Grant of Individual Exemptions; Chase Manhattan Bank

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 96-85; Exemption Application No. D-

10200, et al.]

Grant of Individual Exemptions; Chase Manhattan Bank

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

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Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, D.C. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR

47713, October 17, 1978) transferred the authority of the Secretary of

the Treasury to issue exemptions of the type proposed to the Secretary

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their participants

and beneficiaries; and

(c) They are protective of the rights of the participants and

beneficiaries of the plans.

The Chase Manhattan Bank Located in New York, New York; Exemption

[Prohibited Transaction Exemption 96-85; Exemption Application No.

D-10200]

Section I--Transactions

The restrictions of sections 406(a) of the Act and the sanctions

resulting from the application of section 4975 of the Code, by reason

of section 4975(c)(1) (A) through (D) of the Code, shall not apply to

the following transactions, provided that the conditions set forth in

Section II below are met:

(a) Any acquisition or sale of ``emerging market'' securities (the

Securities), and any repurchase agreement involving such Securities,

which occurs between The Chase Manhattan Bank (Chase) or its Affiliates

and the IBM Retirement Plan (the IBM Plan), to which Chase or an

Affiliate is a party in interest under the Act at the time of the

transaction; and

(b) Certain repurchase agreements involving the Securities which

occurred between the IBM Plan and Chemical Bank (Chemical) that were

outstanding as of March 31, 1996, the date of the merger between the

holding companies of Chemical and Chase. (The merger of the two banks

themselves (the Merger) occurred later on July 14, 1996, and all

references herein to Chase which refer to the time period after July

14, 1996 shall include Chemical.)

Section II--Conditions

(a) The assets of the IBM Plan involved in the transactions

described in Section I(a) and I(b) above are managed by WP Emerging

Markets Asset Management, L.P. (WP), as the independent, qualified

fiduciary for the IMB Plan;

(b) WP, as the IBM Plan's independent fiduciary and investment

manager for the assets invested in the Securities, negotiates the terms

of such transactions on behalf of the IBM Plan and makes the decision

to have the IBM Plan enter into any such transactions with Chase;

(c) WP, as the IBM Plan's independent fiduciary and investment

manager for the assets invested in the Securities, monitors the

investments made by the IBM Plan in such Securities and takes whatever

actions are necessary to protect the interests of the IBM Plan;

(d) Neither Chase nor an Affiliate has discretionary authority or

control with respect to the investment of the IBM Plan's assets

involved in the transactions or renders investment advice (within the

meaning of 29 CFR 2510.3-21(c)) with respect to those assets;

(e) In any transaction where the IBM Plan acquires a Security from

Chase, the IBM Plan pays a price which is no greater than the fair

market value of such Security, as determined by WP in accordance with

either WP's internal valuation process or independent third party

sources (such as independent broker-dealers and market-makers dealing

in such Securities);

(f) In any transaction where the IBM Plan sells a Security to

Chase, the IBM Plan receives a price which is no less than the fair

market value of such Security, as determined by WP in accordance with

either WP's internal valuation process or independent third party

sources (such as independent broker-dealers and market-makers dealing

in such Securities);

(g) The repurchase agreements between the IBM Plan and Chase are

entered into pursuant to a written agreement between the parties which

describes all of the material terms and conditions for such

transactions, including the rights and obligations of each party, and

is consistent with the specific guidelines established by the IBM

Plan's named fiduciary for transactions involving the Securities;

(h) All repurchase agreements between the IBM Plan and Chase, and

those between the IBM Plan and Chemical which were in place as of March

31, 1996, have terms and conditions which are set least as favorable to

the IBM Plan as terms and conditions which would exist in a similar

transaction with an unrelated party;

(j) All other terms of each transaction described above in Section

I(a) are not less favorable to the IBM Plan than the terms available in

an arm's-length transaction between unrelated parties;

(j) WP does not engage in, or commit to sell, any uncovered put or

call options (including, but not exclusive to, ``straddles'' and

``strangles'') in transactions with Chase on behalf of the IBM Plan;

(k) Any transactions involving the use of leverage by WP, on behalf

of the IBM Plan, do not exceed the specific guidelines established by

the IBM Plan's named fiduciary under its investment management

agreement with WP;

(l) No brokerage commission, sales commission, or similar

compensation, other than the particular dealer mark-up for the

Security, is paid to Chase by the IBM Plan with regard to such

transactions; and

(m) The amount of the IBM Plan's assets involved in the

transactions described in Section I(a) and I(b) represents no more than

two (2) percent of the total assets of the IBM Plan.

Section III--Definitions

(a) The term ``Chase'' refers to The Chase Manhattan Bank and its

Affiliates, as defined below, including, as of July 14, 1996, Chemical

Bank, pursuant to the Merger described in Section I(b) above which

occurred on such date.

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(b) The term ``Chemical'' refers to Chemical Bank, as it existed

prior to the Merger on July 14, 1996.

(c) The term ``Affiliate'' refers to affiliates of Chase, including

entities controlling, controlled by, or under common control with Chase

as well as successors to such entities.

(d) The term ``control'' for purposes of the above definition of

``Affiliate'' means the power to exercise a controlling influence over

the management or policies of an entity.

(e) The term ``emerging market'' or ``emerging markets'' refers to

capital markets in developing or less developed countries that are,

with the exception of Mexico, not member countries of the Organization

for Economic Cooperation and Development.

(f) The term ``Security'' refers to certain ``emerging market''

securities and instruments issued in, or on behalf of, an ``emerging

market'' (including both corporate and sovereign issuers of debt

securities as well as corporate issuers of equity securities). For

purposes of the proposed exemption, such ``Securities'' would include

publicly traded or privately placed debt, equity, or convertible

securities, certain put and call options (as described herein),

collateralized bonds, Brady Bonds and Eurobonds.

(g) The term ``IBM Plan'' refers to the IBM Retirement Plan, a

defined benefit pension plan covering employees of the International

Business Machines Corporation and its affiliates (IBM), which is an

employee benefit plan covered by the Act.

(h) The term ``WP'' refers to WP Emerging Markets Asset Management,

L.P. and its affiliates, including the Emerging Capital Markets

Division of Wasserstein Perella Securities, Inc.

EFFECTIVE DATE: The exemption is effective as of September 6, 1996 for

all transactions described in Section I(a), and as of March 31, 1996,

for the transactions described in Section I(b).

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption, refer to

the notice of proposed exemption published on September 6, 1996 at 61

FR 47195.

Written Comments

The Department received two written comments with respect to the

notice of proposed exemption.

The first written comment was submitted by the Applicant, who

wished to clarify the details of its merger with Chemical and the

precise names of the banks involved. On March 31, 1996, a merger of the

holding companies of the two banks occurred; the merger of the banks

themselves occurred on July 14, 1996. Specifically, on March 31, 1996,

the Chase Manhattan Corporation was merged with and into Chemical

Banking Corporation, which entity simultaneously changed its name to

The Chase Manhattan Corporation. On July 14, 1996, the Chase Manhattan

Bank (National Association) was merged with and into Chemical Bank,

which entity simultaneously changed its name to The Chase Manhattan

Bank. Accordingly, the words ``National Association'' are no longer

part of the Applicant's name. The Applicant also notes that the

Chemical Bank to which the notice of proposed exemption referred did

not include ``National Association'' as part of its name. The

Department has modified the language in this exemption to reflect the

Applicant's corrections to the record.

The second written comment was submitted by WP and also concerns a

clarification to the notice of proposed exemption. First, WP notes that

its precise name is WP Emerging Markets Asset Management, L.P.

Secondly, WP notes, in Paragraph 5 of the Summary of Facts and

Representations (the Summary), that the second full sentence on page

47198 should be revised to read, ``WP states that WPS's Emerging

Capital Markets Division [not its equities division], has been a

manager on [eliminate ``significant''] syndicate transactions involving

emerging market securities.'' Thirdly, WP notes, in paragraph 10 of the

Summary, the final subparagraph therein on page 47199, which discusses

WP's customary approach to REPO financing and negotiation, that a REPO

is collateralized by a specific asset and the REPO does not provide the

counterparty with a lien on the IBM Trust's general assets.

Accordingly, the sentence beginning, ``Because the credit-standing of

the IBM Trust is excellent * * *,'' should be eliminated, as well as

the phrase ``of similar credit standing'' in the following sentence.

Finally, WP notes, in Paragraph 16 of the Summary, that the

parenthetical at the beginning of page 47202 should be revised to begin

``currently, 150 percent * * *,'' to reflect the fact that the

Guidelines for the IBM Plan are subject to modification by IBM.*

* As previously noted in Footnote 9, on page 47200 of the notice

of propose exemption, the Department expresses no opinion as to

whether WP's use of leverage would violate any of the provisions of

Part 4 of Title I in the Act. The Department notes that WP is

required, under section 404(a) of the Act, to make investment

decisions on behalf of the IBM Plan prudently and solely in the

interests of the participants and beneficiaries of such Plan.

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FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Acme 401(k) Retirement Savings Plan (the Plan) Located in

Scottsdale, Arizona; Exemption

[Prohibited Transaction Exemption 96-86; Exemption Application No. D-

10270]

The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the

Act and the sanctions resulting from the application of section 4975 of

the Code, by reason of section 4975(c)(1) (A) through (E) of the Code,

shall not apply to the cash sale (the Sale) by the Plan of a 2.86

[percent interest (the Interest) in the Arizona Equities V Real Estate

Investment Trust to RSC Holdings, Inc., the sponsor of the Plan and a

party in interest with respect to the Plan; provided that the following

conditions are satisfied:

(1) The sale is a one-time transaction for cash;

(2) The Plan does not incur any expenses in connection with the

Sale; and

(3) The Plan receives as consideration from the sale the greater

of: (a) the fair market value of the Interest as determined by a

qualified independent appraiser at the time of the Sale; or (b) the

Plan's total investment in the Interest in the amount of $50,572.

For a more complete statement of the facts and representations

supporting this exemption, refer to the notice of proposed exemption

published on September 6, 1996 at 61 FR 47204.

FOR FURTHER INFORMATION CONTACT: Ms. Marianne H. Cole or Mr. Ronald

Willett of the Department, telephone (202) 219-8881. (This is not a

toll-free number.)

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the

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employees of the employer maintaining the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

nay other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application accurately describes all material terms of the transaction

which is the subject of the exemption.

Signed at Washington, D.C., this 19th day of November, 1996.

Ivan Strasfeld,

Director or Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 96-29901 Filed 11-21-96; 8:45 am]

BILLING CODE 4510-29-M