 Filed 10–11–16; 8:45 am] BILLING CODE 4510–29–P

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