[Federal Register Volume 76, Number 33 (Thursday, February 17, 2011)]
[Notices]
[Pages 9361-9366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3589]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employee Benefits Security Administration
Exemptions From Certain Prohibited Transaction Restrictions
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Grant of individual exemptions.
-----------------------------------------------------------------------
SUMMARY: This document contains exemptions issued by the Department of
Labor (the Department) from certain of the prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
This notice includes the following: D-11591, Citigroup Inc. and its
affiliates (Citigroup), the Citigroup 401(k) Plan, the Citibuilder
401(k) Plan for Puerto Rico (the Citibuilder Plan and collectively with
the Citigroup 401(k) Plan, the Participant Directed Plans), the
Citigroup Pension Plan (and collectively with the Participant Directed
Plans, the Plans) (the Applicants), PTE 2011-04; and D-11592, TD
Ameritrade, Inc. (TD Ameritrade), 2011-05.
SUPPLEMENTARY INFORMATION: A notice was published in the Federal
Register of the pendency before the Department of a proposal to grant
such exemption. The notice set forth a summary of facts and
representations contained in the application for exemption and referred
interested persons to the application for a complete statement of the
facts and representations. The application has been available for
public inspection at the Department in Washington, DC. The notice also
invited interested persons to submit comments on the requested
exemption to the Department. In addition the notice stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicant has represented that it has
complied with the requirements of the notification to interested
persons. No requests for a hearing were received by the Department.
Public comments were received by the Department as described in the
granted exemption.
The notice of proposed exemption was issued and the exemption is
being granted solely by the Department because, effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1
(1996), transferred the authority of the Secretary of the Treasury to
issue exemptions of the type proposed to the Secretary of Labor.
[[Page 9362]]
Statutory Findings
In accordance with section 408(a) of the Act and/or section
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon
the entire record, the Department makes the following findings:
(a) The exemption is administratively feasible;
(b) The exemption is in the interests of the plan and its
participants and beneficiaries; and
(c) The exemption is protective of the rights of the participants
and beneficiaries of the plan.
Citigroup Inc. and Its Affiliates (Citigroup), the Citigroup 401(k)
Plan, the Citibuilder 401(k) Plan for Puerto Rico (the Citibuilder Plan
and Collectively With the Citigroup 401(k) Plan, the Participant
Directed Plans), the Citigroup Pension Plan (and Collectively With the
Participant Directed Plans, the Plans) (the Applicants), Located in
Greenwich, CT
[Prohibited Transaction Exemption 2011-04; Exemption Application No. D-
11591]
Exemption
Section I: Transactions
(a) The restrictions of sections 406(a), 406(b)(1), 406(b)(2), and
407(a) of the Act \1\ shall not apply, effective June 22, 2009 (the
Record Date) and until June 10, 2012, to:
---------------------------------------------------------------------------
\1\ For purposes of this exemption, references to provisions of
Title I of the Act, unless otherwise specified, refer also to the
corresponding provisions of the Code.
---------------------------------------------------------------------------
(1) The acquisition of stock rights (the Rights) by certain plans,
described below in Section I(a)(1)(A) through (C) of this exemption, in
connection with holding shares of common stock of Citigroup Inc.
(Citigroup Stock) on the Record Date established pursuant to an
offering of such Rights (the Offering) in accordance with the Tax
Benefits Preservation Plan (the Rights Plan) by Citigroup Inc.
(Citigroup), a party in interest with respect to the following plans,
and/or the acquisition of Citigroup Stock and the attached Rights by
the plans in the future pursuant to the Offering:
(A) The Citigroup 401(k) Plan (the Citigroup 401(k) Plan);
(B) The Citibuilder 401(k) Plan for Puerto Rico (the Citibuilder
Plan and collectively with the Citigroup 401(k) Plan, the Participant
Directed Plans); and
(C) The Citigroup Pension Plan (the Citigroup Pension Plan and
collectively with the Participant Directed Plans, the Plans);
(2) The holding of the Rights by the Plans until the date the Plans
exercise or otherwise dispose of the Rights or the expiration of such
Rights in accordance with the terms and conditions of the Rights Plan,
whichever is earlier; and
(3) The exercise or other disposition of the Rights by the Plans;
provided that the conditions in Section II of this exemption, as set
forth below, are satisfied.\2\
---------------------------------------------------------------------------
\2\ The Department's determination to grant relief for these
transactions should not be viewed as an endorsement of the Rights
Plan, nor is it offering any views as to whether such transactions
satisfy any other requirements of ERISA, the Code or other relevant
statutory provisions. Rather, this exemption is designed to place
the Plans and their participants and beneficiaries in the same
position as other holders of Citigroup Stock with respect to the
acquisition of the Rights and to prevent the possible dilution of
the Plans' investment in the Citigroup Stock.
---------------------------------------------------------------------------
(b) The sanctions resulting from the application of section 4975 of
the Internal Revenue Code of 1986 (the Code), by reason of section
4975(c)(1)(A) through (E) shall not apply, effective June 22, 2009, to
the acquisition of the Rights by the Plans, described above in Section
I(a)(1)(A), and Section I(a)(1)(C) of this exemption; \3\ provided that
the conditions in Section II of this exemption, as set forth below, are
satisfied.
---------------------------------------------------------------------------
\3\ The Applicants represent that, because the fiduciaries for
the Citibuilder 401(k) Plan for Puerto Rico have not made an
election under section 1022(i)(2) of the Act, whereby such plan
would be treated as a trust created and organized in the United
States for purposes of tax qualification under section 401(a) of the
U.S. Code, jurisdiction under Title II of the Act does not apply.
Accordingly, the Applicant is not seeking any relief for the
prohibitions, as set forth in Title II of the Act, for the
acquisition of the Rights by the Citibuilder Plan.
---------------------------------------------------------------------------
Section II: Conditions
The relief provided in this exemption is conditioned upon adherence
to the material facts and representations described herein and as set
forth in the application file and upon compliance with the conditions,
as set forth in this exemption.
(a) The acquisition by each of the Plans of the Rights occurred or
will occur in connection with the June 22, 2009 Offering made available
by Citigroup on the same terms to all shareholders of the common stock
of Citigroup (the Citigroup Stock), including the acquisition of the
Rights at no cost to the Plans;
(b) The acquisition of the Rights by the Participant Directed Plans
on the Record Date resulted from an independent act of Citigroup as a
corporate entity. The acquisition of the Citigroup Stock and the
attached Rights by the Plans in the future will occur either at the
direction of individual participants (in the case of the Participant
Directed Plans), at the direction of an Independent Fiduciary (in the
case of the Citigroup Pension Plan), or in connection with in-kind
contributions to the Citigroup Pension Plan by Citigroup of Citigroup
Stock and the attached Rights (a Stock/Right Contribution), in each
case incidental to, and as a direct consequence of, the purchase or
other acquisition of Citigroup Stock. All holders of Citigroup Stock,
which include the Rights (other than an Acquiring Person, as defined in
the Rights Plan), including the Plans, were, and will continue to be,
treated in the same manner with respect to the acquisition of the
Rights;
(c) All shareholders of Citigroup Stock, including the Plans
acquired, or will acquire, the same proportionate number of Rights
based on the number of shares of Citigroup Stock held by such
shareholders, including the Plans;
(d) The acquisition of the Rights by the Participant Directed Plans
was made, or will be made, pursuant to provisions of each such plan for
individually-directed investment of participant accounts;
(e) All decisions regarding the Rights that will be made by the
Participant Directed Plans will be made in accordance with the
provisions of such Participant Directed Plans for individually-directed
investment of participant accounts by the individual participants whose
accounts in each such Participant Directed Plan acquired the Rights in
connection with the Offering, and if no instructions are received, the
Rights will expire in accordance with the terms and conditions of the
Rights Plan;
(f) All decisions regarding the Citigroup Stock and the attached
Rights will be made on behalf of the Citigroup Pension Plan by an
Independent Fiduciary acting as an investment manager. Such Independent
Fiduciary will have sole discretionary responsibility relating to the
acquisition, holding, ongoing management and disposition of the
Citigroup Stock and the attached Rights. The Independent Fiduciary will
determine, before taking any action regarding the Citigroup Stock and
the attached Rights, that each such action is in the interest of the
Citigroup Pension Plan.
(g) To the extent the Citigroup board of directors exercises its
rights under the Offering to redeem the Rights at the redemption price
set forth in the Offering, all shareholders of Citigroup
[[Page 9363]]
Stock will be treated the same, including the Plans; and
(h) The acquisition of the Rights as a result of a Stock/Right
Contribution by Citigroup to the Citigroup Pension Plan shall result
from a determination by Citigroup as a corporate entity.
(i) Neither the Participant Directed Plan participants nor the
Citigroup Pension Plan will pay any fees or commissions in connection
with the exercise of the Rights other than the aggregate Purchase Price
with respect to the Rights then being exercised and an amount equal to
any applicable transfer tax or other governmental charge.
Section III: Definition
The term ``Independent Fiduciary'' means an investment manager, as
described in section 3(38) of the Act, that is:
(a) Independent of, and unrelated to, Citigroup Inc. and its
affiliates (Citigroup), and
(b) Appointed to act on behalf of the Citigroup Pension Plan for
the purposes described in Section II.(f) above.
For purposes of this exemption, a fiduciary will not be deemed to
be independent of, and unrelated to, Citigroup if: (i) Such fiduciary
directly or indirectly, controls, is controlled by, or is under common
control with Citigroup; (ii) such fiduciary directly or indirectly
receives any compensation or other consideration in connection with any
transaction described in this exemption, except that it may receive
compensation for acting as an independent fiduciary from Citigroup in
connection with the transactions described herein, if the amount or
payment of such compensation is not contingent upon, or in any way
affected by such fiduciary's decision; and (iii) more than 5 percent of
such fiduciary's annual gross revenue in its prior tax year will be
paid by Citigroup in the fiduciary's current tax year.
DATES: Effective Date: This exemption is effective as of June 22, 2009,
the date of the announcement of the Offering and will expire on June
10, 2012.
Written Comments
The Notice of Proposed Exemption, published in the October 6, 2010
issue of the Federal Register (75 FR 61947), invited all interested
persons to submit comments on the Proposed Exemption and/or to request
that a public hearing be held. In response to the solicitation of
comments from interested persons, the Department received a December 6,
2010 comment letter on behalf of Citigroup (the Citigroup Comment) and
comments from several other interested persons. None of the comments
requested that a public hearing be held on the Proposed Exemption. The
Citigroup Comment responded to the comments received from the other
interested persons, provided further information on the exemption
transactions and requested modification of the definition of
Independent Fiduciary in the Proposed Exemption.
The Citigroup Comment notes that several participants in the Plans
provided comments to the Department and that two of these participants
simply voiced a general objection to the Proposed Exemption, one
without providing any rationale and the other appearing to question
Citigroup's treatment of its employees generally. The Applicants stated
that these comments are not relevant to whether the proposed exemption
is in the interests of the Plans and their participants and
beneficiaries and whether it should be granted. The Applicants believe
that granting the proposed exemption is in the interests of the Plans
and their participants and beneficiaries. The Applicants note that
another participant objected on the basis that the participant believed
that the Proposed Exemption was unclear as to its scope and purpose and
that Citigroup Stock was an inappropriate investment for a pension
fund. Two participants shared the sentiment that granting the exemption
would represent a further loosening of regulatory restrictions. The
last participant objected on the grounds that the Proposed Exemption
would permit Citigroup to make future contributions to the Citigroup
Pension Plan in Citigroup Stock rather than cash and believed that the
Independent Fiduciaries should have the right to sell the shares of
Citigroup Stock.
The Applicants assert that the Proposed Exemption permits the Plans
to acquire the Rights as opposed to the underlying Citigroup Stock and
that the purpose of the Proposed Exemption is not to determine whether
acquisition of Citigroup Stock (including an acquisition as a result of
a contribution in-kind to one or more of the Plans by Citigroup) is in
the interests of the Plans, nor is the purpose to authorize or approve
any such acquisition of Citigroup Stock. The Applicants, in the
Citigroup Comment state:
While the Plans would not be permitted to acquire, hold or
dispose of Citigroup Stock if the requested exemption were not
granted, this is merely because the Rights, while they technically
may be a separate `security' under Section 3(20) of ERISA, are not
severable from Citigroup Stock until they become exercisable. The
analysis as to whether the acquisition, holding or disposition of
Citigroup Stock, as opposed to the Rights, is appropriate in any
given circumstance would necessarily involve a separate analysis
under ERISA and is not the subject of the proposed exemption.
Rather, the purpose of the proposed exemption is to allow the Plans
to acquire, hold and, if applicable, dispose of the Rights that are
attached to the Citigroup Stock once the decision has already been
made to acquire Citigroup Stock.
The Department notes that, to the extent that the Citigroup Stock
is not a qualifying employer security as defined in section 407(d)(5)
of ERISA, an administrative exemption would be necessary for the
acquisition and holding of such stock. Accordingly, the final exemption
has been clarified to provide that the Independent Fiduciary of the
Citigroup Pension Plan will have sole discretionary responsibility to
determine whether the Citigroup Pension Plan should acquire Citigroup
Stock and the attached Rights whether by purchase or contribution by
Citigroup. As a result, the Department believes that the condition
requiring the appointment of an independent fiduciary to represent the
interests of the Citigroup Pension Plan with respect to the
acquisition, holding and the exercise or other disposition of the
Rights that are the subject of the exemption request should be
clarified.
The Department, however, is not making a determination as to
whether the Citigroup Stock combined with the attached Rights is a
qualifying employer security, as defined in section 407(d)(5) of ERISA.
Since the Citigroup Stock, without the attached Rights, would be a
qualifying employer security, the percentage limitations for qualifying
employer securities, as set forth in sections 407(a) and 407(f) of
ERISA (the Percentage Limitations), may still be applicable. In light
of this uncertainty, the Applicants have agreed to abide by the
Percentage Limitations.
The Citigroup Comment asserts that the Proposed Exemption is in the
interests of the Plans and their participants and beneficiaries because
allowing the Plans to acquire the Rights will place the Plans and their
participants and beneficiaries in the same position as other holders of
Citigroup Stock with respect to the acquisition of the Rights and to
prevent the possible dilution of the Plans' investments in Citigroup
Stock. The Applicants note that Citigroup Stock itself is a qualifying
employer security and that the acquisition, holding and disposition of
Citigroup Stock in appropriate instances is contemplated by the
statutory scheme of ERISA. The requirement to dispose of the Citigroup
Stock on a retroactive basis would conflict with participants' rights
under
[[Page 9364]]
the terms of the Participant Directed Plans during this period to hold
Citigroup Stock. Additionally, if the Plans held Citigroup Stock but
were not able to exercise the Rights in the event they became
exercisable, the value of their shares would be diluted significantly,
resulting in harm to the Plans.
With respect to the participant's statement that the scope and
purpose of the Proposed Exemption was unclear, the Applicants note that
the Proposed Exemption relates to a complicated tax preservation
vehicle and a technical provision of ERISA. The Applicants, however,
believe that the Proposed Exemption published by the Department, as
well as the Citigroup Comment, provide a clear explanation of why the
Proposed Exemption is in the interests of the Plans and their
participants and beneficiaries.
The Citigroup Comment notes that, under the definition of an
``Independent Fiduciary'' in the Proposed Exemption, the Independent
Fiduciary's compensation cannot be affected in any way by any decision
it makes in connection with the Rights. The Applicants state that
typically an Independent Fiduciary's compensation is a fixed percentage
(or otherwise a function) of the value of the Citigroup Pension Plan's
assets under its management. In the unlikely event that the Rights Plan
is triggered and the Rights become exercisable, the Applicants believe
that the Independent Fiduciary's compensation would be affected by the
Independent Fiduciary's decision in connection with the exercise of the
Rights. By way of example, if the Independent Fiduciary decided not to
exercise the Rights and other stockholders (as would be expected to
avoid dilution of their own stock) did, the value of the Citigroup
Stock that the Citigroup Pension Plan holds would be significantly
diluted and, thus, the value of the assets managed by the Independent
Fiduciary would decrease, resulting in a lower management fee than if
it elected to exercise the Rights.
Although the Independent Fiduciary's compensation would be affected
by its decision regarding the Rights, the Applicants note that the
Independent Fiduciary's discretion is quite limited in these
circumstances. First, any trigger of the Rights Plan would be a result
of the actions of a party unrelated to the Independent Fiduciary.
Second, given that any holder of Citigroup Stock that does not exercise
the Rights would suffer significant dilution, it is difficult for the
Applicant to imagine a situation in which an Independent Fiduciary,
which is bound by fiduciary obligations to the Citigroup Pension Plan,
would elect not to exercise the Rights and allow the Citigroup Pension
Plan to suffer harm in the form of significant dilution of its interest
in Citigroup Stock and, therefore, a significant reduction in the value
of that interest. Thus, the Applicants believe that the fact that the
Independent Fiduciary's compensation may be affected by its decision to
exercise the Rights does not create a conflict of interest and is fully
consistent with the interests of the Citigroup Pension Plan and its
participants and beneficiaries. The Independent Fiduciary's options
would be extremely limited and, in any case, its interests would be
fully aligned with those of the Citigroup Pension Plan. The Applicants
request the Department to modify the definition of Independent
Fiduciary accordingly.
The Department does not believe that any modification to this
definition is necessary since the language of the definition does not
preclude an Independent Fiduciary from receiving compensation that is a
fixed percentage (or otherwise a function) of the value of the
Citigroup Pension Plan's assets under its management. The language in
section III that concerns compensation of the Independent Fiduciary was
designed to preclude third party contingency payments to the
Independent Fiduciary that are dependent on the Independent Fiduciary's
decisions during the management of the plan assets. The language does
not preclude the Independent Fiduciary from receiving ongoing
management fees which are determined as a percentage of the value of
the Citigroup Pension Plan's assets under its management. Rather, the
provision expresses the Department's concern with additional payments
that could influence or have an impact on the decisions of the
Independent Fiduciary. Accordingly, the Department has not made the
Applicant's requested change to the definition of Independent Fiduciary
contained in section III of the Notice.
The Department has given full consideration to the entire record,
including the comments received in response to the Proposed Exemption,
and has determined to grant the exemption.
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 that was published on October 6, 2010
in the Federal Register at 75 FR 61947.
For Further Information Contact: Brian Shiker of the Department,
telephone (202) 693-8540. (This is not a toll-free number.)
TD Ameritrade, Inc. (TD Ameritrade), Located in Omaha, NE
[Prohibited Transaction Exemption 2011-05; Exemption Application No. D-
11592]
Exemption
Section I. Sales of Auction Rate Securities From Plans to TD
Ameritrade: Unrelated to a Settlement Agreement
The restrictions of section 406(a)(1)(A) and (D) and section
406(b)(1) and (2) of the Act and the sanctions resulting from the
application of section 4975 of the Code, by reason of section
4975(c)(1)(A), (D), and (E) of the Code, shall not apply, effective
July 20, 2009, to the sale by a Plan (as defined in Section V(e)) of an
Auction Rate Security (as defined in Section V(c)) to TD Ameritrade,
where such sale (an Unrelated Sale) is unrelated to, and not made in
connection with, a Settlement Agreement (as defined in Section V(f)),
provided that the conditions set forth in Section II have been met.\4\
---------------------------------------------------------------------------
\4\ For purposes of this exemption, references to section 406 of
the Act should be read to refer as well to the corresponding
provisions of section 4975 of the Code.
---------------------------------------------------------------------------
Section II. Conditions Applicable to Transactions Described in Section
I
(a) The Plan acquired the Auction Rate Security in connection with
brokerage services provided by TD Ameritrade to the Plan;
(b) The last auction for the Auction Rate Security was
unsuccessful;
(c) The Unrelated Sale is made pursuant to a written offer by TD
Ameritrade (the Unrelated Offer) containing all of the material terms
of the Unrelated Sale, including, but not limited to: (1) The identity
and par value of the Auction Rate Security; (2) the interest or
dividend amounts that are due with respect to the Auction Rate
Security; and (3) the most recent information for the Auction Rate
Security (if reliable information is available).
(d) The Unrelated Sale is for no consideration other than cash
payment against prompt delivery of the Auction Rate Security;
(e) The sales price for the Auction Rate Security is equal to the
par value of the Auction Rate Security, plus any accrued but unpaid
interest or dividends;
(f) The Plan does not waive any rights or claims in connection with
the Unrelated Sale;
[[Page 9365]]
(g) The decision to accept the Unrelated Offer or retain the
Auction Rate Security is made by a Plan fiduciary or Plan participant
or IRA owner who is independent (as defined in Section V(d)) of TD
Ameritrade.\5\
---------------------------------------------------------------------------
\5\ The Department notes that the Act's general standards of
fiduciary conduct also would apply to the transactions described
herein. In this regard, section 404 of the Act requires, among other
things, that a fiduciary discharge his duties respecting a plan
solely in the interest of the plan's participants and beneficiaries
and in a prudent manner. Accordingly, a plan fiduciary must act
prudently with respect to, among other things, the decision to sell
the Auction Rate Security to TD Ameritrade for the par value of the
Auction Rate Security, plus unpaid interest and dividends. The
Department further emphasizes that it expects Plan fiduciaries,
prior to entering into any of the proposed transactions, to fully
understand the risks associated with this type of transaction
following disclosure by TD Ameritrade of all relevant information.
---------------------------------------------------------------------------
(h) Neither TD Ameritrade nor any affiliate exercises investment
discretion or renders investment advice within the meaning of 29 CFR
2510.3-21(c) with respect to the decision to accept the Unrelated Offer
or retain the Auction Rate Security;
(i) The Plan does not pay any commissions or transaction costs with
respect to the Unrelated Sale;
(j) The Unrelated Sale is not part of an arrangement, agreement or
understanding designed to benefit a party in interest to the Plan;
(k) TD Ameritrade and its affiliates, as applicable, maintain, or
cause to be maintained, for a period of six (6) years from the date of
the Unrelated Sale, such records as are necessary to enable the persons
described below in paragraph (l)(1), to determine whether the
conditions of this exemption, if granted, have been met, except that:
(1) No party in interest with respect to a Plan which engages in an
Unrelated Sale, other than TD Ameritrade and its affiliates, as
applicable, shall be subject to a civil penalty under section 502(i) of
the Act or the taxes imposed by section 4975(a) and (b) of the Code, if
such records are not maintained, or not available for examination, as
required, below, by paragraph (l)(1); and
(2) A separate prohibited transaction shall not be considered to
have occurred solely because, due to circumstances beyond the control
of TD Ameritrade or its affiliates, as applicable, such records are
lost or destroyed prior to the end of the six-year period;
(l)(1) Except as provided below in paragraph (l)(2), and
notwithstanding any provisions of subsections (a)(2) and (b) of section
504 of the Act, the records referred to above in paragraph (k) are
unconditionally available at their customary location for examination
during normal business hours by:
(A) Any duly authorized employee or representative of the
Department, the Internal Revenue Service, or the U.S. Securities and
Exchange Commission;
(B) Any fiduciary of any Plan, including any IRA owner, that
engages in an Unrelated Sale, or any duly authorized employee or
representative of such fiduciary; or
(C) Any employer of participants and beneficiaries and any employee
organization whose members are covered by a Plan that engages in the
Unrelated Sale, or any authorized employee or representative of these
entities;
(2) None of the persons described above in paragraphs (l)(1)(B)-(C)
shall be authorized to examine trade secrets of TD Ameritrade, or
commercial or financial information which is privileged or
confidential; and
(3) Should TD Ameritrade refuse to disclose information on the
basis that such information is exempt from disclosure, TD Ameritrade
shall, by the close of the thirtieth (30th) day following the request,
provide a written notice advising that person of the reasons for the
refusal and that the Department may request such information.
Section III. Sales of Auction Rate Securities From Plans to TD
Ameritrade: Related to a Settlement Agreement
The restrictions of section 406(a)(1)(A) and (D) and section
406(b)(1) and (2) of the Act and the sanctions resulting from the
application of section 4975 of the Code, by reason of section
4975(c)(1)(A), (D), and (E) of the Code shall not apply, effective July
20, 2009, to the sale by a Plan of an Auction Rate Security to TD
Ameritrade, where such sale (a Settlement Sale) is related to, and made
in connection with, a Settlement Agreement, provided that the
conditions set forth in Section IV have been met.
Section IV. Conditions Applicable to Transactions Described in Section
III
(a) The terms and delivery of the offer (the Purchase Offer) are
consistent with the requirements set forth in the Settlement Agreement;
(b) The Purchase Offer or other documents available to the Plan
specifically describe, among other things:
(1) How a Plan may determine: the Auction Rate Securities held by
the Plan with TD Ameritrade; the number of shares and par value of the
Auction Rate Securities; the interest or dividend amounts that are due
with respect to the Auction Rate Securities; purchase dates for the
Auction Rate Securities; and (if reliable information is available) the
most recent rate information for the Auction Rate Securities;
(2) The background of the Purchase Offer;
(3) That neither the tender of Auction Rate Securities nor the
purchase of any Auction Rate Securities pursuant to the Purchase Offer
will constitute a waiver of any claim of the tendering Plan;
(4) The methods and timing by which Plans may accept the Purchase
Offer;
(5) The purchase dates, or the manner of determining the purchase
dates, for Auction Rate Securities tendered pursuant to the Purchase
Offer;
(6) The timing for acceptance by TD Ameritrade of tendered Auction
Rate Securities;
(7) The timing of payment for Auction Rate Securities accepted by
TD Ameritrade for payment;
(8) The methods and timing by which a Plan may elect to withdraw
tendered Auction Rate Securities from the Purchase Offer;
(9) The expiration date of the Purchase Offer;
(10) The fact that TD Ameritrade may make purchases of Auction Rate
Securities outside of the Purchase Offer following the termination or
expiration of the Purchase Offer and may otherwise buy, sell, hold or
seek to restructure, redeem or otherwise dispose of the Auction Rate
Securities;
(11) A description of the risk factors relating to the Purchase
Offer as TD Ameritrade deems appropriate;
(12) How to obtain additional information concerning the Purchase
Offer; and
(13) The manner in which information concerning material amendments
or changes to the Purchase Offer will be communicated to the Plan.
(c) The terms of the Settlement Sale are consistent with the
requirements set forth in the Settlement Agreement; and
(d) All the conditions of Section II have been met.
Section V. Definitions
For purposes of this proposed exemption:
(a) The term ``affiliate'' means any person directly or indirectly,
through one or more intermediaries, controlling, controlled by, or
under common control with such other person;
(b) The term ``control'' means the power to exercise a controlling
influence over the management or policies of a person other than an
individual;
(c) The term ``Auction Rate Security'' means a security: (1) That
is either a debt instrument (generally with a long-term nominal
maturity) or preferred
[[Page 9366]]
stock; and (2) with an interest rate or dividend that is reset at
specific intervals through a Dutch Auction process;
(d) A person is ``independent'' of TD Ameritrade if the person is
(1) not TD Ameritrade or an affiliate; and
(2) not a relative (as defined in section 3(15) of the Act) of the
party engaging in the transaction;
(e) The term ``Plan'' means an individual retirement account or
similar account described in section 4975(e)(1)(B) through (F) of the
Code (an IRA); an employee benefit plan as defined in section 3(3) of
the Act; or an entity holding plan assets within the meaning of 29 CFR
2510.3-101, as modified by section 3(42) of the Act; and
(f) The term ``Settlement Agreement'' means a legal settlement
involving TD Ameritrade and a U.S. state or federal authority that
provides for the purchase of an Auction Rate Security by TD Ameritrade
from a Plan.
Effective Date: This exemption is effective as of July 20, 2009.
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 December 16, 2009 at 75
FR 78768.
For Further Information Contact: Ms. Anna Mpras Vaughan of the
Department, telephone (202) 693-8565. (This is not a toll-free number.)
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 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) This exemption is supplemental to and not in derogation of, any
other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional 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
(3) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 14th day of February, 2011.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2011-3589 Filed 2-16-11; 8:45 am]
BILLING CODE 4510-29-P