# Proposed Exemptions From Certain Prohibited Transaction Restrictions > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2014-27935 ## Record - **Collection:** Federal Register - **Document type:** Notice - **Published:** November 26, 2014 - **Citation:** 79 FR 70624 ## Text DEPARTMENT OF LABOR Employee Benefits Security Administration Proposed Exemptions From Certain Prohibited Transaction Restrictions AGENCY: Employee Benefits Security Administration, Labor. ACTION: Notice of Proposed Exemptions. SUMMARY: This document contains notices of pendency before the Department of Labor (the Department) of proposed exemptions 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 proposed exemptions: D-11750, United Association of Journeymen and Apprentices of the Plumbers and Pipefitters Local Union No. 189 Pension Plan; D-11751, The Camco Financial & Subsidiaries Salary Savings Plan; D-11752, Wells Fargo Company; L-11775, Craftsman Independent Union Local #1 Health, Welfare & Hospitalization Trust Fund; D-11782, Robert W. Baird & Co. Incorporated; D-11826, First Security Group, Inc. 401(k) and Employee Stock Ownership Plan; and, D-11827, BNP Paribas, S.A. DATES: All interested persons are invited to submit written comments or requests for a hearing on the pending exemptions, unless otherwise stated in the Notice of Proposed Exemption, within 45 days from the date of publication of this Federal Register Notice. ADDRESSES: Comments and requests for a hearing should state: (1) The name, address, and telephone number of the person making the comment or request, and (2) the nature of the person's interest in the exemption and the manner in which the person would be adversely affected by the exemption. A request for a hearing must also state the issues to be addressed and include a general description of the evidence to be presented at the hearing. All written comments and requests for a hearing (at least three copies) should be sent to the Employee Benefits Security Administration (EBSA), Office of Exemption Determinations, Room N-5700, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210. Attention: Application No. ____, stated in each Notice of Proposed Exemption. Interested persons are also invited to submit comments and/or hearing requests to EBSA via email or FAX. Any such comments or requests should be sent either by email to: moffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of the scheduled comment period. The applications for exemption and the comments received will be available for public inspection in the Public Documents Room of the Employee Benefits Security Administration, U.S. Department of Labor, Room N-1513, 200 Constitution Avenue NW., Washington, DC 20210. Warning: All comments will be made available to the public. Do not include any personally identifiable information (such as Social Security number, name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments may be posted on the Internet and can be retrieved by most Internet search engines. SUPPLEMENTARY INFORMATION: Notice to Interested Persons Notice of the proposed exemptions will be provided to all interested persons in the manner agreed upon by the applicant and the Department within 15 days of the date of publication in the Federal Register . Such notice shall include a copy of the notice of proposed exemption as published in the Federal Register and shall inform interested persons of their right to comment and to request a hearing (where appropriate). The proposed exemptions were requested in applications filed pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the Code, and in accordance with procedures set forth in 29 CFR part 2570, Subpart B (76 FR 66637, 66644, October 27, 2011). 1 Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. Therefore, these notices of proposed exemption are issued solely by the Department. 1 The Department has considered exemption applications received prior to December 27, 2011 under the exemption procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990). The applications contain representations with regard to the proposed exemptions which are summarized below. Interested persons are referred to the applications on file with the Department for a complete statement of the facts and representations. The United Association of Journeymen and Apprentices of the Plumbers and Pipefitters Local Union No. 189 Pension Plan, as Amended (the Plan) Located in Columbus, Ohio [Application No. D-11750] Proposed Exemption The Department is considering granting an exemption under the authority of section 408(a) of the Act (or ERISA) 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, 66644, October 27, 2011). 2 If the exemption is granted, the restrictions of section 406(a)(1)(A) and (D) and section 406(b)(1) and (b)(2) of the Act and the sanctions resulting from the application of section 4975(c)(1)(A), (D) and (E) of the Code, shall not apply to the proposed sale (Sale) of certain improved real property (the Property) by the Plan to Local #189 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada (the Union), 3 a party in interest with respect to the Plan, provided that the following conditions are satisfied: 2 For purposes of this proposed exemption, references to the provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code. 3 The Plan and the Union are together referred to herein as “the Applicants.” (a) The Sale is a one-time transaction for cash; (b) As consideration, the Plan receives the greater of $2,900,000 or the fair market value of the Property as determined by a qualified, independent appraiser (the Appraiser) in a written appraisal (the Appraisal) of the Property, which is updated on the date of Sale (Sale Date); (c) The Plan pays no commissions, costs or fees with respect to the Sale; (d) The terms and conditions of the Sale are at least as favorable to the Plan as those obtainable in an arm's length transaction with an unrelated party; (e) The Sale has been reviewed and approved by a qualified, independent fiduciary (I/F), who, among other things: has reviewed and approved the methodology used by the Appraiser and has ensured that the appraisal methodology was properly applied in determining the fair market value of the Property; and has determined that it is prudent to go forward with the Sale. Summary of Facts and Representations The Parties 1. The Plan, with offices located in Columbus, Ohio, is a multiemployer defined benefit plan created as of June 1, 1967, to provide retirement and disability benefits to apprentices and journeymen in the plumbing and pipefitting industry. The Plan is maintained pursuant to a collective bargaining agreement between the Union and the Mechanical Contractors Association of Central Ohio, Inc. (the MCACO), an association of central Ohio contractors formed to promote, among other things, cooperation with state and city inspection departments and develop relations between designers and mechanical engineers. As of December 31, 2013, the Plan had 1,587 participants and beneficiaries who were either active, terminated with a vested interest, or retired and in pay status. As of the same date, the Plan had total assets of approximately $130,319,233. 2. The Plan is administered by a Board of Trustees (the Board) consisting of eight members, four of whom are elected by the Union members and four of whom are designated by the MCACO. The Trustees are fiduciaries, as defined in section 3(21) of the Act, and therefore are parties in interest with respect to the Plan, pursuant to section 3(14)(A) of the Act. The Plan's current Trustees elected by the Union are Bill Steinhausser (Board Chairman), Michael Kelly, Kenneth Davis, and James C. Green. Mr. Kelly also serves as the Union's Business Manager and Mr. Davis also serves as the Union's Financial Secretary. The Plan's current Trustees designated by the MCACO are Michael Stemen (Board Secretary), Dennis Shuman, Neil Harfield, and Terry Griffith. For purposes of the proposed Sale, Messrs. Kelly and Davis, who currently serve in dual roles as Trustees and Union officials, have recused themselves from all determinations in connection therewith. The Board employs James A. Wright, the Plan Administrator, to oversee the performance of the routine administrative duties of the Plan. Because the Plan Administrator has discretionary control over a nominal level of Plan assets, he is also a fiduciary under section 3(14)(A) of the Act and a party in interest to the Plan. 3. The Union, which is based in Columbus, Ohio, was chartered in 1899. Members of the Union, except for first-year apprentices, are eligible to participate in the Plan. As an employee organization with members covered by the Plan, the Union is a party in interest with respect to the Plan pursuant to section 3(14)(D) of the Act. The Union represents over 1,500 individuals working in the plumbing and mechanical pipefitting industries within central Ohio. The Property 4. On June 11, 1980, the Plan purchased the Property from Buckeye Telephone, Harold Wirtz and Bob Rice, who were unrelated parties, for $600,000 in cash. The Property consists of approximately 4.868 acres of improved real property located on the north side of Kinnear Road in Clinton Township, Franklin County, Ohio. Although the street address for the Property is 1226 through 1250 Kinnear Road, Columbus, Ohio, the Property is more commonly identified as “1250 Kinnear Road, Columbus, Ohio.” The Plan owns no other real property besides the Property. The Property is improved with a building that was constructed in or about 1951 and remodeled in 1999. The building consists of approximately 37,230 square feet of space. The south and east portions of the building are used as Union offices. The north and west portions of the building have classrooms designed to allow access to training. A large portion of the building is a meeting hall with a stage and a kitchen. There are also some unfinished storage areas. Leasing of the Property 5. On October 30, 1980, the Plan entered into a lease of the Property with the Union (the 1980 Lease) for a 20-year period, effective January 1, 1981. Under the terms of the 1980 Lease, the Union was obligated to: (a) Pay taxes assessed by any governmental taxing authority during the term; (b) maintain insurance on the Property; and (c) maintain the buildings on the Property in good condition at its sole cost and expense. The 1980 Lease was amended several times over the ensuing years. Currently, the Union pays the Plan monthly rent of $10,433.99 or $125,207.89, annually. According to the Applicants, the Plan and the Union have relied on Prohibited Transaction Exemption (PTE) 76-1, 71 FR 12740 (March 26, 1976, as corrected, 41 FR 16620, April 20, 1976) and PTE 77-10, 42 FR 33918 (July 1, 1977) with respect to the 1980 Lease and the amendments to this lease. 4 4 The Department expresses no opinion herein as to whether the conditions of PTEs 76-1 and 77-10 have been met. Plan's Holding Costs and Net Income Related to the Property 6. For the period from January 31, 1981, to March 31, 2014, the Plan incurred total unaudited expenses of $801,109, in connection with the structural maintenance of the Property, as well as expenses related to that portion of the Property that the Plan retained. Such expenses included $670,005 for repairs and maintenance, $84,187 for property tax and administrative office expenses, and $46,917 for utilities, insurance and other expenses. During this same period, the Plan received total rental income of $2,924,898. Therefore, the Plan's net income for this period is $2,123,789. Sale Transaction and Rationale 7. The Applicants request an individual exemption from the Department that would permit the Plan to sell the Property to the Union. The Applicants represent that the Sale is in the interest of the participants and beneficiaries of the Plan for the following reasons. First, the Sale will be a one-time transaction for cash, which will transfer a non-liquid asset from the Plan. Second, the Plan will receive the greater of $2,900,000 or the fair market value of the Property as determined by an Appraiser, and set forth in an Appraisal of the Property, which will be updated on the Sale Date. Third, the Plan will pay no commissions, costs or fees with respect to the Sale. Further, as described in more detail below, the Plan does not want to risk a substantial diminution in the value of the Property if it loses the Union as its tenant, so the Plan wishes to sell the Property, at this time, to the Union while the current value of the Property reflects the fact that it is largely occupied. Following the Sale, the Plan intends to enter into a lease whereby the Union will lease to the Plan the space currently occupied by the Plan. 5 The Applicants represent that the Plan Trustees, who are Union officials, will recuse themselves from any consideration of the proposed sale and leasing arrangement described above, and they will not otherwise exercise any fiduciary authority, control or responsibility in connection with these transactions. 5 According to the Applicants, the lease between the Union and the Plan will be consistent with section 408(b)(2) of the Act and the regulations promulgated thereunder. Request for Exemptive Relief 8. The Applicants are requesting exemptive relief from section 406(a)(1)(A) and (D) of the Act and section 406(b)(1) and (b)(2) of the Act for the Sale of the Property by the Plan to the Union. In this regard, section 406(a)(1)(A) of the Act provides, in part, that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction if he knows or should know that such transaction constitutes a direct or indirect sale of any property between a plan and a party in interest. In addition, section 406(a)(1)(D) of the Act provides that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction if he knows or should know that such transaction constitutes a direct or indirect transfer to or use by or for the benefit of a party in interest of any assets of the plan. Further, section 406(b)(1) of the Act prohibits any fiduciary from dealing with plan assets in his own interest or for his own account. Moreover, section 406(b)(2) of the Act prohibits any fiduciary from acting, in his individual or any other capacity, in any transaction involving the plan on behalf of a party whose interests are adverse to the interests of the plan or its participants or beneficiaries. The term “party in interest” is defined under section 3(14)(A) of the Act to include a fiduciary with respect to the Plan, such as the Trustees, or an employee organization any of whose employees are covered by such plan, as defined under section 3(14)(D), such as the Union. Accordingly, in the absence of a statutory or administrative exemption, the Sale would violate the foregoing provisions of the Act. The Appraisal 9. In an independent appraisal report dated January 31, 2014 (the 2014 Appraisal), Thomas R. Horner, MAI, SRA, ASA (the Appraiser) of Ohio Real Estate Consultants, Inc., updated a July 6, 2012, appraisal (the 2012 Appraisal) that was prepared by his firm, in which the fair market value of the Property in fee simple was placed at $2,650,000, as of July 6, 2012. The Appraiser is President of Ohio Real Estate Consultants, Inc., which is located in Dublin, Ohio. The Appraiser is an Ohio certified general real estate appraiser with approximately 30 years of appraisal experience. The Appraiser is also a member of the Appraisal Institute and the American Society of Appraisers and has served as an expert witness in the Ohio and Michigan judicial systems. 10. The Appraiser represents that he has no present or prospective interest in the Property and has no personal interest with respect to the parties involved. Further, the Appraiser represents that he has derived less than 1% of his annual income from any party in interest involved in the transaction or such party's affiliates for the years 2012, 2013 and 2014. 11. In the 2014 Appraisal, the Appraiser estimated the Property's land value, as if vacant, and compared the land value to the value of the Property, as improved, to determine its highest and best value. The Appraiser did not develop the Income Capitalization Approach to valuation because, among other things, the Property is currently occupied by entities related to the ownership and the rental rates are not considered to reflect market conditions. Likewise, the Appraiser did not develop the Cost Approach to valuation because he determined that the Property's improvements are at or near the end of their useful life. Using the Sales Comparison Approach to valuation for the land value, if vacant, the Appraiser placed the fair market value of the Property in fee simple at $2,900,000 as of January 27, 2014. As of the same date, using the Sales Comparison Approach to valuation for the Property, as improved, the Appraiser placed the fair market value of the improved Property at $2,250,000. 12. The Appraiser considered the Sales Comparison Approach to value the Property's land, if vacant, to be the best indication of the Property's market value because: (a) Most of the comparables have been redevelopment sites and redevelopment continues to occur throughout the neighborhood; and (b) the Property's existing improvements have reached the end of their economic life and no longer contribute value to the Property other than in an interim use. In this regard, the Appraiser represents that the Property is located in an area that is in transition from older industrial uses to high-density residential and high-tech business and research uses. The Appraiser further represents that Ohio State University (OSU) has purchased many buildings in the area for these uses and that The Commons, a multifamily development located just east of the Property, was developed in 2000. Based upon surrounding land uses in the Property's neighborhood, as well as the Kinnear Road engineering and the increased demand for housing created by OSU, the Appraiser believes that a high-density residential use is probable. Taking into consideration those uses that are legally permissible, physically possible and financially feasible, the Appraiser believes that the highest and best use of the Property, if vacant, is for future high-density residential use. 13. Accordingly, after reconciling the Sales Comparison Approach for the land value, if vacant, and the Sales Comparison Approach for the Property, as improved, the Appraiser represents that in his professional opinion the market value, fee simple estate, of the Property, as a whole, in its present condition, in terms of financial arrangements equivalent to cash, “as-is”, as of January 27, 2014, is $2,900,000. The I/F 14. Pursuant to an engagement letter dated March 20, 2013 (the Engagement Letter), SEI Investments Management Corporation (SEI), was retained on behalf of the Plan by the Plan Administrator to serve as the qualified independent fiduciary. SEI provides investment management and advisory services and is a federally registered investment adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940. 15. The I/F estimates that it will receive approximately $1,236,000 from the Plan in 2014 for its institutional fiduciary investment management services, $0 of which is specifically related to the services described herein. 6 The I/F represents that its revenue from all sources related to its institutional fiduciary investment management services (excluding fixed, nondiscretionary retirement income) for 2013 is estimated to be $187,000,000. Therefore, the I/F represents that its revenue from the Plan for its institutional fiduciary investment management services is expected to comprise approximately 0.7% of its estimated annual institutional fiduciary management gross revenue, 0% of which is attributable to services rendered in connection with the proposed Sale. Further, the I/F states that it does not receive any amount from a party in interest to the Plan. 6 The I/F represents that it agreed to provide the services described herein without the receipt of compensation in order to save the Plan the expense of paying for such services and because it expected its engagement to be narrow in scope. 16. The I/F represents that it is qualified to represent the Plan's interests with respect to the Sale because it has a demonstrated strong understanding of fiduciary duties under the Act for the following reasons. First, the I/F states that it already serves as an independent fiduciary of the Plan, overseeing the Plan's investments. In this regard, the I/F states that it is generally responsible for providing guidance to the Plan's Board of Trustees on matters pertaining to the investment of the Plan's assets, including investment selection and monitoring the Plan's performance and compliance with its investment guidelines. Second, the I/F represents that it has general financial management experience in evaluating asset allocations, financial transactions, projected risk and return expectations and certain real estate transactions on behalf of plans gained through its previous fiduciary investment management experience and from overseeing real estate investment trusts. In addition, the I/F represents that it has engaged Morgan, Lewis & Bockius LLP, a law firm that has experience in dealing with matters under the Act's fiduciary responsibility rules, as outside legal counsel to advise the I/F with regard to the exercise of its fiduciary duties with respect to its engagement on this matter to the extent that this engagement is outside of the I/F's typical role for its clients. 17. Pursuant to the Engagement Letter, the I/F agreed to perform certain services on the Plan's behalf with respect to the Sale. Among other things, the I/F agreed to: (a) Analyze the prudence of the proposed Sale, from an investment standpoint, taking into consideration certain things such as the 2014 Appraisal, the Plan's investment guidelines and objectives, and the interests of the Plan and its participants and beneficiaries with respect to any subsequent leasing of the Property; and (b) issue a written report to the Plan that would include, among other things, a complete analysis of the proposed Sale, a determination of whether the proposed Sale is consistent with the Plan's investment guidelines and financial objectives, a determination as to the financial effects of the proposed Sale, and a determination as to whether the proposed Sale is in the interests of and protective of the Plan and its participants and beneficiaries. The I/F is also authorized to take all appropriate actions to safeguard the interests of the Plan in connection with the Sale and, during the pendency of the subject transaction, to: (a) Monitor the transaction on behalf of the Plan on a continuing basis; (b) ensure that the transaction remains in the interest of the Plan and, if not, to take any appropriate actions available under the circumstances; and (c) enforce compliance with all conditions and obligations imposed on any party dealing with the Plan with respect to the Sale. 18. Based on its analysis of the proposed Sale, the I/F has determined that the Sale is in the interests of the Plan and its participants and beneficiaries, and is protective of the rights of such participants and beneficiaries. In the “Report of Independent Fiduciary” (the I/F Report) dated March 25, 2014 (which updated an I/F Report of March 20, 2013), the I/F sets forth the following reasons for its opinion. First, the I/F has analyzed the proposed Sale terms, as well as the Plan's reasons for the proposed Sale, as stated above in Representation 7, which include the Plan's desire to avoid the risk of a substantial diminution in the value of the Property if the Plan should lose the Union as tenant. The I/F notes that the proposed Sale will allow the Plan to sell the Property at a time when its value reflects the fact that it is largely occupied. 19. In addition, the I/F represents that the proposed Sale is consistent with the Plan's investment guidelines. As provided in the Plan's Investment Policy Statement, the I/F states that the primary financial objective is to increase the value of the Plan's assets and a secondary financial objective is to avoid significant downside risk. The I/F represents that the objectives of the Plan must be considered with respect to any investment of the Plan. In particular, the I/F states that consideration must be given to the return and risk expectations of the Plan and how such investment fits within the total portfolio, as well as to the liquidity needs of the Plan. The I/F represents that the current actuarial return assumption of the Plan is 7.50%. The I/F explains that portfolios should be constructed to target expected long-term return of the total portfolio of investments in excess of this target with a reasonable level of annual variation of return. Further, the I/F opines that ownership of the Property inhibits the Plan from the full ability to rebalance its portfolio and to avail itself of liquid assets should it need to do so for outflow purposes. The I/F states that if the Plan should divest itself of the Property and invest the proceeds across its other portfolio asset classes, the Plan would enhance the expected return of the portfolio as a whole while not affecting the risk level of the portfolio (as measured by standard deviation of returns). The I/F represents that this action would also provide additional liquidity to the Plan by exchanging the investment in a single property for the investment in a collective trust holding many properties or for other diversified fund asset classes within the portfolio. 20. Finally, the I/F confirms that it has reviewed the methodology used by the Appraiser in the 2014 Appraisal and that the methodology is consistent with industry standards in the valuation of commercial properties of this type. The I/F therefore agrees that the Appraiser's methodology has been properly applied to arrive at the Property's fair market value. Summary 21. In summary, the Applicants represent that the Sale will satisfy the statutory requirements for an exemption under section 408(a) of the Act because: (a) The Sale will be a one-time transaction for cash; (b) As consideration, the Plan will receive the greater of $2,900,000, or the fair market value of the Property as determined by the Appraiser in a written Appraisal of the Property, which is updated on the Sale Date; (c) The Plan will pay no commissions, costs, or fees; (d) The terms and conditions of the Sale will be at least as favorable to the Plan as those obtainable in an arm's length transaction with an unrelated party; and (e) The Sale has been reviewed and approved by an I/F, who, among other things: Has reviewed and approved the methodology used by the Appraiser, and has ensured that such methodology was properly applied in determining the fair market value of the Property; and has determined that it is prudent to go forward with the Sale. Notice to Interested Parties Notice of the proposed exemption (consisting of a copy of the proposed exemption, as published in the Federal Register , and the supplemental statement required by 29 CFR 2570.43(b)(2), (together, the Notice)) will be given to interested persons within 15 days of the publication of the Notice in the Federal Register . The Notice will be given to interested persons by posting in the Union hall for active Plan participants and by first class mail for inactive Plan participants. Active Plan participants are those Plan participants for whom a participating employer contributed to the Plan within the 60 days before the Notice is distributed. Inactive Plan participants are those participants for whom a participating employer is not currently contributing under a collectively bargained agreement, and includes any deferred vested participant (i.e, a participant who is not drawing retirement benefits and for whom no contributions are being made by a participating employer, either because they are not working or because they are working for a non-contributing employer) and any retiree (a participant who is currently drawing retirement benefits). Written comments are due within 45 days of the publication of the Notice in the Federal Register . All comments will be made available to the public. Warning: Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments may be posted on the Internet and can be retrieved by most Internet search engines. FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the Department at (202) 693-8565. (This is not a toll-free number.) The Camco Financial & Subsidiaries Salary Savings Plan (the Plan) and Huntington Bancshares, Inc. (Huntington) Located in Cambridge, OH and Columbus, OH [Application No. D-11751] Proposed Exemption The Department is considering granting an exemption under the authority of section 408(a) of the Employee Retirement Income Security Act of 1974, as amended, (the Act or ERISA) and section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code), and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011). Section I: Transactions If the proposed exemption is granted, the restrictions of sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407(a)(1)(A) of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of sections 4975(c)(1)(A) and (E) of the Code, 7 shall not apply to the acquisition and holding of certain warrants (the Warrants) by the individually-directed account(s) (the Account(s)) of certain participant(s) in the Plan in connection with an offering (the Offering) of shares of common stock (the Stock) of Camco Financial Corporation (Camco), the sponsor of the Plan and a party in interest with respect to the Plan. 7 For purposes of this proposed exemption, references to specific provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code. Section II: Proposed Conditions (a) The Accounts acquired the Warrants in connection with the exercise of subscription rights (the Rights) to purchase Stock by the Plan's directed trustee (the Directed Trustee) on behalf of Plan participants; (b) Each stockholder, including each of the Accounts holding Stock on behalf of Plan participants, received the same proportionate number of Rights based on the number of shares of Stock held as of July 29, 2012 (the Record Date), and the same proportionate number of Warrants based on the number of Rights exercised during the Offering; (c) The Plan participant whose Account received the Warrants made, or will make, all decisions with respect to the holding or exercise of such Warrants; (d) The Plan did not pay, nor will it pay, any brokerage fees, commissions, or other fees or expenses to any related broker in connection with the acquisition, holding, and/or exercise of the Rights or Warrants; (e) The acquisition of the Rights by the Accounts resulted from an independent corporate act of Camco; and (f) The Rights and Warrants were acquired pursuant to and in accordance with, provisions under the Plan for individually directed investments of the Accounts holding Stock on behalf of Plan participants. Effective Date: This proposed exemption, if granted, will be effective from November 1, 2012, until the Warrants are exercised or expire. Summary of Facts and Representations 8 8 The Summary of Facts and Representations is based on the Applicants' representations and does not reflect the views of the Department, unless indicated otherwise. Background 1. The Camco Financial & Subsidiaries Salary Savings Plan (the Plan) and Huntington Bancshares Incorporated (Huntington, and together with the Plan, the Applicants) request the prohibited transaction exemption proposed herein. At the time of the transaction described herein, Camco Financial Corporation (Camco), the original sponsor of the Plan, was engaged in the financial services business in Ohio, Kentucky, and West Virginia through its wholly-owned subsidiary, Advantage Bank (Advantage). Advantage is an Ohio savings bank that operates branch offices in Ohio, Kentucky, and West Virginia. The Applicants represent that on October 9, 2013, Camco entered into a definitive agreement with Huntington, by which Huntington acquired Camco and Advantage in a cash and stock transaction (the Acquisition) that allowed Camco shareholders to receive, in exchange for each of their Camco shares, either a fractional share of Huntington stock or $6.00 per Camco share. The Applicants represent that Camco filed proxy materials describing the proposed merger with the SEC and distributed those materials to its shareholders. 2. The Plan is a 401(k) plan qualified under section 401(a) of the Internal Revenue Code of 1986, as amended (the Code) and intended to comply with ERISA section 404(c) with respect to accounts subject to participant investment direction. Camco established the Plan on February 1, 1987. The Plan was taken over by Huntington in connection with the Acquisition and has not been merged into any other plans sponsored by Huntington. The Applicants represent that the Plan, as amended and restated, operates in compliance with applicable Code requirements. As of December 31, 2011, approximately 249 participants had account balances in the Plan and total combined assets of approximately $9,374,142. The fair market value of the Plan's shares of Camco common stock (the Stock) as of December 31, 2011, was $288,615, which represented approximately 3% of the Plan's total assets. 3. Prior to the Acquisition, all employees of Camco and Advantage were eligible to participate in the Plan, which allows each participant to choose the investments in his or her Account. Prior to 2008, Camco made profit-sharing contributions to the Plan on behalf of participants, portions of which were automatically invested in shares of the Stock, but the Plan was amended effective January 1, 2009, to make all accounts fully participant-directed. Each Plan participant could choose from a variety of investment options, including any combination of mutual funds, Camco common stock, common/collective funds, and other investment securities. 9 Therefore, starting in 2009, any Plan participant who chose to invest in the Stock did so voluntarily. The Applicants represent that the Stock was a “qualifying employer security” as defined under section 407(d)(5) of ERISA and section 4975(e) of the Code. 9 The Plan's directed trustee, Charles Schwab Trust Company or its affiliates, manage certain investment funds offered within the Plan. 4. Prior to the Acquisition, the Plan was administered by Camco, which adopted an investment policy that provided for a Plan committee called the “401(k) Retirement Planning Committee” (the Committee). The Committee met periodically (typically at least twice a year) and monitored and selected the investment options under the Plan. Jim Huston, Camco's Chairman, CEO, and President, was a member of the Committee. The MOU, Consent Order, and Rights Offering 5. Camco was regulated by the Federal Reserve Board (FRB), and Advantage is primarily regulated by the State of Ohio Department of Commerce, Division of Financial Institutions (the Ohio Division) and the Federal Deposit Insurance Corporation (FDIC). The Applicants state that on March 4, 2009, Camco entered into a Memorandum of Understanding (MOU) with the FRB that prohibits Camco from: (1) Declaring or paying dividends to stockholders; and (2) repurchasing the Stock without the prior written approval of the FRB. On August 5, 2009, Camco and the FRB entered into a written agreement that required Camco to obtain FRB approval prior to: (1) Declaring or paying dividends; (2) receiving dividends or any other form of payment representing a reduction in capital from Advantage; (3) making distributions of interest, principal, or other sums or subordinated debentures or trust preferred securities; (4) incurring, increasing, or guaranteeing any debt; or (5) repurchasing any Camco stock. The written agreement also required Camco to develop a capital plan and submit it to the FRB for approval. On February 9, 2012, the FDIC and the Ohio Division executed a Consent Order, which required Advantage to, among other things: (1) Raise its Tier 1 Leverage Capital ratio to 9%; (2) raise its total Risk-Based Capital ratio to 12%; and (3) seek regulatory approval prior to declaring or paying any cash dividend. 6. According to the Applicants, the Camco board of directors chose to raise equity capital through a rights offering (the Offering) in order to improve Advantage's capital position, retain additional capital at Camco, and give stockholders the opportunity to limit ownership dilution by buying additional shares of the Stock. Camco's Offering commenced on September 24, 2012. Through the Offering, Camco offered up to 5,714,286 shares of the Stock at a subscription price of $1.75 per share (the Subscription Price). 7. The Applicants state that on or about September 26, 2012, Camco sent detailed information regarding the Rights Offering to each Plan participant. In this regard, the Applicants represent that Plan participants were provided with a copy of the prospectus that described the Offering, a Q&A entitled “Important Information Regarding the Rights Offering for Plan Participants,” an election form, a return envelope addressed to Camco, and a statement indicating the number of shares of Stock each participant held in his or her Account, as of the Record Date. Camco informed stockholders that the proceeds from the Offering would be used to improve Advantage's capital position and to retain additional capital at Camco. Additionally, Camco informed stockholders that even if the Offering was fully subscribed, Advantage would not meet the Consent Order's capital requirements. 8. Under the terms of the Offering, all stockholders, including the Plan participants whose Accounts held shares of the Stock, received at no charge, non-transferable subscription rights (the Rights) to purchase their share of $10 million worth of the Stock. Stockholders could execute their Rights through a “basic subscription privilege” and an “oversubscription privilege.” The “basic subscription privilege” gave each stockholder the opportunity to purchase one share of Stock, for $1.75 per share (the Subscription Price), for every one share of Stock owned as of July 29, 2012 (the Record Date). The Applicants state further that, if a stockholder exercised all of his or her Rights through the basic subscription privilege, that stockholder was also entitled to an “over-subscription privilege,” which allowed the stockholder to purchase a proportional share of the Stock that was not subscribed for by other stockholders under their basic subscription privileges. 9. The Applicants represent that for every two Rights a stockholder exercised, the stockholder received one Warrant to purchase one share of Stock at a future date for $2.10 per share. The Applicants represent that the Warrants are exercisable for a period of five years from the close of the Offering. The Applicants state further that the Warrants are not transferrable, except: (1) By will or the laws of descent and distribution upon a Warrant holder's death; and (2) through a distribution of Warrants to a Plan participant whose Account holds the Warrants, assuming that particular participant is eligible to receive a distribution. Moreover, the Applicants state that Camco did not issue any fractional Warrants; instead, Camco rounded the number of Warrants down. Furthermore, the number of shares for which Warrants may be exercised and the exercise price applicable to the Warrants would be proportionately adjusted if Camco paid dividends on the Stock or made a distribution of common stock, or subdivided, combined, or reclassified outstanding shares of common stock such as through a stock split or a reverse stock split. The Applicants represent further that any shares of Stock purchased upon exercise of the Warrants held by a Plan participant's Account would be allocated to a common stock investment option where it would remain subject to further investment direction from the Plan participant. 10. The Offering was originally scheduled to close on October 31, 2012, at 5:00 p.m. Eastern Time. Camco reserved the right to extend the Offering one or more times, but in no event later than December 31, 2012. The Offering was extended one day due to Hurricane Sandy and officially closed on November 1, 2012, at 5:00 p.m. EST. The Applicants represent that the Rights Offering was fully subscribed so that Camco received gross proceeds of $10,000,000 and net proceeds estimated at $9,361,000. 10 10 The Applicants represent that expenses related to the Rights Offering included: Legal fees, accounting fees, printing and mailing fees, subscription/escrow/warrant agent fees, and financial advisor fees. Early Exercise 11. The Applicants explain that each Plan participant who desired to exercise Rights was required to make an election to exercise any or all of the Rights in his or her Account. According to the Applicants, the Directed Trustee had to aggregate all such elections and place a single order to exercise Rights on behalf of the Plan as a whole, through a process known as an “early exercise.” 11 The early exercise required Plan participants to place orders to exercise his or her Account's Rights by the close of business on the fifth business day prior to the close of the Offering ( i.e., October 24, 2012, at 5:00 p.m. EST) so that the Directed Trustee had enough time to combine all of the orders. Additionally, Camco informed all stockholders that their election to exercise the Rights was irrevocable. According to the Applicants, in order to protect Plan participants from a drop in the stock price between October 24, 2012 (Plan participant's early election date), and November 1, 2012, (the close of the Offering), Camco informed Plan participants that the Directed Trustee would not place the order if the closing price of the Stock was below the Subscription Price on October 31, 2012, the business day immediately before the Offering closed. 11 The Applicants note that brokers and stockholders who hold shares for the benefit of third parties commonly utilize this process. 12. The Applicants represent that on October 31, 2012, there was a discrepancy with respect to the Stock's closing price, as reported on NASDAQ. According to the Applicants, over the course of the day, the Stock traded between $1.65 and $1.90 per share. The Applicants contend that after the markets closed, Jim Huston and the Plan's counsel checked the NASDAQ official Web site, which indicated an “Official Close Price” of $1.85. The Applicants note that The Standard, the Plan's recordkeeper, also used its internal systems to verify that the closing price was $1.85 and informed the Directed Trustee that it could submit the Plan's order to exercise the Rights. 12 Then, according to the Applicants, on November 1, 2012, Camco's financial advisor for the Offering, Paracap Group LLC (Paracap), and Camco's attorney noted that the Web sites for SNL Financial and Yahoo! showed the closing price as $1.70. Additionally, on November 1, 2012, Paracap was aware that NASDAQ's Web site also showed the closing price as $1.70. However, according to the Applicants, the internal computer terminal of a Paracap analyst continued to show the closing price of the Stock as $1.85. Ultimately, the Directed Trustee deferred to Camco and The Standard's reliance on $1.85 as the closing price and caused the Plan to participate in the Offering by exercising the Rights on behalf of electing participants. Accordingly, the Plan purchased and allocated 941,909 shares of Stock and 470,946 Warrants to the Accounts of 47 Plan participants. The Plan paid $1,648,340.75 for the Stock in connection with the Offering, or roughly 16% of the $10 million available in the Offering. 12 The Applicants explain that The Standard uses only the official NASDAQ closing price when reporting prices for the Stock held by the Plan, and The Standard did not contact anyone at NASDAQ in connection with its interpretation. 13. After the Offering closed, Plan fiduciaries contacted a NASDAQ employee at the NASDAQ Market Intelligence Desk (the Representative) for an explanation of the price discrepancy. The Applicants represent that the Representative explained that the NASDAQ Official Closing Price is the last trade that occurs on the NASDAQ platform whereas the “Previous Close” is based on the last trade across all places where the Stock is traded. 13 According to the Applicants, the Representative confirmed that the last trade on the NASDAQ platform on October 31, 2012, was for $1.85, but there were two later trades on another exchange. Notably, the last trade of the day on October 31, 2012, was for $1.70 per share. 14 Consequently, the Directed Trustee and other Plan fiduciaries caused the Plan to participate in the Offering despite the fact that the Stock's closing price was below $1.75 on October 31, 2012. As described in further detail in paragraph 18, Camco filed a form 5330 with the IRS with respect to the Plan's acquisition and holding of the Rights. 13 The Stock was traded on 11 exchanges: (1) NASDAQ Stock Market, (2) NASDAQ BX, (3) NASDAQ PSX, (4) Archipelago, (5) National, (6) Bats, (7) Bats Y, (8) DirectEdge EDGA, (9) DirectEdge EDGX, (10) CBOE Stock Exchange, and (11) the Chicago Stock Exchange. Trades that occur off exchanges are reported to NASDAQ via two trade reporting facilities, the FINRA/NASDAQ TRF and FINRA/NYSE TRF. 14 The Department notes that the NASDAQ now reports $1.70 as the closing price for October 31, 2012. Exercise of the Rights and Acquisition of the Warrants 14. The Applicants explain that each Plan participant was instructed to transfer assets in his or her Account into a specially designated investment alternative, the Morley Stable Value Fund (the Fund), in order to purchase the Stock. The Applicants state that if a Plan participant's Account did not hold sufficient assets in the Fund, the Directed Trustee exercised the participant's request to the fullest extent possible based on the cash value of the participant's Fund. 15. The Applicants state that Camco's subscription agent, Registrar and Transfer Company (Registrar), issued the purchased shares of Stock to each subscriber, along with any excess payment from the subscriber, and forwarded the payments to Camco. According to the Applicants, Camco issued the Stock and accompanying Warrants to stockholders, including the Plan, on November 7, 2012. 16. The Applicants represent that Camco paid all expenses associated with the Offering, and the Plan paid no brokerage fees, commissions, subscription fees, or other charges with respect to the acquisition, holding, or exercise of the Rights, Warrants, or Stock. 17. The Applicants also represent that upon completion of the Acquisition, Huntington assumed the Camco Warrant Agreement, dated November 2, 2012, between Camco and Registrar, and each outstanding Warrant was converted into a warrant to purchase Huntington common stock, as adjusted based on an exchange ratio of 0.7264 Huntington warrants for each Camco warrant. Requested Relief 18. The Applicants originally requested retroactive exemptive relief to cover the Plan's acquisition and holding of both the Rights and the Warrants. However, given the uncertainty regarding whether the proper closing price was used for purposes of the Plan's acquisition and holding of the Rights, as discussed above, Camco filed a Form 5330 with the IRS disclosing a prohibited transaction with no related loss amount. 15 Therefore, the Department is proposing relief only for the acquisition and holding of the Warrants (the Warrants Transaction). 15 The Department is taking no view herein regarding whether Camco properly filed the Form 5330, including properly reporting such loss amount. 19. The Applicants explain that the Warrants Transaction constitutes the acquisition and holding of “employer securities” as defined under section 407(d)(1) of the Act. However, the Warrants do not satisfy the definition of “qualifying employer securities” as defined under section 407(d)(5) of the Act because they are not stock or marketable securities. Under section 407(a)(1)(A) of the Act, a plan may not acquire or hold any “employer security” which is not a “qualifying employer security.” Moreover, section 406(a)(1)(E) of the Act prohibits the acquisition, on behalf of a plan, of any “employer security in violation of section 407(a) of the Act.” Finally, section 406(a)(2) of the Act prohibits a fiduciary who has authority or discretion to control or manage the assets of a plan to permit the plan to hold any “employer security” that violates section 407(a) of the Act. Therefore, the acquisition and holding of the Warrants constitute prohibited transactions in violation of sections 406(a)(1)(E) and 406(a)(2) of the Act. 20. Additionally, the Applicants explain that other provisions of the Act that are implicated by the Warrants Transaction include section 406(a)(1)(A) of the Act and the fiduciary self-dealing and conflict of interest provisions of section 406(b)(1) and (b)(2) of the Act. In relevant part, section 406(a)(1)(A) of the Act provides that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction if the fiduciary knows or should know that the transaction is a prohibited sale or exchange of any property between a plan and a party in interest. Because the Plan fiduciaries acquired the Warrants on behalf of Plan participants through the exercise of the Rights in the Offering, the Warrants Transaction also constituted a sale or exchange of property between a Plan and a party in interest, in violation of section 406(a)(1)(A) of the Act. Section 406(b)(1) of the Act prohibits a fiduciary from dealing with the assets of a plan in his own interest or for his own account. Section 406(b)(2) of the Act prohibits a fiduciary with respect to a plan from acting in any transaction involving the plan on behalf of a party, or represent a party, whose interests are adverse to the interests of the plan or its participants and beneficiaries. In causing the Plan to engage in the Warrants Transaction, the Plan fiduciaries may have violated sections 406(b)(1) and 406(b)(2) of the Act. Therefore, the Applicants request that the Department grant an exemption from the prohibitions of sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407(a)(1)(A) of the Act, and the sanctions resulting from the application of section 4975 of the Code, by reason of sections 4975(c)(1)(A) and (E) of the Code, for the Warrants Transaction. 21. The Applicants state that the acquisition of the Warrants has been completed, and although all Accounts that received the Warrants could have held the Warrants until exercised for Stock or until the Warrants expire, five years from the date that the Offering closed, some Plan participants may have already exercised some or all of their Accounts' Warrants. The Applicants requested retroactive relief because Camco sought to comply with the Consent Order with the FDIC and the Ohio Division. Therefore, according to the Applicants, Camco determined that it was in the best interest of all its stockholders, including the Plan, to issue the Rights as soon as possible after the Securities and Exchange Commission approved the Offering documents. Moreover, because of the tight time frame, Camco decided not to wait for a granted exemption before it completed the Offering. Statutory Findings 22. The Applicants represent that the proposed exemption with respect to the Warrants is administratively feasible because all shareholders of Camco, including the Plan, were, and will be treated in the same manner with respect to any acquisition, holding and exercise or other disposition of the Warrants. 23. The Applicants represent that the proposed exemption for the acquisition and holding of the Warrants by the Plan is in the interest of and beneficial to the Plan and to the participants and beneficiaries of the Plan. The Applicants explain that to the extent that the Plan is a shareholder, the Offering and subsequent issuance of Warrants was designed to: (1) Strengthen the financial condition of Camco by improving its capital position; and (2) give shareholders the opportunity to limit ownership dilution by buying additional shares of the Stock. The Applicants represent that Camco's ability to achieve these objectives had significant value to its shareholders, including the Plan. Moreover, the Applicants explain that participants and beneficiaries whose Accounts received the Warrants have been provided with the opportunity to acquire additional equity in Camco at a discount and either: (1) Have exercised the Warrants to purchase the Stock for less than its fair market value; or (2) have the potential opportunity to exercise the Warrants to purchase the Stock for less than its fair market value. 24. The Applicants represent that the proposed exemption is protective of the rights of the participants and beneficiaries of the Plan because decisions with regard to the acquisition, holding and exercise or other disposition of the Warrants were made, and will be made, by each Plan participant in accordance with the provisions under the Plan for individually-directed accounts. Summary 25. In summary, the Applicants state that the proposed exemption satisfies the statutory criteria for an exemption under section 408(a) of ERISA and section 4975(c)(2) of the Code because: (a) The Accounts acquired the Warrants in connection with the exercise of the Rights by the Directed Trustee on behalf of Plan participants; (b) Each stockholder, including each of the Accounts holding Stock on behalf of Plan participants, received the same proportionate number of Rights based on the number of shares of Stock held as of the Record Date and the same proportionate number of Warrants based on the number of Rights exercised during the Offering; (c) The Plan participant whose Account received the Warrants made or will make all decisions with respect to the holding or exercise of such Account's Warrants; (d) The Plan did not pay, nor will it pay, any brokerage fees, commissions, or other fees or expenses to any related broker in connection with the acquisition, holding, and/or exercise of the Rights or Warrants; (e) The acquisition of the Rights by the Accounts resulted from an independent corporate act of Camco; and (f) The Rights and Warrants were acquired pursuant to and in accordance with, provisions under the Plan for individually directed investments of the Accounts holding Stock on behalf of Plan participants. Notice to Interested Persons The Applicants will provide notice of the proposed exemption to all Plan participants within fifteen (15) days of the date of publication of the proposed exemption in the Federal Register . The Applicants will provide the notice by email to all Plan participants who are actively employed by Huntington in accordance with the Department's procedures for electronic disclosure to active employees under 29 CFR 520.104b-1(c). The Applicants will provide notice to all other Plan participants, including individuals who were Plan participants at the time of the Offering, via first-class mail. In addition to the proposed exemption, as published in the Federal Register , the Applicants will provide Plan participants with a supplemental statement, as required, under 29 CFR 2570.43(a)(2). The supplemental statement will inform the Plan participants of their right to comment on and to request a hearing with respect to this proposed exemption. The Department must receive all written comments and/or requests for a hearing within 45 days of the publication of this proposed exemption in the Federal Register . All comments will be made available to the public. Warning: Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments may be posted on the Internet and can be retrieved by most Internet search engines. FOR FURTHER INFORMATION CONTACT: Mr. Erin S. Hesse of the Department, telephone (202) 693-8546. (This is not a toll-free number.) Wells Fargo Company (WFC), Located in San Francisco, California [Application No. D-11752] Proposed Exemption The Department of Labor (the Department) is considering granting an exemption under the authority of section 408(a) of the Act and section 4975(c)(2) of the Code, as amended, and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011). 16 16 For purposes of this proposed exemption references to specific provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code. Section I. Covered Transactions If the proposed exemption is granted, the restrictions of section 406(a)(1)(A) and (D), and section 406(b) 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), (E), and (F) of the Code, shall not apply to the purchase of certain securities (the Securities), as defined in Section V(j), during the existence of an underwriting or selling syndicate with respect to such Securities by an asset management affiliate of WFC (the Asset Manager(s)), as defined in Section V(f), from any person other than such Asset Manager, where the Asset Manager purchases such Securities, as a fiduciary: (1) On behalf of an employee benefit plan or employee benefit plans (Client Plan(s)), as defined in Section V(g); or (2) on behalf of Client Plans and/or In-House Plan(s), as defined in Section V(m), which are invested in a pooled fund or in pooled funds (Pooled Fund(s)), as defined in Section V(h), under the following circumstances: (a) Where a broker-dealer affiliated with WFC (an Affiliated Broker-Dealer), as defined in Section V(d), is a manager or member of such syndicate (an affiliated underwriter transaction (AUT)); or (b) Where an Affiliated Broker-Dealer is a manager or member of such syndicate and a servicer affiliated with WFC (an Affiliated Servicer), as defined in Section V(n), serves as servicer of a trust that issues commercial mortgage backed securities (CMBS), as defined in Section V(r), including servicing one or more of the commercial mortgage backed loans in such trust (an affiliated underwriter and affiliated servicer transaction (AUT and AST)); or (c) Where an Affiliated Servicer serves as servicer of a trust that issues CMBS, including servicing one or more of the commercial mortgage backed loans in such trust (AST); or (d) Where a trustee affiliated with WFC (an Affiliated Trustee), as defined in Section V(o), serves as trustee of a trust that issues the Securities (whether or not debt securities) or serves as indenture trustee of Securities that are debt securities (an affiliated trustee transaction (ATT)); or (e) Where an Affiliated Broker-Dealer is a manager or member of such syndicate and where an Affiliated Trustee serves as trustee of a trust that issues the Securities (whether or not debt securities) or serves as an indenture trustee of Securities that are debt Securities (an affiliated underwriter and affiliated trustee transaction (AUT and ATT). Section II. Conditions for Transactions Described in Section I(A), (B), (D) and (E) The transactions described in Section I(a), (b), (d), and (e) are conditioned upon satisfaction of the general conditions, as set forth in Section IV, and upon satisfaction of the following requirements: (a)(1) In the case of a transaction described in Section I(b), the Securities to be purchased are CMBS, as defined in Section V(r). In the case of transactions described in Section I(a), (d), and (e) the Securities to be purchased are either— (i) Part of an issue registered under the Securities Act of 1933 (the 1933 Act) (15 U.S.C. 77a et seq. ). If the Securities to be purchased are part of an issue that is exempt from such registration requirement, such Securities: (A) Are issued or guaranteed by the United States or by any person controlled or supervised by and acting as an instrumentality of the United States pursuant to authority granted by the Congress of the United States; (B) Are issued by a bank; (C) Are exempt from such registration requirement pursuant to a federal statute other than the 1933 Act; or (D) Are the subject of a distribution and are of a class which is required to be registered under section 12 of the Securities Exchange Act of 1934 (the 1934 Act) (15 U.S.C. 781), and are issued by an issuer that has been subject to the reporting requirements of section 13 of the 1934 Act (15 U.S.C. 78m) for a period of at least ninety (90) days immediately preceding the sale of such Securities and that has filed all reports required to be filed thereunder with the Securities and Exchange Commission (SEC) during the preceding twelve (12) months; or (ii) Part of an issue that is an eligible Rule 144A offering (Eligible Rule 144A Offering), as defined in SEC Rule 10f-3 (17 CFR 270.10f-3(a)(4)). 17 Where the Eligible Rule 144A Offering of the Securities is of equity securities, the offering syndicate shall obtain a legal opinion regarding the adequacy of the disclosures in the offering memorandum; 17 SEC Rule 10f-3(a)(4), 17 CFR 270.10f-3(a)(4), states that the term, “Eligible Rule 144A Offering” means an offering of securities that meets the following conditions: (i) The securities are offered or sold in transactions exempt from registration under section 4(2) of the 1933 Act [15 U.S.C. 77d(d)], rule 144A thereunder [§ 230.144A of this chapter], or rules 501-508 thereunder [§§ 230.501-230-508 of this chapter]; (ii) The securities are sold to persons that the seller and any person acting on behalf of the seller reasonably believe to include qualified institutional buyers, as defined in § 230.144A(a)(1) of this chapter; and (iii) The seller and any person acting on behalf of the seller reasonably believe that the securities are eligible for resale to other qualified institutional buyers pursuant to § 230.144A of this chapter. (2) The Securities to be purchased are purchased prior to the end of the first day on which any sales are made, pursuant to that offering, at a price that is not more than the price paid by each other purchaser of the Securities in that offering or in any concurrent offering of the Securities, except that— (i) If such Securities are offered for subscription upon exercise of rights, they may be purchased on or before the fourth day preceding the day on which the rights offering terminates; or (ii) If such Securities are debt securities, they may be purchased at a price that is not more than the price paid by each other purchaser of the Securities in that offering or in any concurrent offering of the Securities and may be purchased on a day subsequent to the end of the first day on which any sales are made, pursuant to that offering, provided that the interest rates, as of the date of such purchase, on comparable debt securities offered to the public subsequent to the end of the first day on which any sales are made and prior to the purchase date are less than the interest rate of the debt Securities being purchased; and (3) The Securities to be purchased are offered pursuant to an underwriting or selling agreement under which the members of the syndicate are committed to purchase all of the Securities being offered, except if— (i) Such Securities are purchased by others pursuant to a rights offering; or (ii) Such Securities are offered pursuant to an over-allotment option. (b) The issuer of the Securities to be purchased must have been in continuous operation for not less than three (3) years, including the operation of any predecessors, unless the Securities to be purchased— (1) Are non-convertible debt securities rated in one of the four highest rating categories by a rating agency (a Rating Agency or collectively, Rating Agencies), as defined in Section V(q); provided that none of the Rating Agencies rates such securities in a category lower than the fourth highest rating category; or (2) Are debt securities issued or fully guaranteed by the United States or by any person controlled or supervised by and acting as an instrumentality of the United States pursuant to authority granted by the Congress of the United States; or (3) Are debt securities which are fully guaranteed by a person (the Guarantor) that has been in continuous operation for not less than three (3) years, including the operation of any predecessors, provided that such Guarantor has issued other securities registered under the 1933 Act; or if such Guarantor has issued other securities which are exempt from such registration requirement, such Guarantor has been in continuous operation for not less than three (3) years, including the operation of any predecessors, and such Guarantor: (i) Is a bank; or (ii) Is an issuer of securities which are exempt from such registration requirement, pursuant to a Federal statute other than the 1933 Act; or (iii) Is an issuer of securities that are the subject of a distribution and are of a class which is required to be registered under section 12 of the 1934 Act (15 U.S.C. 781), and are issued by an issuer that has been subject to the reporting requirements of section 13 of the 1934 Act (15 U.S.C. 78m) for a period of at least ninety (90) days immediately preceding the sale of such securities and that has filed all reports required to be filed hereunder with the SEC during the preceding twelve (12) months. (c) The aggregate amount of Securities of an issue purchased by the Asset Manager with the assets of all Client Plans, and the assets, calculated on a pro rata basis, of all Client Plans and In-House Plans investing in Pooled Funds managed by the Asset Manager, and the assets of plans to which the Asset Manager renders investment advice within the meaning of 29 CFR 2510.3-21(c) does not exceed: (1) 10 percent (10%) of the total amount of the Securities being offered in an issue, if such Securities are equity securities; or (2) 35 percent (35%) of the total amount of the Securities being offered in an issue, if such Securities are debt securities rated in one of the four highest rating categories by at least one of the Rating Agencies; provided that none of the Rating Agencies rates such Securities in a category lower than the fourth highest rating category; and (3) The assets of any single Client Plan (and the assets of any Client Plans and any In-House Plans investing in Pooled Funds) may not be used to purchase any Securities being offered, if such Securities are debt securities rated lower than the fourth highest rating category by any of the Rating Agencies; and (4) Notwithstanding the percentage of Securities of an issue permitted to be acquired, as set forth in Section II(c)(1), and (2), the amount of Securities in any issue (whether equity or debt securities) purchased pursuant to transactions described in Section I(a), (b), (d), and (e) by the Asset Manager on behalf of any single Client Plan, either individually or through investment, calculated on a pro rata basis, in a Pooled Fund may not exceed three percent (3%) of the total amount of such Securities being offered in such issue, and; (5) If purchased in an Eligible Rule 144A Offering, the total amount of the Securities being offered for purposes of determining the percentages described in Section II(c)(1),(2) and (4) is the total of: (i) The principal amount of the offering of such class of Securities sold by underwriters or members of the selling syndicate to “qualified institutional buyers” (QIBs), as defined in SEC Rule 144A (17 CFR 230.144A(a)(1)); plus (ii) The principal amount of the offering of such class of Securities in any concurrent public offering. (d) The aggregate amount to be paid by any single Client Plan in purchasing any Securities described in Section I(a), (b), (d), and (e), including any amounts paid by any Client Plan or In-House Plan in purchasing such Securities through a Pooled Fund, calculated on a pro-rata basis, does not exceed three percent (3%) of the fair market value of the net assets of such Client Plan or In-House Plan, as of the last day of the most recent fiscal quarter of such Client Plan or In-House Plan prior to such transaction. (e) If the transaction is an AUT as described in Section I(a), (b), and (e), the Affiliated Broker-Dealer does not receive, either directly, indirectly, or through designation, any selling concession, or other compensation or consideration that is based upon the amount of Securities purchased by any single Client Plan, or that is based upon the amount of Securities purchased by Client Plans or In-House Plans through Pooled Funds, pursuant to this proposed exemption. In this regard, the Affiliated Broker-Dealer may not receive, either directly or indirectly, any compensation or consideration that is attributable to the fixed designations generated by purchases of the Securities by the Asset Manager on behalf of any single Client Plan or on behalf of any Client Plan or In-House Plan in Pooled Funds. (f)(1) If the transaction is an AUT as described in Section I(a), (b), and (e), the amount the Affiliated Broker-Dealer receives in management, underwriting, or other compensation or consideration is not increased through an agreement, arrangement, or understanding for the purpose of compensating such Affiliated Broker-Dealer for foregoing any selling concessions for those Securities sold. Except as described above, nothing in this Section II(f)(1) shall be construed as precluding an Affiliated Broker-Dealer from receiving management fees for serving as manager of an underwriting or selling syndicate, underwriting fees for assuming the responsibilities of an underwriter in the underwriting or selling syndicate, or other compensation or consideration that is not based upon the amount of Securities purchased by the Asset Manager on behalf of any single Client Plan, or on behalf of any Client Plan or In-House Plan participating in Pooled Funds; and (2) Each Affiliated Broker-Dealer shall provide, on a quarterly basis, to the Asset Manager a written certification, signed and dated by an officer, as defined in Section V(s), of such Affiliated Broker-Dealer, stating that the amount that each such Affiliated Broker-Dealer received in compensation or consideration during the past quarter, in connection with any transactions described in Section I(a), (b), (d), and (e), was not adjusted in a manner inconsistent with Section II(e), (f), or Section IV(d). (g)(1) The transactions described in Section I(a), (b), (d), and (e), are performed under a written authorization executed in advance by an Independent Fiduciary of each single Client Plan (the Independent Fiduciary), as defined in Section V(i); and (2) The authorization described in Section II(g)(1), to engage in the transactions described in Section I(a), (b), (d), and (e), may be terminated at will by the Independent Fiduciary of a single Client Plan, without penalty to such single Client Plan, within five (5) days after receipt by the Asset Manager of a written notification from such Independent Fiduciary that the authorization to engage, on behalf of such single Client Plan, in such transactions is terminated. (h) Prior to the execution by an Independent Fiduciary of a single Client Plan of the written authorization described in Section II(g)(1), the following information and materials (which may be provided electronically) must be provided by the Asset Manager to such Independent Fiduciary: (1) A copy of the Notice of Proposed Exemption (the Notice) and, if granted, a copy of the final exemption (the Grant) as published in the Federal Register , provided that the Notice and the Grant are supplied simultaneously; and (2) Any other reasonably available information regarding the transactions described in Section I(a), (b), (d), and (e), that such Independent Fiduciary requests the Asset Manager to provide. (i)(1) In the case of an existing employee benefit plan investor (or existing In-House Plan investor, as the case may be) in a Pooled Fund, such Pooled Fund may not engage in any transactions described in Section I(a), (b), (d), and (e), unless the Asset Manager provides the written information, as described below, and within the time period described below in this Section II(i)(2), to the Independent Fiduciary of each such plan participating in such Pooled Fund (and to the fiduciary of each such In-House Plan participating in such Pooled Fund); (2) The following information and materials (which may be provided electronically) shall be provided by the Asset Manager not less than 45 days prior to such Asset Manager engaging in the transactions described in Section I(a), (b), (d), and (e) on behalf of a Pooled Fund, and provided further that the information described in this Section II(i)(2)(i) and (iii), is supplied simultaneously: (i) A notice of the intent of such Pooled Fund to purchase Securities, pursuant to this proposed exemption for the transactions described in Section I(a), (b), (d), and (e), a copy of this Notice, and if granted, a copy of the Grant, as published in the Federal Register ; (ii) Any other reasonably available information regarding the transactions described in Section I(a), (b), (d), and (e), that the Independent Fiduciary of a plan (or fiduciary of an In-House Plan) participating in a Pooled Fund requests the Asset Manager to provide; and (iii) A termination form (the Termination Form), as defined in Section V(p); and (3) The Independent Fiduciary of an existing employee benefit plan investor (or fiduciary of an In-House Plan) participating in a Pooled Fund has an opportunity to withdraw the assets of such plan (or such In-House Plan) from a Pooled Fund for a period of no more than thirty (30) days after such plan's (or such In-House Plan's) receipt of the initial notice of intent described in Section II(i)(2)(i), and to terminate such plan's (or In-House Plan's) investment in such Pooled Fund without penalty to such plan (or In-House Plan). Failure of the Independent Fiduciary of an existing employee benefit plan investor (or fiduciary of such In-House Plan) to return the Termination Form to the Asset Manager in the case of such plan (or In-House Plan) participating in a Pooled Fund within the time period specified in Section V(p), shall be deemed to be an approval by such plan (or such In-House Plan) of its participation in the transactions described in Section I(a), (b), (d), and (e), as an investor in such Pooled Fund. (j) In the case of each plan (and in the case of each In-House Plan) whose assets are proposed to be invested in a Pooled Fund after such Pooled Fund has satisfied the conditions set forth in this proposed exemption to engage in the transactions described in Section I(a), (b), (d), and (e), the investment by such plan (or by such In-House Plan) in the Pooled Fund is subject to the prior written authorization of an Independent Fiduciary representing such plan (or the prior written authorization by the fiduciary of such In-House Plan, as the case may be), following the receipt by such Independent Fiduciary of such plan (or by the fiduciary of such In-House Plan, as the case may be) of the written information described in Section II(i)(2)(i) and (ii), provided that the Notice and the Grant described in Section II(i)(2)(i) are provided simultaneously. (k) At least once every three months, and not later than 45 days following the period to which such information relates the Asset Manager shall furnish: (1) In the case of each single Client Plan that engages in the transactions described in Section I(a), (b), (d), and (e), the information described in this Section II(k)(3)-(7) to the Independent Fiduciary of each such single Client Plan; (2) In the case of each Pooled Fund in which a Client Plan (or in which an In-House Plan) invests, the information described in this Section II(k)(3)-(6) and (8) to the Independent Fiduciary of each such Client Plan (and to the fiduciary of each such In-House Plan) invested in such Pooled Fund; (3) A quarterly report (the Quarterly Report) (which may be provided electronically) which discloses all the Securities purchased during the period to which such report relates, on behalf of the Client Plan, In-House Plan, or Pooled Fund to which such report relates, and which discloses the terms of each of the transactions described in such report, including: (i) The type of Securities (including the rating of any Securities which are debt securities) involved in each of the transactions; (ii) The price at which the Securities were purchased in each of the transactions; (iii) The first day on which any sale was made during the offering of the Securities; (iv) The size of the issue of the Securities involved in each of the transactions; (v) The number of Securities purchased by the Asset Manager for the Client Plan, In-House Plan, or Pooled Fund to which each of the transactions relates; (vi) The identity of the underwriter from whom the Securities were purchased for each of the transactions; (vii) In the case of AUTs as described in Section I(a), (b), and (e), the underwriting spread in each of the transactions ( i.e., the difference, between the price at which the underwriter purchases the Securities from the issuer and the price at which the Securities are sold to the public); (viii) In the case of ATTs as described in Section I(d), and (e), the basis upon which the Affiliated Trustee is compensated in each of the transactions; (ix) The price at which any of the Securities purchased during the period to which such report relates were sold; (x) The market value at the end of the period to which such report relates of the Securities purchased during such period and not sold; and (xi) In the case of an AST as described in Section I(b), the basis upon which the Affiliated Servicer is compensated; (4) The Quarterly Report contains: (i) In the case of AUTs, as described in Section I(a), (b), and (e), a representation that the Asset Manager has received a written certification signed by an officer, as defined in Section V(s), of the Affiliated Broker-Dealer as described in Section II(f)(2), affirming that, as to each such AUT during the past quarter, such Affiliated Broker-Dealer acted in compliance with Section II(e), (f), and Section IV(d); (ii) In the case of ATTs as described in Section I(d) and (e), a representation by the Asset Manager affirming that, as to each such ATT, the transaction was not part of an agreement, arrangement, or understanding designed to benefit the Affiliated Trustee; (iii) In the case of an AST as described in Section I(b), a representation of the Asset Manager affirming that, as to each such AST, the transaction was not part of an agreement, arrangement, or understanding designed to benefit the Affiliated Servicer; and (iv) A representation that copies of such certifications will be provided upon request; (5) A disclosure in the Quarterly Report that states that any other reasonably available information regarding the transactions described in Section I(a), (b), (d), and (e), that an Independent Fiduciary (or fiduciary of an In-House Plan) requests will be provided, including, but not limited to: (i) The date on which the Securities were purchased on behalf of the Client Plan (or the In-House Plan) to which the disclosure relates (including Securities purchased by Pooled Funds in which such Client Plan (or such In-House Plan) invests; (ii) The percentage of the offering purchased on behalf of all Client Plans (and the pro-rata percentage purchased on behalf of Client Plans and In-House Plans investing in Pooled Funds); and (iii) The identity of all members of the underwriting syndicate; (6) The Quarterly Report discloses any instance during the past quarter where the Asset Manager was precluded for any period of time from selling Securities purchased for the transactions described in Section I(a), (b), (d), and (e), in that quarter because of its status as an affiliate of an Affiliated Broker-Dealer and, as applicable, as an affiliate of an Affiliated Trustee, or as an affiliate of an Affiliated Servicer and the reason for this restriction; (7) Explicit notification, prominently displayed in each Quarterly Report sent to the Independent Fiduciary of each single Client Plan that engages in any of the transactions described in Section I(a), (b), (d), and (e) that the authorization to engage in such covered transactions may be terminated, without penalty to such single Client Plan, within five (5) days after the date that the Independent Fiduciary of such single Client Plan informs the person identified in such notification that the authorization to engage in such transactions is terminated; and (8) Explicit notification, prominently displayed in each Quarterly Report sent to the Independent Fiduciary of each Client Plan (and to the fiduciary of each In-House Plan) that engages in any of the transactions described in Section I(a), (b), (d), and (e) through a Pooled Fund, that the investment in such Pooled Fund may be terminated, without penalty to such Client Plan (or such In-House Plan), within such time as may be necessary to effect the withdrawal in an orderly manner that is equitable to all withdrawing plans and to the non-withdrawing plans, after the date that that the Independent Fiduciary of such Client Plan (or the fiduciary of such In-House Plan, as the case may be) informs the person identified in such notification that the investment in such Pooled Fund is terminated. (l) The Asset Manager, the Affiliated Broker-Dealer, the Affiliated Trustee, and the Affiliated Servicer, as applicable, maintain, or cause to be maintained, for a period of six (6) years from the date of any of the transactions described in Section I(a), (b), (d), and (e), such records as are necessary to enable the persons described in Section II(m) to determine whether the conditions of this proposed exemption have been met, except that— (1) No party in interest with respect to a plan which engages in any of the transactions described in Section I(a), (b), (d), and (e), other than WFC, the Asset Manager, the Affiliated Broker-Dealer, the Affiliated Trustee, and the Affiliated Servicer, 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 are not available for examination, as required by Section II(m); and (2) A separate prohibited transaction shall not be considered to have occurred if, due to circumstances beyond the control of WFC, the Asset Manager, the Affiliated Broker-Dealer, and the Affiliated Trustee, or the Affiliated Servicer, as applicable, such records are lost or destroyed prior to the end of the six (6) year period. (m)(1) Except as provided in Section II(m)(2), and notwithstanding any provisions of subsections (a)(2) and (b) of section 504 of the Act, the records referred to in Section II(l) are unconditionally available at their customary location for examination during normal business hours by— (i) Any duly authorized employee or representative of the Department, the Internal Revenue Service, or the SEC; or (ii) Any fiduciary of any plan that engages in any of the transactions described in Section I(a), (b), (d), and (e), or any duly authorized employee or representative of such fiduciary; or (iii) Any employer of participants and beneficiaries and any employee organization whose members are covered by a plan that engages in any of the transactions described in Section I(a), (b), (d), and (e), or any authorized employee or representative of these entities; or (iv) Any participant or beneficiary of a plan that engages in any of the transactions described in Section I(a), (b), (d), and (e), or duly authorized employee or representative of such participant or beneficiary; (2) None of the persons described in Section II(m)(1)(ii)—(iv) shall be authorized to examine trade secrets of WFC, the Asset Manager, the Affiliated Broker-Dealer, the Affiliated Trustee, or the Affiliated Servicer, or commercial or financial information which is privileged or confidential; and (3) Should WFC, the Asset Manager, the Affiliated Broker-Dealer, the Affiliated Trustee, or the Affiliated Servicer refuse to disclose information on the basis that such information is exempt from disclosure, pursuant to Section II(m)(2), the Asset Manager shall, by the close of the thirtieth (30th) day following the request, provide a written notice advising the person who requested such information of the reasons for the refusal and that the Department may request such information. (o) An indenture trustee whose affiliate has, within the prior 12 months, underwritten any Securities for an obligor of the indenture Securities must resign as indenture trustee, if a default occurs upon the indenture Securities, within a reasonable amount of time of such default. Section III. Conditions for Transactions Described In Section I(c) The transaction described in Section I(c) is conditioned upon satisfaction of the general conditions, as set forth in Section IV and upon satisfaction of the following requirements: (a) The Securities to be purchased are CMBS, as defined in Section V(r). (b) The purchase of the CMBS meets the conditions of an applicable underwriter exemption (the Underwriter Exemption(s)). 18 18 The Underwriter Exemptions are a group of individual exemptions granted by the Department to provide relief for the origination and operation of certain asset pool investment trusts and the acquisition, holding, and disposition by plans of certain asset-backed pass-through certificates representing undivided interests in those investment trusts. The most recent amendment to the Underwriter Exemptions is the Amendment to Prohibited Transaction Exemption 2007-05, 72 FR 13130 (March 20, 2007), Involving Prudential Securities Incorporated, et. al., To Amend the Definition of “Rating Agency” (Prohibited Transaction Exemption 2013-08, 78 FR 41090 (July 9, 2013)). (c)(1) The aggregate amount of CMBS of an issue purchased by the Asset Manager with: (i) The assets of all Client Plans; (ii) The assets, calculated on a pro rata basis, of all Client Plans and In-House Plans investing in Pooled Funds managed by the Asset Manager; and (iii) The assets of plans to which the Asset Manager renders investment advice within the meaning of 29 CFR 2510.3-21(c) does not exceed 35 percent (35%) of the total amount of the CMBS being offered in an issue; (2) Notwithstanding the percentage of CMBS of an issue permitted to be acquired, as set forth in Section III(c)(1), the amount of CMBS in any issue purchased by the Asset Manager on behalf of any single Client Plan, either individually or through investment, calculated on a pro rata basis, in a Pooled Fund may not exceed three percent (3%) of the total amount of such CMBS being offered in such issue; and (3) If purchased in an Eligible Rule 144A Offering, the total amount of the CMBS being offered for purposes of determining the percentages described in this Section III(c) is the total of: (i) The principal amount of the offering of such class of CMBS sold by underwriters or members of the selling syndicate to QIBs; plus (ii) The principal amount of the offering of such class of CMBS in any concurrent public offering. (d) The aggregate amount to be paid by any single Client Plan in purchasing any CMBS, including any amounts paid by any Client Plan or In-House Plan in purchasing such CMBS through a Pooled Fund, calculated on a pro rata basis, does not exceed three percent (3%) of the fair market value of the net assets of such Client Plan or In-House Plan, as of the last day of the most recent fiscal quarter of such Client Plan or In-House Plan prior to such transaction. (e)(1) The transaction described in Section I(c) is performed under a written authorization executed in advance by an Independent Fiduciary of each single Client Plan, as defined in Section V(i); and (2) The authorization described in Section III(e)(1) to engage in the transaction described in Section I(c) may be terminated at will by the Independent Fiduciary of a single Client Plan, without penalty to such single Client Plan within five (5) days after receipt by the Asset Manager of a written notification from such Independent Fiduciary that the authorization to engage, on behalf of such single Client Plan, in such transactions is terminated. (f) The following information and materials (which may be provided electronically) must be provided by the Asset Manager to the Independent Fiduciary of a single Client Plan not less than 45 days prior to such Asset Manager engaging in the transaction described in Section I(c), pursuant to this proposed exemption: (1) A notice of the intent of the Asset Manager to purchase CMBS, pursuant to Section I(c), a copy of the Notice, and, if granted, a copy of the Grant, as published in the Federal Register , provided that the Notice and the Grant are supplied simultaneously; (2) A notice describing the relationship of the Affiliated Servicer to the Asset Manager; (3) The basis upon which the Affiliated Servicer is compensated and a representation by the Asset Manager affirming that, the transaction described in Section I(c) was not part of an agreement, arrangement, or understanding designed to benefit the Affiliated Servicer; and (4) Any other reasonably available information regarding the transaction described in Section I(c) that the Independent Fiduciary of such single Client Plan requests the Asset Manager to provide. (g)(1) In the case of an existing employee benefit plan investor (or existing In-House Plan investor, as the case may be) in a Pooled Fund, such Pooled Fund may not engage in a transaction, pursuant to Section I(c), unless the Asset Manager provides the written information, as described below and within the time period described below in this Section III(g)(2), to the Independent Fiduciary of each such plan participating in such Pooled Fund (and to the fiduciary of each such In-House Plan participating in such Pooled Fund); (2) The following information and materials, (which may be provided electronically) shall be provided by the Asset Manager not less than 45 days prior to such Asset Manager engaging in a transaction described in Section I(c) on behalf of a Pooled Fund, pursuant to this proposed exemption; and provided further that the information described in this Section III(g)(2)(i), (ii), (iii), and (v) is supplied simultaneously: (i) A notice of the intent of such Pooled Fund to purchase CMBS, pursuant to this proposed exemption for a transaction described in Section I(c), a copy of this Notice, and a copy of the Grant, as published in the Federal Register ; (ii) A notice describing the relationship of the Affiliated Servicer to the Asset Manager; (iii) Information on the basis upon which the Affiliated Servicer is compensated and a representation by the Asset Manager affirming that, such transaction, as described in Section I(c), was not part of an agreement, arrangement, or understanding designed to benefit the Affiliated Servicer; (iv) Any other reasonably available information regarding such transaction described in Section I(c) that the Independent Fiduciary of a plan (or fiduciary of an In-House Plan) participating in a Pooled Fund requests the Asset Manager to provide; and (v) A Termination Form, as defined in Section V(p); and (3) The Independent Fiduciary of an existing employee benefit plan investor (or fiduciary of an In-House Plan) participating in a Pooled Fund has an opportunity to withdraw the assets of such plan (or such In-House Plan) from a Pooled Fund for a period of no more than thirty (30) days after such plan's (or such In-House Plan's) receipt of the initial notice of intent described in Section III(g)(2)(i) and to terminate such plan's (or In-House Plan's) investment in such Pooled Fund without penalty to such plan (or In-House Plan). Failure of the Independent Fiduciary of an existing employee benefit plan investor (or fiduciary of such In-House Plan) to return the Termination Form to the Asset Manager in the case of such plan (or In-House Plan) participating in a Pooled Fund within the time period specified in Section V(p), shall be deemed to be an approval by such plan (or such In-House Plan) of its participation in a transaction described in Section I(c), as an investor in such Pooled Fund. (h)(1) In the case of each plan (and in the case of each In-House Plan) whose assets are proposed to be invested in a Pooled Fund after such Pooled Fund has satisfied the conditions set forth in this proposed exemption for a transaction described in Section I(c), the investment by such plan (or by such In-House Plan) in the Pooled Fund is subject to the prior written authorization of an Independent Fiduciary representing such plan (or the prior written authorization by the fiduciary of such In-House Plan, as the case may be), following the receipt by such Independent Fiduciary of the plan (or by the fiduciary of the In-House Plan, as the case may be) of the written information described in Section III(g)(2); provided that the Notice and, if granted, the Grant described in Section III(g)(2)(i) are provided simultaneously. (i) The requirements of Section IV are met. Section IV. General Conditions for Transactions Described in Section I (a) For purposes of engaging in the transactions described in Section I, each Client Plan (and each In-House Plan) shall have total net assets with a value of at least $50 million (the $50 Million Net Asset Requirement). For purposes of engaging in the transactions described in Section I, involving an Eligible Rule 144A Offering, each Client Plan (and each In-House Plan) shall have total net assets of at least $100 million in securities of issuers that are not affiliated with such Client Plan (or such In-House Plan, as the case may be) (the $100 Million Net Asset Requirement). For purposes of a Pooled Fund engaging in the transactions described in Section I, each Client Plan (and each In-House Plan) in such Pooled Fund shall have total net assets with a value of at least $50 million. Notwithstanding the foregoing, if each such Client Plan (and each such In-House Plan) in such Pooled Fund does not have total net assets with a value of at least $50 million, the $50 Million Net Asset Requirement will be met, if 50 percent (50%) or more of the units of beneficial interest in such Pooled Fund are held by Client Plans (and by In-House Plans) each of which has total net assets with a value of at least $50 million. For purposes of a Pooled Fund engaging in the transactions described in Section I involving an Eligible Rule 144A Offering, each Client Plan (and each In-House Plan) in such Pooled Fund shall have total net assets of at least $100 million in securities of issuers that are not affiliated with such Client Plan (or such In-House Plan, as the case may be). Notwithstanding the foregoing, if each such Client Plan (and each such In-House Plan) in such Pooled Fund does not have total net assets of at least $100 million in securities of issuers that are not affiliated with such Client Plan (or In-House Plan, as the case may be), the $100 Million Net Asset Requirement will be met if 50 percent (50%) or more of the units of beneficial interest in such Pooled Fund are held by Client Plans (and by In-House Plans) each of which have total net assets of at least $100 million in securities of issuers that are not affiliated with such Client Plan (or such In-House Plan, as the case may be), and the Pooled Fund itself qualifies as a QIB, as determined pursuant to SEC Rule 144A (17 CFR 230.144A(a)(F)). For purposes of the net asset requirements described in Section IV(a), where a group of Client Plans is maintained by a single employer or controlled group of employers, as defined in section 407(d)(7) of the Act, the $50 Million Net Asset Requirement (or in the case of an Eligible Rule 144A Offering, the $100 Million Net Asset Requirement) may be met by aggregating the assets of such Client Plans, if the assets of such Client Plans are pooled for investment purposes in a single master trust. (b) The Asset Manager is a “qualified professional asset manager” (QPAM), as that term is defined under Section V(a) of Prohibited Transaction Exemption (PTE 84-14), 19 as amended from time to time, or any successor exemption thereto. In addition to satisfying the requirements for a QPAM under Section V(a) of PTE 84-14, the Asset Manager also must have total client assets under its management and control in excess of $5 billion, as of the last day of its most recent fiscal year and shareholders' or partners' equity in excess of $1 million. 19 49 FR 9494 (March 13, 1984), as amended at, 75 FR 38837 (July 6, 2010). (c) At the time a transaction described in Section I is entered into, no more than 20 percent of the assets of a Pooled Fund are comprised of assets of In-House Plans for which WFC, the Asset Manager, the Affiliated Broker-Dealer, the Affiliated Trustee, the Affiliated Servicer, or any affiliate thereof exercises investment discretion. (d) The transactions described in Section I are not part of an agreement, arrangement, or understanding designed to benefit the Asset Manager or any affiliate. (e) For purposes of Section II(i), Section II(j), Section III(g) and Section III(h), the requirement that the fiduciary responsible for the decision to authorize the transactions described in Section I, as applicable, for each plan proposing to invest in a Pooled Fund be independent of WFC and its affiliates shall not apply in the case of an In-House Plan. (f) Subsequent to the initial authorization, pursuant to Section II(g) and Section III(e), by an Independent Fiduciary of a single Client Plan permitting the Asset Manager to engage in transactions described in Section I, as applicable, and subsequent to the initial authorization, pursuant to Section II(i), Section II(j), Section III(g), and Section III(h), by an Independent Fiduciary of a plan (or by a fiduciary of an In-House Plan) to invest in a Pooled Fund that engages in the transactions described in Section I, as applicable, the Asset Manager will continue to be subject to the requirement to provide within a reasonable period of time any reasonably available information regarding such transactions that the Independent Fiduciary of such plan, such Client Plan (or of such In-House Plan, as the case may be) requests the Asset Manager to provide. (g) The Independent Fiduciary of each Client Plan (and the fiduciary of each In-House Plan) that engages in the transactions described in Section I through a Pooled Fund may terminate the investment in such Pooled Fund, without penalty to such Client Plan (or such In-House Plan), within such time as may be necessary to effect the withdrawal in an orderly manner that is equitable to all withdrawing plans and to the non-withdrawing plans, after the date that that the Independent Fiduciary of such Client Plan (or the fiduciary of such In-House Plan, as the case may be) informs the Asset Manager that the investment in such Pooled Fund is terminated. (h) The Applicant establishes internal policies that restrict the contact and the flow of information between investment management personnel and non-investment management personnel in the same or affiliated financial service firms. (i) The Applicant establishes business separation policies and procedures for WFC and its affiliates which are also structured to restrict the flow of any information to or from the Asset Manager that could limit its flexibility in managing client assets, and of information obtained or developed by the Asset Manager that can be used by other parts of the organization, to the detriment of the Asset Manager's clients. Section V. Definitions (a) The term “the Applicant” means WFC. (b) The term “affiliate” of a person includes: (1) Any person directly or indirectly through one or more intermediaries, controlling, controlled by, or under common control with such person; (2) Any officer, director, partner, employee, or relative, as defined in section 3(15) of the Act, of such person; and (3) Any corporation or partnership of which such person is an officer, director, partner, or employee. (c) The term “control” means the power to exercise a controlling influence over the management or policies of a person other than an individual. (d) The term “Affiliated Broker-Dealer” means any broker-dealer affiliate, as the term “affiliate” is defined in Section V(b)(1), of the Applicant, as the term “Applicant” is defined in Section V(a), that meets the requirements of this proposed exemption. Such Affiliated Broker-Dealer may participate in an underwriting or selling syndicate as a manager or member. (e) The term “manager” used in Section V(d) above and Section V(f) below, means any member of an underwriting or selling syndicate who, either alone or together with other members of the syndicate, is authorized to act on behalf of the members of the syndicate in connection with the sale and distribution of the Securities, as defined in Section V(j), being offered or who receives compensation from the members of the syndicate for its services as a manager of the syndicate. (f) The term “Asset Manager(s)” means WFC or an affiliate of WFC, as the term “affiliate” is defined in Section V(b)(1), which entity acts as the fiduciary with respect to Client Plan(s), as the term “Client Plan(s)” is defined in Section V(g), or as the fiduciary with respect to Pooled Fund(s), as the term “Pooled Fund(s)” is defined in Section V(h). For purposes of this proposed exemption, the Asset Manager must qualify as a QPAM, as that term is defined under Section V(a) of PTE 84-14, 49 FR 9494, (March 13, 1984), as amended at, 75 FR 38837, (July 6, 2010). In addition to satisfying the requirements for a QPAM under Section V(a) of PTE 84-14, the Asset Manager must also have total client assets under its management and control in excess of $5 billion, as of the last day of its most recent fiscal year and shareholders' or partners' equity in excess of $1 million. (g) The term “Client Plan(s)” means an employee benefit plan or employee benefit plans that are subject to the Act and/or the Code, and for which plan(s) an Asset Manager exercises discretionary authority or discretionary control respecting management or disposition of some or all of the assets of such plan(s). The term “Client Plan(s)” excludes In-House Plans, as defined in Section V(m). (h) The term “Pooled Fund(s)” means a common or collective trust fund(s) or a pooled investment fund(s): (1) In which employee benefit plan(s) subject to the Act and/or Code invest; (2) Which is maintained by an Asset Manager, as defined in Section V(f); and (3) For which such Asset Manager exercises discretionary authority or discretionary control respecting the management or disposition of the assets of such fund(s). (i)(1) The term “Independent Fiduciary” means a fiduciary of a plan who is unrelated to, and independent of WFC, and is unrelated to, and independent of any affiliate of WFC. For purposes of this proposed exemption, a fiduciary of a plan will be deemed to be unrelated to, and independent of WFC, and unrelated to, and independent of any affiliate of WFC, if such fiduciary represents in writing that neither such fiduciary, nor any individual responsible for the decision to authorize or terminate authorization for the transactions described in Section I is an officer, director, or highly compensated employee (within the meaning of section 4975(e)(2)(H) of the Code) of WFC, or of any affiliate of WFC, and represents that such fiduciary shall advise the Asset Manager within a reasonable period of time after any change in such facts occur; (2) Notwithstanding anything to the contrary in this Section V(i), a fiduciary of a plan is not independent: (i) If such fiduciary, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with WFC, or any affiliate of WFC; (ii) If such fiduciary directly or indirectly receives any compensation or other consideration from WFC, or from any affiliate of WFC for his or her own personal account in connection with any transaction described in this proposed exemption; and (iii) If any officer, director, or highly compensated employee (within the meaning of section 4975(e)(2)(H) of the Code) of the Asset Manager responsible for the transactions described in Section I is an officer, director, or highly compensated employee (within the meaning of section 4975(e)(2)(H) of the Code) of the sponsor of a plan or of the fiduciary responsible for the decision to authorize or terminate authorization for the transactions described in Section I. However, if such individual is a director of the sponsor of a plan or of the responsible fiduciary, and if he or she abstains from participation in: (A) The choice of such plan's investment manager/adviser; and (B) the decision to authorize or terminate authorization for the transactions described in Section I, then Section V(i)(2)(iii) shall not apply. (j) The term “Securities” shall have the same meaning as defined in section 2(36) of the Investment Company Act of 1940 (the 1940 Act), as amended (15 U.S.C. 80a 2(36)(1996)). For purposes of this proposed exemption, mortgage-backed or other asset backed securities rated by one of the Rating Agencies, as defined in Section V(q), will be treated as debt securities. (k) The term “Eligible Rule 144A Offering” shall have the same meaning as defined in SEC Rule 10f-3(a)(4) (17 CFR 270.10f-3(a)(4))under the 1940 Act. (l) The term “qualified institutional buyer” or the term, “QIB,” shall have the same meaning as defined in SEC Rule 144A (17 CFR 230.144A(a)(1)) under the 1933 Act. (m) The term “In-House Plan(s)” means an employee benefit plan or employee benefit plans that is/are subject to the Act and/or the Code, and that is/are sponsored by WFC or by an affiliate of WFC, as the term, affiliate is defined in Section V(b)(1), for its own employees. (n) The term “Affiliated Servicer” means any affiliate of WFC, as defined in Section V(b)(1), that serves as a servicer of a trust that issues CMBS (including servicing one or more of the commercial mortgage loans in such trust). (o) The term “Affiliated Trustee” means any affiliate of WFC, as affiliate is defined in Section V(b)(1), which is a bank or trust company that serves as trustee of a trust that issues Securities which are asset-backed securities or as indenture trustee of Securities which are either asset-backed securities or other debt securities that meet the requirements of Section II of this proposed exemption. For purposes of this proposed exemption, other than Section II(o), performing services as custodian, paying agent, registrar, or similar ministerial capacities is, in each case, also considered as serving as trustee or indenture trustee. (p) The term “Termination Form” is a form provided by the Asset Manager to the Independent Fiduciary of each such plan participating in a Pooled Fund (and to the fiduciary of each such In-House Plan participating in such Pooled Fund) which expressly provides an election for the Independent Fiduciary of a plan (or fiduciary of an In-House Plan) participating in a Pooled Fund to terminate such plan's (or In-House Plan's) investment in such Pooled Fund without penalty to such plan (or In-House Plan). Such form shall include instructions specifying how to use the form. Specifically, the instructions must explain that such plan (or such In-House Plan) has an opportunity to withdraw its assets from a Pooled Fund for a period of no more than thirty (30) days after such plan's (or such In-House Plan's) receipt of the initial notice of intent described in Section II(i)(2)(i) or in Section III(g)(2)(i), as applicable, and that the failure of the Independent Fiduciary of such plan (or fiduciary of such In-House Plan) to return the Termination Form to the Asset Manager in the case of a plan (or In-House Plan) participating in a Pooled Fund within the time period, specified in Section II(i)(2)(iii) or in Section III(g)(2)(iii), as applicable, shall be deemed to be an approval by such plan (or such In-House Plan) of its participation in the transactions described in Section I, as applicable, as an investor in such Pooled Fund. Further, the instructions will identify WFC, the Asset Manager, the Affiliated Broker-Dealer, and as applicable, the Affiliated Trustee, or the Affiliated Servicer, and will provide the address of the Asset Manager. The instructions will state that this proposed exemption will not be available, unless the fiduciary of each plan participating in any of the transactions described in Section I, as applicable, as an investor in a Pooled Fund is, in fact, independent of WFC, the Asset Manager, the Affiliated Broker-Dealer, and, as applicable, the Affiliated Trustee or the Affiliated Servicer. The instructions will also state that the fiduciary of each such plan must advise the Asset Manager, in writing, if it is not an “Independent Fiduciary,” as that term is defined in Section V(i). (q) The term “Rating Agency” or collectively, “Rating Agencies” means a credit rating agency that: (1) Is currently recognized by the SEC as a nationally recognized statistical ratings organization (NRSRO); (2) Has indicated on its most recently filed SEC Form NRSRO that it rates “issuers of asset-backed securities;” and (3) Has had, within a period not exceeding twelve (12) months prior to the initial issuance of the securities, at least three (3) “qualified ratings engagements.” A “qualified ratings engagement” is one: (i) Requested by an issuer or underwriter of securities in connection with the initial offering of the securities; (ii) For which the credit rating agency is compensated for providing ratings; (iii) Which is made public to investors generally; and (iv) Which involves the offering of securities of the type that would be granted relief by the Underwriter Exemptions. (r) The term “CMBS” means pass-through certificates or trust certificates that represent a beneficial ownership interest in the assets of an issuer which is a trust and which entitle the holder to payments of principal, interest, and/or other payments made with respect to the assets of such trust and the corpus or assets of which consist solely of obligations that bear interest or are purchased at a discount and which are secured by commercial real property (including obligations secured by leasehold interests on commercial real property) that are rated in one of the four highest rating categories by the Rating Agencies; provided that none of the Rating Agencies rates such securities in a category lower than the fourth highest rating category. (s) The term “officer” means a president, any vice president in charge of a principal business unit, division, or function (such as sales, administration, or finance), or any other officer who performs a policy-making function for WFC or any affiliate thereof. The availability of this proposed exemption is subject to the express condition that the material facts and representations contained in the application for exemption are true and complete and accurately describe all material terms of the transactions. In the case of continuing transactions, if any of the material facts or representations described in the applications change, the exemption will cease to apply as of the date of such change. In the event of any such change, an application for a new exemption must be made to the Department. Effective Date: If granted, this proposed exemption will be effective as of the date the Grant is published in the Federal Register . Summary of Facts and Representations 1. WFC (or the Applicant) is headquartered in San Francisco, California. WFC is a diversified financial services company organized under the laws of Delaware and is registered as a bank holding company and financial holding company under the Bank Holding Company Act of 1956. WFC engages in banking and a variety of related financial services businesses. Subsidiaries of the Applicant manage institutional portfolios for mutual funds, corporations, employee benefit plans, endowments, foundations, health care organizations, public agencies, sovereign organizations, and insurance companies. These affiliates act as fiduciaries to employee benefit plans, providing trustee, recordkeeping, consulting services, and investment management services. The Applicant states that certain affiliates of the Applicant act as the fiduciary with respect to Client Plan(s), or as the fiduciary with respect to Pooled Fund(s), and qualify as a “QPAM,” as that term is defined under Section V(a) of PTE 84-14, 49 FR 9494 (March 13, 1984), as amended at, 75 FR 38837, (July 6, 2010). In addition to satisfying the requirements for a QPAM under Section V(a) of PTE 84-14, such affiliates of the Applicant must also have total client assets under its management and control in excess of $5 billion, as of the last day of its most recent fiscal year and shareholders' or partners' equity in excess of $1 million. As of March 31, 2013, WFC, through its affiliates, had approximately $463 billion in assets under management. The activities of WFC and its affiliates are subject to oversight and regulation by the SEC, the Federal Reserve Board, and the Office of the Comptroller of the Currency. 2. The proposed exemption involves the transactions described in Section I engaged in by single Client Plans (and by Client Plans and In-House Plans invested in Pooled Funds). In this regard, the Applicant represents that there is no feasible manner to identify specific information on all such plans. 3. The Applicant requests an individual administrative exemption that would permit the purchase of certain Securities, including Rule 144A Securities, by an Asset Manager acting as a fiduciary on behalf of single Client Plans or acting on behalf of Client Plans and In-House Plans which are invested in Pooled Funds, from any person other than such Asset Manager or an affiliate, thereof, during the existence of an initial offering of such Securities in which an Affiliated Broker-Dealer is a manager or a member of the underwriting or selling syndicate with respect to such Securities. Such a transaction is described, herein, as an AUT. 4. The Applicant also seeks an individual administrative exemption for certain transactions arising pursuant to an arrangement whereby an Affiliated Broker-Dealer is a manager or member of an underwriting syndicate, and an Affiliated Servicer serves as servicer of a trust that issues CMBS (including servicing one or more of the commercial mortgage backed loans in such trust) which are purchased by an Asset Manager, acting as a fiduciary on behalf of single Client Plans (or acting on behalf of Client Plans and In-House Plan invested in Pooled Funds, as applicable). Such transactions are described herein as an AUT and AST. 5. Further, the Applicant requests an individual administrative exemption for certain transactions arising pursuant to an arrangement whereby an Affiliated Servicer serves as servicer of a trust that issues CMBS where an Affiliated Broker-Dealer is not a manager or member of the underwriting syndicate for such securities. Such a transaction is described, herein, as an AST. 6. In addition, the Applicant seeks an individual administrative exemption for certain transactions arising from an arrangement whereby an Affiliated Trustee serves as trustee of a trust that issues certain Securities (whether or not debt securities) or serves as indenture trustee of such Securities that are debt securities. Such a transaction is described, herein, as an ATT. 7. Finally, the Applicant has requested an individual administrative exemption for certain transactions arising from an arrangement whereby an Affiliated Broker-Dealer is a manager or member of the underwriting syndicate for Securities and an Affiliated Trustee serves as trustee of a trust that issued the Securities (whether or not debt securities) or serves as an indenture trustee of Securities that are debt Securities and where such Securities are purchased by an Asset Manager, acting as a fiduciary on behalf of single Client Plans (or acting on behalf of Client Plans and In-House Plan which are invested in Pooled Funds). Such transactions are described, herein, as an AUT and ATT. The Applicant argues that absent an individual administrative exemption, Client Plans (and In-House Plans, as applicable) potentially could be cut off from primary market participation in a significant number of offerings of securities in which affiliates of WFC fill one or more of the roles, described above. 8. When an Asset Manager affiliated with WFC is a fiduciary with investment discretion with respect to the assets of single Client Plans (or with respect to the assets of Client Plans and In-House Plans invested in a Pooled Fund, as applicable), and such Asset Manager decides to engage in any of the transactions described in Section I above, the fact that WFC has an ownership interest in the Asset Manager, the Affiliated Broker-Dealer, and, as applicable, the Affiliated Trustee, or the Affiliated Servicer, raises issues under section 406(a)(1)(A) and (D) and section 406(b) of the Act, because one or more affiliates of such Asset Manager may be receiving compensation as a result of the purchase of the Securities involved in such transactions by Client Plans (or by In-House Plans, as applicable). AUTs 9. In 2007, WFC obtained a Prohibited Transaction Exemption 2007-14 (PTE 2007-14) 20 from the Department, which provides relief for AUTs only. In connection with this proposed exemption, the Applicant requests that PTE 2007-14 be restated, with any updates required and/or granted in the interim by the Department. In Section I(a) of this proposed exemption, the Department has restated the AUT descri [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2014-27935. Public record. Not legal advice.