[Federal Register Volume 78, Number 178 (Friday, September 13, 2013)]
[Notices]
[Pages 56740-56742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22314]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2013-09; Application No. D-11772]
Grant of Individual Exemption Involving UBS AG (UBS or the
Applicant); Located in Zurich, Switzerland
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Grant of individual exemption.
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SUMMARY: This document contains an individual exemption from certain
prohibited transaction restrictions of the Employee Retirement Income
Security Act of 1974, as amended (ERISA or the Act) and the Internal
Revenue Code of 1986, as amended (the Code). The transactions involve
UBS, and certain entities within UBS's Global Asset Management and
Wealth Management Americas divisions that function as ``qualified
professional asset managers'' (QPAMs) under Prohibited Transaction
Class Exemption 84-14 (PTE 84-14).\1\ The individual exemption affects
UBS QPAMS, and participants and beneficiaries of ERISA plans the assets
of which plan are managed by a UBS QPAM.
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\1\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and
as amended at 75 FR 38837 (July 6, 2010).
DATES: Effective Date: This exemption is effective as of the date a
judgment of conviction against UBS Securities Japan for wire fraud is
entered in the District Court of Connecticut in Case Number 3:12-cr-
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00268-RNC.
FOR FURTHER INFORMATION CONTACT: Mr. Erin S. Hesse of the Department,
telephone (202) 693-8546. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: On July 9, 2013, the Department of Labor
(the Department) published a notice of proposed individual exemption in
the Federal Register at 78 FR 41105, such that entities within UBS's
Global Asset Management and Wealth Management Americas divisions that
function as QPAMs, would not be precluded from relying on the relief
provided by PTE 84-14, solely due to the failure to satisfy the
condition in section I(g) of PTE 84-14 as a result of their affiliation
with UBS Securities Japan Co. Ltd., against whom a judgment of
conviction for one count of wire fraud is scheduled to be entered in
the District Court of Connecticut in Case Number 3:12-cr-00268-RNC. The
proposed exemption was requested by UBS pursuant to section 408(a) of
the Act and section 4975(c)(2) of the Code, and in accordance with the
procedures set forth in 29 CFR Part 2570, Subpart B (76 FR 66637,
October 27, 2011).\2\ Effective December 31, 1978, section 102 of the
Reorganization Plan No. 4 of 1978, (5 USC App. 1 (1996)) transferred
the authority of the Secretary of the Treasury to issue exemptions of
the type requested to the Secretary of Labor. Accordingly, this final
individual exemption is being issued solely by the Department.
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\2\ For purposes of this exemption, references to the provisions
of Title I of the Act, unless otherwise specified, refer also to the
corresponding provisions of the Code.
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Written Comments
The Department invited all interested persons to submit written
comments and/or requests for a public hearing with respect to the
notice of proposed exemption. All comments and requests for hearing
were due by August 11, 2013. During the comment period, the Department
received no comments and no requests for a hearing from interested
persons. Accordingly, after giving full consideration to the entire
record, the Department has decided to grant the exemption. The complete
application file (Application No. D-11772), including all supplemental
submissions received by the Department, is available for public
inspection in the Public Disclosure Room of the Employee Benefits
Security Administration, Room N-1513, U.S. Department of Labor, 200
Constitution Avenue NW., Washington, DC 20210.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption published on July 9, 2013, at 78 FR
41105.
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest or disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which, among other things, require a fiduciary
to discharge his duties respecting the plan solely in the interest of
the participants and beneficiaries of the plan and in a prudent fashion
in accordance with section 404(a)(1)(B) of the Act; nor does it affect
the requirement of section 401(a) of the Code that the plan must
operate for the exclusive benefit of the employees of the employer
maintaining the plan and their beneficiaries;
(2) In accordance with section 408(a) of ERISA and/or section
4975(c)(2) of the Code, the Department makes the following
determinations: the exemption is administratively feasible, the
exemption is in the interests of the plan and of its participants and
beneficiaries, and the exemption is protective of the rights of
participants and beneficiaries of the plan;
(3) The exemption is supplemental to, and not in derogation of, any
other provisions of ERISA, including statutory or administrative
exemptions and transitional rules. Furthermore, the fact that a
transaction is subject to an administrative or statutory exemption is
not dispositive of whether the transaction is in fact a prohibited
transaction; and
(4) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describe all material terms of the transaction
which is the subject of the exemption.
Accordingly, the following exemption is granted under the authority
of section 408(a) of ERISA and section 4975(c)(2)
[[Page 56741]]
of the Code and in accordance with the procedures set forth in 29 CFR
Part 2570, Subpart B (76 FR 66637, 66644, October 27, 2011):
Exemption
Entities within UBS's Global Asset Management and Wealth Management
Americas divisions that function as ``qualified professional asset
managers'' (QPAMs), shall not be precluded from relying on the relief
provided by Prohibited Transaction Exemption 84-14 (PTE 84-14),\3\
solely due to the failure to satisfy the condition in section I(g) of
PTE 84-14 as a result of their affiliation with UBS Securities Japan
Co. Ltd. (UBS Securities Japan), against whom a judgment of conviction
for one count of wire fraud (the Conviction) is scheduled to be entered
in the District Court of Connecticut in Case Number 3:12-cr-00268-RNC,
provided the following conditions are satisfied:
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\3\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and
as amended at 75 FR 38837 (July 6, 2010).
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(a) No ERISA-covered assets were involved in, or directly affected
by, the conduct of UBS Securities Japan that is the subject of the
Conviction. For purposes of this paragraph, ERISA-covered assets are
not considered directly affected solely because an ERISA plan held an
economic interest in a security or investment product, the value of
which was tied to one of the benchmark interest rates manipulated in
connection with conduct by certain UBS personnel;
(b) The entities acting as QPAMs within UBS's Global Asset
Management and Wealth Management Americas divisions (UBS QPAMs) did not
know of, have reason to know of, participate in, or directly receive
compensation in connection with, the conduct by certain UBS personnel
that gave rise to the manipulation of certain benchmark interest rates;
(c) UBS Securities Japan did not provide any fiduciary services to,
or act as a QPAM for, ERISA plans or otherwise exercise any
discretionary control over ERISA-covered assets;
(d) UBS Securities Japan will not enter into any transactions with
funds managed by UBS QPAMs or provide any services to UBS QPAMs;
(e) UBS QPAMs were insulated from UBS Securities Japan due to: (1)
The independent business operations of the Wealth Management Americas
and Global Asset Management divisions from UBS's other divisions, and
(2) Written policies and procedures which created information barriers
that were in place to ensure that the UBS QPAMs, and the ERISA-covered
assets they manage, were not affected by the business activities of UBS
affiliates within the Investment Bank division, such as UBS Securities
Japan;
(f) UBS maintains and follows written policies and procedures that
create information barriers designed to ensure UBS QPAMs, and the
ERISA-covered assets they manage, are not affected by the business
activities of UBS affiliates within the Investment Bank division, such
as UBS Securities Japan. UBS also develops and implements a program of
training for UBS personnel regarding such written policies and
procedures;
(g) UBS submits to an annual audit which meets the following
requirements:
(1) An independent auditor, who has appropriate technical training
and proficiency with Title I of ERISA, shall conduct an annual written
audit;
(2) The audit shall specifically require the auditor to determine
whether UBS has continued to maintain and follow, and developed and
implemented a training program with respect to, written policies and
procedures that create information barriers designed to ensure that the
UBS QPAMs, and the ERISA-covered assets they manage, are not improperly
influenced or affected by the business activities of UBS affiliates
within the Investment Bank division, such as UBS Securities Japan;
(3) The audit shall test operational compliance with the training
requirements and written policies and procedures requirements described
in paragraph (f);
(4) The auditor shall issue a written report (the Audit Report)
describing the steps performed by the auditor during the course of its
examination. The Audit Report shall include the auditor's specific
determinations regarding the adequacy of the training requirements and
written policies and procedures requirements described in paragraph
(f), the auditor's recommendations (if any) with respect to
strengthening such training requirements and policies and procedures,
and any instances of UBS's noncompliance with developing and
implementing such training requirements and policies and procedures.
Any determinations made by the auditor as a result of the audit
regarding the adequacy of the training requirements and written
policies and procedures requirements described in paragraph (f) and the
auditor's recommendations (if any) with respect to strengthening such
training requirements and policies and procedures shall be promptly
addressed by UBS, and any actions taken by UBS to address such
recommendations should be included in an addendum to the Audit Report.
Any determinations by the auditor that UBS has developed and maintained
sufficient written policies and procedures, and developed and
maintained a training program regarding such policies and procedures,
shall not be based solely or in substantial part on an absence of
evidence indicating noncompliance;
(5) UBS shall provide notice to the Department's Office of
Exemption Determinations (OED) of any instances of UBS's noncompliance
reviewed by the auditor within ten (10) business days after such
noncompliance is determined by the auditor, regardless of whether the
audit has been completed as of that date. Upon request, the auditor
shall provide OED with all of the relevant workpapers reflecting the
instances of noncompliance. The workpapers should identify whether and
to what extent the assets of ERISA plans were involved in the
instance(s) of noncompliance and an explanation of any corrective
actions taken by UBS;
(6) The yearly Audit Report will be provided to OED no later than
90 days following the 12-month period to which it relates and will be
unconditionally available for examination by any duly authorized
employee or representative of the Department, Internal Revenue Service,
U.S. Commodity Futures Trading Commission, U.S. Department of Justice,
Japanese Financial Services Authority, other relevant regulators, and
any fiduciary of an ERISA plan the assets of which plan are managed by
a UBS QPAM;
(7) This audit requirement in paragraph (g) herein shall continue
to be applicable for five (5) years from the date of Conviction;
(h) Notwithstanding the Conviction, UBS complies with each
condition of PTE 84-14, as amended;
(i) UBS imposes its internal procedures, controls, and protocols on
UBS Securities Japan to: (1) Reduce the likelihood of any recurrence of
conduct that is the subject of the Conviction, and (2) Comply in all
material respects with the Business Improvement Order, dated December
16, 2011, issued by the Japanese Financial Services Authority;
(j) UBS complies in all material respects with the audit and
monitoring procedures imposed on UBS by the United States Commodity
Futures Trading Commission Order, dated December 19, 2012;
(k) UBS maintains records necessary to demonstrate that the
conditions of this exemption have been met for six (6) years following
the completion date of
[[Page 56742]]
the last audit conducted in accordance with paragraph (g); and
(l) Each sponsor of an ERISA plan the assets of which plan are
managed by a UBS QPAM receives: Notice of the proposed exemption with a
copy of the summary of facts that led to the Conviction, which was
submitted to the Department; and a prominently displayed statement that
the Conviction results in a failure to meet a condition in PTE 84-14.
Effective Date: This exemption is effective as of the date a
judgment of conviction against UBS Securities Japan for wire fraud is
entered in the District Court of Connecticut in Case Number 3:12-cr-
00268-RNC.
Signed at Washington, DC, this 9th day of September, 2013.
Lyssa E. Hall,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2013-22314 Filed 9-12-13; 8:45 am]
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