Bankers Trust Co., New York, New York, BT Alex Brown Inc., and Deutsche Bank AG

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-29; Exemption Application No. D-

10747]

Bankers Trust Co., New York, New York, BT Alex Brown Inc., and

Deutsche Bank AG

AGENCY: Pension and Welfare Benefits Administration, Department of

Labor

ACTION: Grant of Individual Exemption.

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SUMMARY: This document contains a final exemption from certain of the

[[Page 40624]]

prohibited transaction restrictions of the Employee Retirement Income

Security Act of 1974 (ERISA or the Act) and the Internal Revenue Code

of 1986 (the Code). The final exemption, granted by the Department of

Labor (the Department) to Bankers Trust Company, BT Alex Brown and

Deutsche Bank AG, provides that those entities shall not be precluded

from functioning as a ``qualified professional asset manager'' pursuant

to Prohibited Transaction Exemption 84-14 (49 FR 9494, March 13,

1984)(PTE 84-14) solely because of a failure to satisfy section I(g) of

PTE 84-14 as a result of Bankers Trust Company's conviction for

felonies described in a March 11, 1999 felony information.

FOR FURTHER INFORMATION CONTACT: Ms. Allison Padams-Lavigne of the

Department, telephone (202) 219-8194. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On June 7, 1999, the Department published a

notice in the Federal Register of the pendency before the Department of

a proposed exemption requested by Bankers Trust Company and Deutsche

Bank AG. The Department proposed the exemption in response to an

application dated March 12, 1999, which was submitted on behalf of

Bankers Trust Company and its future affiliates pursuant to section

408(a) of the Act and section 4975(c)(2) of the Code and in accordance

with the procedures set forth in 29 CFR Part 2570, Subpart (55 FR

32836, 32847, August 10, 1990).1

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\1\ 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 Treasury to issue exemptions of the

type proposed to the Secretary of Labor.

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The notice set forth a summary of the facts and representations

contained in the application for exemption and also invited interested

persons to submit comments or requests for a hearing on the pending

exemption to the Department.

The applicants agreed to provide notice to interested persons

within three days of the date that the proposal appeared in the Federal

Register. The applicants have represented that notice was furnished to

five interested persons two days later than that date. As a result, the

comment period was extended for two additional days. The applicants

represent that notice to all other interested persons was furnished in

a timely manner. All comments and requests for hearing were due by July

12, 1999.

The Department received eleven comments from interested persons on

the proposed exemption. The Department forwarded copies of the comments

to the applicants and requested that the applicants address in writing

the various concerns raised by the commentators. Most of the comments

fell into broad categories that the applicants responded to in a

general fashion. Where a single commentator raised a specific issue,

such issue was responded to individually. A description of the comments

and the applicants' responses are summarized below.

One commentator urged that the exemption not be granted because he

had not received all of his benefits under a plan maintained by Bankers

Trust Company. Bankers Trust Company notes that the former participant

enclosed with his comment a copy of the check receipt that he had

received at the time of the distribution. Bankers Trust Company

believes that the participant received the full amount of his benefit

at the time he received his check receipt.

Five comments urged denial of the exemption because of the

commentators' belief that Bankers Trust Company has failed to meet the

highest standard as a fiduciary. Deutsche Bank AG responded that it is

committed to maintaining the highest fiduciary standards on which

Bankers Trust Company was organized in 1903, and intends to bring

together the best of the long traditions of service of each

organization, building on the organizational changes described in the

exemption application and the new policies and procedures put in place

in the recent past.

One commentator suggested that not all employees have received

certain ethics training. Deutsche Bank AG represents that it will

verify that all Global Institutional Services (GIS) employees have

received the appropriate training.2 Another commentator was

concerned that the legal protections of the Act and the Code would be

eliminated if the exemption was granted. Deutsche Bank AG responded

that it understands that all of the legal requirements of the Act and

the Code continue to apply to the employee benefit plans of Bankers

Trust Company and, as sponsor of those plans, represents that it will

fully comply with all laws respecting its plans.

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\2\ The March 11, 1999 felony information related to the conduct

of certain employees in Bankers Trust Company's processing services

business. This unit was subsequently restructured as part of GIS.

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Two commentators opposed the granting of the exemption because they

had unanswered questions about their pension benefits. While these

comments did not relate to the terms of the exemption, Deutsche Bank

represents that it will contact those commentators and attempt to

resolve their questions.

Another commentator argued that the exemption ought to be denied

because, in the commentator's view, Deutsche Bank AG discriminates

against members of the Church of Scientology. Deutsche Bank AG states

that it maintains strict policies against discrimination on the basis

of sex, race, creed or national origin and believes that those policies

have been adhered to. Another commentator argued that the exemption

should be denied because, in the past, Bankers Trust Company merged two

of its employee benefit plans inappropriately. Bankers Trust Company

responds that its actions in merging its plans were fully in compliance

with the law.

In addition to comments, questions and requests for a hearing, the

Department also received a comment letter, dated July 13, 1999, from

Deutsche Bank AG. Deutsche Bank AG notes that Paragraph 2 of the Facts

and Representations of the Notice states that BT Alex Brown is a

subsidiary of Bankers Trust Corporation. Deutsche Bank AG noted that

while that fact was true as of the date of the proposed exemption, BT

Alex Brown is now a subsidiary of Deutsche Bank Securities, Inc.

Two commentators also requested a hearing on the proposal. The

Department believes that the issues raised by the commentators are

outside the scope of the proposed exemption. Accordingly, the

Department does not believe that any issues have been identified which

would require the convening of a hearing and has determined not to hold

a public hearing.

Accordingly, after giving full consideration to the entire record,

including the comments by the commentators, and the responses of the

applicants, the Department has determined to grant the exemption. In

this regard, the comments submitted to the Department have been

included as part of the public record of the exemption application. The

complete application file, including all supplemental submissions

received by the Department, is made available for public inspection in

the Public Documents Room of the Pension and Welfare Benefits

Administration, Room N-5507, U.S. Department of Labor, 200 Constitution

Ave. NW, Washington DC 20010.

[[Page 40625]]

General Information

The attention of interested persons is directed to the following:

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

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

does not relieve a fiduciary or other party in interest with respect to

a plan to which the exemption is applicable from certain other

provisions of the Act and/or the Code. These provisions include any

prohibited transaction provisions to which the exemption does not apply

and the general fiduciary provisions of section 404 of the Act which,

among other things, requires a fiduciary to discharge his or her duties

respecting the plan solely in the interests of the participants and

beneficiaries of the plan and in a prudent fashion in accordance with

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

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

benefit of the employees of the employer maintaining the plan and their

beneficiaries.

(2) This exemption is supplemental to and not in derogation of any

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

administrative exemptions and transitional rules. Furthermore, the fact

that a transaction is subject to an administrative or statutory

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

prohibited transaction; and

(3) The availability of this exemption is subject to the express

condition that the material facts and representations contained in the

application are true and complete and accurately describe all material

terms of the transaction which is the subject of this exemption.

Exemption

Section I. Bankers Trust Company

Bankers Trust Company shall not be precluded from functioning as a

``qualified professional asset manager'' pursuant to Prohibited

Transaction Exemption 84-14 (49 FR 9494, March 13, 1994) (PTE 84-14)

for the period beginning on the date of sentencing with respect to the

charges to which Bankers Trust Company 3 pled guilty on

March 11, 1999 and ending five years 4 from the date of

publication of the final exemption in the Federal Register, solely

because of a failure to satisfy section I(g) of PTE 84-14 as a result

of the conviction of Bankers Trust Company for felonies described in

the March 11, 1999 felony information (the Information) entered in the

U.S. District Court for the Southern District of New York, provided

that:

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\3\ On June 4, 1999, Bankers Trust Corporation, the parent of

Bankers Trust Company, was acquired by Deutsche Bank AG. Bankers

Trust Company, now a subsidiary of Deutsche Bank AG, continues to

offer banking services to its clients.

\4\ Prior to the expiration of this exemption, Bankers Trust

Company may apply for an extension of the exemption.

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(a) This exemption is not applicable if Bankers Trust Company

becomes affiliated with any person or entity convicted of any of the

crimes described in section I(g) of PTE 84-14; and

(b) This exemption is not applicable if Bankers Trust Company is

convicted of any of the crimes described in section I(g) of PTE 84-14,

other than those felonies discussed in the Information;

(c) The custody operations that were part of Bankers Trust Company

at the time of the March 11, 1999 information, and which have

subsequently been reorganized as part of Global Institutional Services

(GIS), are subject to an annual examination of its abandoned property

and escheatment policies, procedures and practices by an independent

public accounting firm. The examination required by this condition

shall determine whether the written procedures adopted by Bankers Trust

Company are properly designed to assure compliance with the

requirements of ERISA. The annual examination shall specifically

require a determination by the auditor as to whether the Bank has

developed and adopted internal policies and procedures that achieve

appropriate control objectives and shall include a test of a

representative sample of transactions, fifty percent of which must

involve ERISA covered plans, to determine operational compliance with

such policies and procedures. The auditor shall issue a written report

describing the steps performed by the auditor during the course of its

examination. The report shall include the auditor's specific findings

and recommendations. This requirement shall continue to be applicable

to the custody operations that were part of Bankers Trust Company as of

March 11, 1999, notwithstanding any subsequent reorganization of the

custody operation function during the term of the exemption.

(d) With respect to the independent audit report described in

section I(c) above:

(1) Bankers Trust Company shall provide notice to the Department of

any instances of the Bank's noncompliance with the written policies and

procedures reviewed by the auditor within 10 business days after such

noncompliance is determined by the auditor notwithstanding the fact

that the examination may not have been completed as of that date. Upon

request, the auditor shall provide the Department with all of the

relevant workpapers reflecting the instances of noncompliance. The

workpapers should identify whether and to what extent the assets of

ERISA plans were involved in the instances of noncompliance, and

(2) Any information relating to the Bank's noncompliance with the

written policies and procedures that is required by Federal and/or

state banking authorities to be reported to the state and/or Federal

banking agencies shall also be reported by Bankers Trust Company to the

Department within the same time frames that such information is

otherwise required to be reported to those agencies.

(e) The annual examination described in section I(c) above will be

provided to the Department not later than 90 days following the 12

month period to which it relates, and will be unconditionally available

for examination by any duly authorized employee or representative of

the Department, Internal Revenue Service, Securities and Exchange

Commission or Department of Justice or other relevant regulators and

any fiduciary of a plan for which Bankers Trust Company performs

services.

Section II

BT Alex. Brown Incorporated and its subsidiaries and Deutsche Bank

AG shall not be precluded from functioning as a ``qualified

professional asset manager'' pursuant to PTE 84-14 for the period

beginning on the date of sentencing with respect to the charges to

which Bankers Trust Company pled guilty on March 11, 1999 and ending

ten years from the date of publication of the final exemption in the

Federal Register, solely because of a failure to satisfy section I(g)

of PTE 84-14 as a result of an affiliation with Bankers Trust Company,

provided that:

(a) This exemption is not applicable if BT Alex. Brown

Incorporated, its subsidiaries or Deutsche Bank AG becomes affiliated

with any person or entity convicted of any of the crimes described in

section I(g) of PTE 84-14; and

(b) This exemption is not applicable if BT Alex. Brown

Incorporated, its subsidiaries or Deutsche Bank AG is convicted of any

of the crimes described in section I(g) of PTE 84-14.

Section III. Definitions

(a) For purposes of this exemption, the term ``Bankers Trust

Company'' includes Bankers Trust Company and any entity that was

affiliated with Bankers Trust Company prior to the

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date of the acquisition of Bankers Trust Corporation by Deutsche Bank

AG, other than BT Alex. Brown Incorporated and its subsidiaries.

(b) For purposes of this exemption, ``Deutsche Bank AG'' includes

Deutsche Bank AG and any entity that was affiliated with Deutsche Bank

AG prior to the date of the acquisition of Bankers Trust Corporation by

Deutsche Bank AG, and any future affiliates, other than Bankers Trust

Company, as defined in subsection (a).

(c) The term ``affiliate'' of a person means--

(1) Any person directly or indirectly through one or more

intermediaries, controlling, controlled by, or under common control

with the person,

(2) Any director of, relative of, or partner in, any such person,

(3) Any corporation, partnership, trust or unincorporated

enterprise of which such person is an officer, director, or a 5 percent

or more partner or owner, and,

(4) Any employee or officer of the person who--

(A) is a highly compensated employee (as defined in section

4975(e)(2)(H) of the Code) or officer (earning 10 percent or more of

the yearly wages of such person) or,

(B) has direct or indirect authority, responsibility or control

regarding the custody, management or disposition of plan assets.

(d) The term ``control'' means the power to exercise a controlling

influence over the management or policies of a person other than an

individual.

Signed at Washington, DC, this 22nd day of July, 1999.

Ivan L. Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 99-19152 Filed 7-26-99; 8:45 am]

BILLING CODE 4510-29-P