Notice2022-22861
Proposed Exemption for Certain Prohibited Transaction Restrictions Involving JPMorgan Chase Co. (JPMC or the Applicant) Located in New York, New York
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 20, 2022
Effective
January 10, 2023
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This document provides notice of the pendency before the Department of Labor (the Department) of a proposed individual exemption from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA) and/or the Internal Revenue Code of 1986 (the Code). If the proposed exemption is granted, certain asset managers with specified relationships to JPMorgan Chase Co. (JPMC) (the JPMC Affiliated qualified professional asset managers (QPAMs) and the JPMC Related QPAMs) will not be precluded from relying on the exemptive relief provided by Prohibited Transaction Class Exemption 84-14 (PTE 84-14 or the QPAM Exemption), notwithstanding the judgment of conviction against JPMC, as described below.
Full Text
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<title>Federal Register, Volume 87 Issue 202 (Thursday, October 20, 2022)</title>
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[Federal Register Volume 87, Number 202 (Thursday, October 20, 2022)]
[Notices]
[Pages 63802-63818]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22861]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Exemption Application No. D-12035]
Proposed Exemption for Certain Prohibited Transaction
Restrictions Involving JPMorgan Chase Co. (JPMC or the Applicant)
Located in New York, New York
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemption.
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SUMMARY: This document provides notice of the pendency before the
Department of Labor (the Department) of a proposed individual exemption
from certain of the prohibited transaction restrictions of the Employee
Retirement Income Security Act of 1974 (ERISA) and/or the Internal
Revenue Code of 1986 (the Code). If the proposed exemption is granted,
certain asset managers with specified relationships to JPMorgan Chase
Co. (JPMC) (the JPMC Affiliated qualified professional asset managers
(QPAMs) and the JPMC Related QPAMs) will not be precluded from relying
on the exemptive relief provided by Prohibited Transaction Class
Exemption 84-14 (PTE 84-14 or the QPAM Exemption), notwithstanding the
judgment of conviction against JPMC, as described below.
DATES: If granted, this proposed exemption will be effective for a
period of four years beginning on January 10, 2023, and ending on
January 9, 2027, if the exemption's conditions and definitions are
satisfied.
Written comments and requests for a public hearing on the proposed
exemption should be submitted to the Department by December 19, 2022.
ADDRESSES: All written comments and requests for a hearing should be
sent to the Employee Benefits Security Administration (EBSA), Office of
Exemption Determinations, Attention: Application No. D-12035 via email
to <a href="/cdn-cgi/l/email-protection#9df8b0d2d8d9ddf9f2f1b3faf2eb"><span class="__cf_email__" data-cfemail="9bfeb6d4dedfdbfff4f7b5fcf4ed">[email protected]</span></a> or online through <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Any
such comments or requests should be sent by the end of the scheduled
comment period. The application for exemption and the comments received
will be available for public inspection in the Public Disclosure Room
of the Employee Benefits Security Administration, U.S. Department of
Labor, Room N-1515, 200 Constitution Avenue NW, Washington, DC 20210.
See SUPPLEMENTARY INFORMATION below for additional information
regarding comments.
FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department
at (202) 693-8456. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION:
Comments
In light of the current circumstances surrounding the COVID-19
pandemic caused by the novel coronavirus which may result in disruption
to the receipt of comments by U.S. Mail or hand delivery/courier,
persons are encouraged to submit all comments electronically and not to
follow with paper copies. Comments should state the nature of the
person's interest in the proposed exemption and the manner in which the
person would be adversely affected by the exemption, if granted. Any
person who may be adversely affected by an exemption can request a
hearing on the exemption. A request for a hearing must state: (1) the
name, address, telephone number, and email address of the person making
the request; (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; and (3) a statement of the issues to be addressed and a
general description of the evidence to be presented at the hearing. The
Department will grant a request for a hearing made in accordance with
the requirements above where a hearing is necessary to fully explore
material factual issues identified by the person requesting the
hearing. A notice of such hearing shall be published by the Department
in the Federal Register. The Department may decline to hold a hearing
if: (1) the request for the hearing does not meet the requirements
above; (2) the only issues identified for exploration at the hearing
are matters of law; or (3) the factual issues identified can be fully
explored through the submission of evidence in written (including
electronic) form.
WARNING: All comments received will be included in the public
record without change and may be made available online at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal information provided,
unless the comment includes information claimed to be confidential or
other information whose disclosure is restricted by statute. If you
submit a comment, EBSA recommends that you include your name and other
contact information in the body of your comment, but DO NOT submit
information that you consider to be confidential, or otherwise
protected (such as a Social Security number or an unlisted phone
number) or confidential business information that you do not want
publicly disclosed. However, if EBSA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EBSA
might not be able to consider your comment. Additionally, the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website is an ``anonymous access'' system, which
means EBSA will not know your identity or contact information unless
you provide it in the body of your comment. If you send an email
directly to EBSA without going through <a href="https://www.regulations.gov">https://www.regulations.gov</a>,
your email address will be automatically captured and included as part
of the comment that is placed in the public record and made available
on the internet.
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 (ERISA), and Section 4975(c)(2) of the Internal
Revenue Code of 1986, as amended (the Code), and in accordance with the
[[Page 63803]]
procedures set forth in 29 CFR part 2570, subpart B (75 FR 66637,
66644, October 27, 2011).\1\ If the proposed exemption is granted,
certain asset managers with specified relationships to JPMC (the JPMC
Affiliated QPAMs and the JPMC Related QPAMs) will not be precluded from
relying on the exemptive relief provided by Prohibited Transaction
Class Exemption 84-14 (PTE 84-14 or the QPAM Exemption),\2\
notwithstanding the judgment of conviction against JPMC (the
Conviction) \3\ for engaging in a conspiracy to fix the price of, or
eliminate competition in, the purchase or sale of the euro/U.S. dollar
currency pair exchanged in the Foreign Exchange (FX) Spot Market. This
proposed exemption, if granted, will be effective for a period of four
years beginning on January 10, 2023, and ending on January 9, 2027, if
the exemption's conditions and definitions are satisfied.
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\1\ For purposes of this proposed exemption, references to
specific provisions of ERISA Title I, unless otherwise specified,
should be read to refer as well to the corresponding provisions of
Code Section 4975. Further, this proposed exemption, if granted,
does not provide relief from the requirements of, or specific
sections of, any law not noted above. Accordingly, the Applicant is
responsible for ensuring compliance with any other laws applicable
to the transactions described herein.
\2\ 49 FR 9494 (March 13, 1984), as corrected at 50 FR 41430
(October 10, 1985), as amended at 70 FR 49305 (August 23, 2005), and
as amended at 75 FR 38837 (July 6, 2010).
\3\ Section I(g) of PTE 84-14 generally provides that
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including violation of the Sherman
Antitrust Act, Title 15 United States Code, Section 1.
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This proposed exemption, would provide relief from certain of the
restrictions set forth in ERISA sections 406 and 407. It would not,
however, provide relief from any other violation of law. Furthermore,
the Department cautions that the relief in this proposed exemption
would terminate immediately if, among other things, an entity within
the JPMC corporate structure is convicted of a crime covered by Section
I(g) of PTE 84-14 (other than the Conviction as defined in Section
I(a)) during the exemption period (as defined in Section I(c)).
Although the JPMC QPAMs could apply for a new exemption in that
circumstance, the Department would not be obligated to grant the
exemption.
The terms of this proposed exemption have been specifically
designed to permit plans to terminate their relationships in an orderly
and cost-effective fashion in the event of an additional conviction or
a determination by a plan that it is otherwise prudent to terminate its
relationship with an entity covered by the exemption.
Summary of Facts and Representations <SUP>4</SUP>
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\4\ The Summary of Facts and Representations is based on the
Applicant's representations provided in its exemption application
and does not reflect factual findings or opinions of the Department
unless indicated otherwise. The Department notes that availability
of this exemption, is subject to the express condition that the
material facts and representations contained in application D-12035
are true and complete at all times, and accurately describe all
material terms of the transactions covered by the exemption. If
there is any material change in a transaction covered by the
exemption, or in a material fact or representation described in the
application, the exemption will cease to apply as of the date of the
change.
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Background
1. JPMC is a financial holding company and global financial
services firm incorporated in Delaware and headquartered in New York,
New York. JPMC's principal bank subsidiaries are JPMorgan Chase Bank,
N.A. and Chase Bank USA, National Association. Two of JPMC's principal
non-bank subsidiaries are its primary broker-dealer subsidiary, J.P.
Morgan Securities LLC, and its primary investment management
subsidiary, J.P. Morgan Investment Management Inc. (JPMIM). JPMC
operates through four major reportable segments or lines of business:
Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB),
Commercial Banking (CB), and Asset & Wealth Management (AWM).
2. JPMC is the publicly-traded parent company of investment
management affiliates that function as QPAMs, through which the CCB,
CIB, and AWM segments operate. Since the Department granted PTE 2017-03
(as discussed in more detail below), the following seven JPMC QPAMs
have exercised discretionary control over the management and
disposition of client assets held by ERISA-covered Plans and IRAs
(together, Covered Plans): \5\ JPMorgan Chase Bank, N.A., J.P. Morgan
Alternative Asset Management, Inc., JPMorgan Asset Management (Asia
Pacific) Limited, J.P. Morgan Investment Management Inc., J.P. Morgan
Private Investments Inc., J.P. Morgan Securities LLC., and Security
Capital Research & Management Incorporated.
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\5\ For purposes of this proposed exemption, the term Covered
Plan means a plan subject to Part IV of Title I of ERISA (an
``ERISA-covered plan'') or a plan subject to Code section 4975 (an
``IRA''), in each case, with respect to which a JPMC Affiliated QPAM
relies on PTE 84-14, or with respect to which a JPMC Affiliated QPAM
(or any JPMC affiliate) has expressly represented that the manager
qualifies as a QPAM or relies on PTE 84-14.
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The JPMC Affiliated QPAMs provide investment management services to
thousands of plans and IRAs. In managing these assets, the JPMC
Affiliated QPAMs regularly rely on the QPAM Exemption. In addition to
the JPMC Affiliated QPAMs, JPMC currently owns a 5% or greater direct
or indirect interest in certain investment managers that are not
affiliated with JPMC in the actual control sense (the JPMC Related
QPAMs). JPMC does not have the authority to exercise a controlling
influence over the JPMC Related QPAMs and is not involved with their
clients, strategies, or ERISA assets under management, if any.
ERISA and Code Prohibited Transactions and PTE 84-14
3. The rules set forth in ERISA Section 406 and Code Section
4975(c)(1) proscribe certain ``prohibited transactions'' between plans
and certain parties in interest with respect to those plans.\6\ ERISA
Section 3(14) defines parties in interest with respect to a plan to
include, among others, the plan fiduciary, a sponsoring employer of the
plan, a union whose members are covered by the plan, service providers
with respect to the plan, and certain of their affiliates.\7\ The
prohibited transaction provisions under ERISA Section 406(a) and Code
Section 4975(c)(1) prohibit, in relevant part, (1) sales, leases,
loans, or the provision of services between a party in interest and a
plan (or an entity whose assets are deemed to constitute the assets of
a plan), (2) the use of plan assets by or for the benefit of a party in
interest, or (3) a transfer of plan assets to a party in interest.\8\
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\6\ For purposes of the Summary of Facts and Representations,
references to specific provisions of Title I of ERISA, unless
otherwise specified, refer also to the corresponding provisions of
the Code.
\7\ Under the Code, such parties, or similar parties, are
referred to as ``disqualified persons.''
\8\ The prohibited transaction provisions also include certain
fiduciary prohibited transactions under ERISA Section 406(b). These
include transactions involving fiduciary self-dealing, fiduciary
conflicts of interest, and kickbacks to fiduciaries.
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Under the authority of ERISA Section 408(a) and Code Section
4975(c)(2), the Department has the authority to grant exemptions from
such ``prohibited transactions'' in accordance with the procedures set
forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27,
2011) if the Department finds an exemption is: (a) administratively
feasible, (b) in the interests of the plan and of its participants and
beneficiaries, and (c)
[[Page 63804]]
protective of the rights of participants and beneficiaries.
4. PTE 84-14 exempts certain prohibited transactions between a
party in interest and an ``investment fund'' (as defined in Section
VI(b) of PTE 84-14) in which a plan has an interest if the investment
manager satisfies the definition of ``qualified professional asset
manager'' (QPAM) and satisfies additional conditions of the exemption.
PTE 84-14 was developed and granted based on the essential premise that
broad relief could be afforded for all types of transactions in which a
plan engages only if the commitments and the investments of plan assets
and the negotiations leading thereto are the sole responsibility of an
independent, discretionary manager.\9\
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\9\ See 75 FR 38837, 38839 (July 6, 2010).
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5. Section I(g) of PTE 84-14 prevents an entity that may otherwise
meet the definition of QPAM from utilizing the exemptive relief
provided by the QPAM exemption, for itself and its client plans if that
entity, an ``affiliate'' thereof,\10\ or any direct or indirect five
percent or more owner in the QPAM has been either convicted or released
from imprisonment, whichever is later, as a result of criminal activity
described in section I(g) within the 10 years immediately preceding the
transaction. Section I(g) was included in PTE 84-14, in part, based on
the Department's expectation that QPAMs and those who may be in a
position to influence the QPAM's policies maintain a high standard of
integrity.
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\10\ Section VI(d) of PTE 84-14 defines the term ``affiliate''
for purposes of Section I(g) as ``(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.''
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JPMC Conviction and PTE 84-14 Disqualification
6. On May 20, 2015, the Department of Justice filed a Criminal
Information in the U.S. District Court for the District of Connecticut
(the District Court) \11\ charging JPMC with a one-count violation of
the Sherman Antitrust Act.\12\ The Information charged that from at
least as early as July 2010 until at least January 2013, JPMC, through
one of its euro/U.S. dollar (EUR/USD) traders, entered into and engaged
in a combination and conspiracy to fix, stabilize, maintain, increase
or decrease the price of, and rig bids and offers for, the EUR/USD
currency pair exchanged in the foreign exchange (FX) spot market by
agreeing to eliminate competition in the purchase and sale of the EUR/
USD currency pair in the United States and elsewhere (the Criminal
Misconduct). The Criminal Misconduct involved near-daily conversations
some of which were in code, in an exclusive electronic chat room used
by certain EUR/USD traders.
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\11\ Case Number 3:15-CR-79-SRU.
\12\ 15 U.S.C. 1.
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JPMC resolved the charges through a plea agreement presented to the
District Court on May 20, 2015 (the Plea Agreement), under which JPMC
agreed to enter a plea of guilty to the charge set out in the
Information. A judgment of the Conviction was subsequently entered
against JPMC on January 10, 2017, and pursuant to the judgment, JPMC
was required to pay approximately $550 million in total fines and
restitution in connection with the Conviction.
The Prior and Existing Exemptions
7. PTE 2016-15. Once the District Court entered the Conviction, the
JPMC Affiliated QPAMs and the JPMC Related QPAMs, as well as their
Covered Plan clients, became ineligible to rely on PTE 84-14, pursuant
to section I(g) of the class exemption without receiving an individual
prohibited transaction exemption from the Department. The JPMC
Affiliated QPAMs submitted an exemption application to the Department
on May 20, 2015, and after reviewing the application, the Department
granted PTE 2016-15 on January 10, 2017. PTE 2016-15 permitted the JPMC
Affiliated QPAMs and the JPMC Related QPAMs to continue to rely upon
the relief provided in the QPAM exemption for one-year period from the
date of the Conviction.\13\
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\13\ PTE 2016-15, 81 FR 94028 (December 22, 2016). PTE 2016-15
became effective on January 10, 2017 (the date on which the District
Court entered the Conviction against JPMC) and expired on January
10, 2018.
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8. PTE 2017-03. Subsequently, on December 29, 2017, the Department
granted PTE 2017-03, a second individual exemption that permitted the
JPMC Affiliated QPAMs and the JPMC Related QPAMs to continue to rely
upon the relief provided by PTE 84-14 for a period of five years
beginning on January 10, 2018, and ending on January 9, 2023.\14\
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\14\ PTE 2017-03, 82 FR 61816 (December 29, 2017).
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9. PTEs 2016-15 and 2017-03 each contain a set of conditions that
are designed to protect those Covered Plans that entrust their assets
to a JPMC Affiliated QPAM despite the serious nature of the Criminal
Misconduct underlying the Conviction. The Department discusses some of
the protective conditions below.\15\
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\15\ The following paragraphs do not discuss all of the
conditions set out in PTE 2017-03. For the complete set of
conditions, see PTE 2017-03, 82 FR 61816 (December 29, 2017).
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Conditions of PTE 2017-03
10. PTE 2017-03 requires each JPMC Affiliated QPAM to develop,
implement, maintain, and follow written policies (the Policies) that
are reasonably designed to ensure that, among other things: (a) the
asset management decisions of the JPMC Affiliated QPAM are independent
of the corporate management and business activities of JPMC; (b) the
JPMC Affiliated QPAM fully complies with ERISA's fiduciary duties; (c)
any filings or statements made by the JPMC Affiliated QPAM to
regulators on behalf of Covered Plans are materially accurate and
complete; and (d) the JPMC Affiliated QPAM complies with the terms of
PTE 2017-03. Further, any violation of or failure to comply with the
Policies must be corrected promptly upon discovery, and any such
violation or compliance failure that is not promptly corrected must be
reported, in writing to appropriate corporate officers upon the
discovery of the failure to promptly correct.
11. PTE 2017-03 requires each JPMC Affiliated QPAM to develop and
implement a training program (the Training) that is conducted at least
annually by a prudently selected independent professional. The Training
must cover the Policies, ERISA and Code compliance, ethical conduct,
the consequences for not complying with the conditions of PTE 2017-03,
and the duty to promptly report wrongdoing.
12. PTE 2017-03 further requires each JPMC Affiliated QPAM to be
audited biannually (covering the preceding 12-month period) by a
prudently selected independent auditor (the Auditor). The Auditor must
evaluate the adequacy of each JPMC Affiliated QPAM's implementation of
the Policies and Training requirements of PTE 2017-03 and their
compliance with them. The Auditor must issue a written report (the
Audit Report) to JPMC and each JPMC Affiliated QPAM to which the audit
applies that describes the procedures performed during the Audit. In
its Audit Report, the Auditor must assess the
[[Page 63805]]
adequacy of each of the JPMC Affiliated QPAM's Policies and Training,
their compliance with the Policies and Training, the need, if any, to
strengthen the Policies and Training, and any instance(s) of
noncompliance.
13. PTE 2017-03 also requires certain JPMC senior personnel to
review the Audit Report, make certain certifications, and take
corrective actions when necessary. In this regard, a general counsel,
or one of the three most senior executive officers of each JPMC
Affiliated QPAM to which the Audit Report applies must certify in
writing and under penalty of perjury that the officer has reviewed the
Audit Report, addressed, corrected, or remedied any inadequacy
identified in the Audit Report, and determined that the Policies and
Training comply with the requirements of PTE 2017-03 and applicable
provisions of ERISA and the Code.
14. PTE 2017-03 requires each JPMC Affiliated QPAM to agree and
warrant to its Covered Plan clients that it will: (a) comply with ERISA
and the Code; (b) refrain from engaging in prohibited transactions that
are not otherwise exempt (and promptly correct any inadvertent
prohibited transactions); and (c) comply with the standards of prudence
and loyalty set forth in ERISA Section 404. PTE 2017-03 also requires
each JPMC Affiliated QPAM to agree and warrant: (a) to indemnify and
hold harmless Covered Plans for certain damages; and (b) not to require
(or otherwise cause) Covered Plans to waive, limit, or qualify the
liability of each JPMC Affiliated QPAM for violating ERISA or the Code
or engaging in prohibited transactions. Finally, PTE 2017-03 requires
the JPMC Affiliated QPAMs to agree and warrant not to: (a) restrict the
ability of Covered Plans to terminate or withdraw from their
arrangement with the JPMC Affiliated QPAM, with the exception of
reasonable restrictions disclosed in advance, as defined in PTE 2017-
03; or (b) impose any fees, penalties, or charges for such termination
or withdrawal, with the exception of reasonable fees.
15. PTE 2017-03 contains extensive notice requirements that
obligate the JPMC Affiliated QPAMs to provide Covered Plans with a
notice of the QPAM's obligations under the exemption, a copy of the
notice of the exemption as published in the Federal Register, a
separate summary describing the facts that led to the Conviction (the
Summary), and a prominently displayed statement (the Statement) that
the Conviction results in a failure to meet a condition in PTE 84-14.
16. PTE 2017-03 also requires JPMC to designate a senior compliance
officer (the Compliance Officer) to conduct an annual review to
determine the adequacy and effectiveness of the implementation of the
Policies and Training (the Annual Review). The Compliance Officer must
prepare a written report for each Annual Review that, among other
things, summarizes their material activities during the preceding year,
sets forth any instance of noncompliance discovered during the
preceding year, and any related corrective action taken.
Current Exemption Request
17. On October 1, 2021, the Applicant filed an application for
exemptive relief that would permit the JPMC Affiliated QPAMs and the
JPMC Related QPAMs to continue to rely upon the relief provided under
PTE 84-14 for a period of four years from January 10, 2023 (the
expiration of PTE 2017-03), through January 9, 2027 (the conclusion of
the Section I(g) 10-year ineligibility period triggered by the
Conviction). On February 7, 2022, the Applicant supplemented its
application with the Second Audit Report. In support of its request,
the Applicant states that: each of the JPMC Affiliated QPAMs and the
JPMC Related QPAMs have complied with the conditions of PTE 2017-03
and, therefore, should be permitted to continue to rely upon PTE 84-14
through the remainder of the ineligibility period in order to avoid
substantial costs and other disruptions that would occur if it no
longer could rely on the exemption. The Applicant's representations
regarding PTE 2017-03 compliance are addressed immediately below and
its representations regarding costs to Covered Plans begins at
paragraph 42 under the heading ``Hardship to Plans.''
Compliance With PTE 2017-03
18. Training. The Applicant represents that the JPMC Affiliated
QPAMs developed and implemented a comprehensive Training program before
the July 9, 2018, deadline specified in PTE 2017-03. Through a web-
based e-learning training module, the Applicant requires the Training
to be completed annually by relevant personnel of each JPMC Affiliated
QPAM, including asset/portfolio management, trading, legal, compliance,
and internal audit personnel, as required under PTE 2017-03. The
Training is designed to track completion by required participants and
covers compliance with ERISA and the Code, including applicable ERISA
fiduciary duty and prohibited transaction provisions. The Applicant
updates the Training annually, as necessary, for clarity,
accessibility, and legislative and regulatory changes.
19. Policies and Procedures. The Applicant represents that before
the effective date of PTE 2016-15, each JPMC Affiliated QPAM developed
and instituted a firmwide policy specifically addressing fiduciary
responsibilities under ERISA and the Code (the ERISA Policies). The
ERISA Policies cover a broad range of topics relevant to the JPMC
QPAMs' management of Covered Plan assets, including ERISA's prohibited
transaction rules, party in interest transactions, self-dealing and
conflicts of interest, employer securities, and employer real property.
The ERISA Policies also cover PTE 84-14, PTE 2017-03, the statutory
exemption provided under ERISA Section 408(b)(2), recordkeeping and
reporting obligations, and the applicability of the ERISA Policies to
Covered Plans.
Each section of the ERISA Policies provides background information,
identifies responsible parties, and describes objective requirements,
internal practices, and reporting obligations. The ERISA Policies
address compliance requirements for Covered Plans and assign
responsibility for specific activities to relevant JPMC personnel. They
further address PTE 2017-03's required content related to manager
independence, compliance with ERISA and the Code, communications with
regulators, exemption compliance, corrections, and the Training. The
ERISA Policies also feature cross-references to related policies,
procedures, and compliance manuals, and are supplemented by a library
of pre-existing firmwide, line of business-specific, and JPMC QPAM-
specific policies and procedures on particular topics.
The ERISA Policies apply to all lines of business that engage in
activities involving a JPMC Affiliated QPAM's exercise of investment
discretion or provision of investment advice to plans and plan asset
investment funds, or indirect service as an adviser or sub-adviser to a
pooled investment vehicle deemed to hold the assets of Covered Plans.
The Applicant represents that an electronic notice was sent to relevant
JPMC Affiliated QPAM personnel regarding the availability of the ERISA
Policies and that the ERISA Policies have been easily accessible on
JPMC's intranet during the relevant period. The Applicant states that
the ERISA Policies are reviewed annually and updated as necessary.
20. Internal Compliance Processes. The Applicant represents that
the JPMC Affiliated QPAMs conducted a thorough
[[Page 63806]]
review of their ERISA policies and procedures and implemented or
augmented a variety of testing, monitoring, and reporting capabilities
to ensure that they employ and follow robust and comprehensive
compliance systems.
21. The Audits. PTE 2017-03 requires the JPMC Affiliated QPAMs to
submit to an audit conducted annually by a prudently selected
independent auditor to evaluate the adequacy of, and each JPMC
Affiliated QPAM's compliance with, the Policies and Training
requirements of the exemption. The JPMC Affiliated QPAMs have undergone
two comprehensive audits performed by Newport Trust Company (Newport).
Newport completed its first audit (covering July 10, 2018 through July
9, 2019) on January 9, 2020 (the First Audit). Newport completed its
second audit (covering July 10, 2020-July 9, 2021) on January 9, 2022
(the Second Audit). In conducting the audits, Newport states that it
thoroughly analyzed the Policies and Training implemented by each JPMC
Affiliated QPAM in connection with PTE 2017-03.
Auditor's Findings
22. The ERISA Policies. With respect to the ERISA Policies, Newport
gathered information from JPMC through six separate data requests,
reviewed the JPMC Affiliated QPAMs' obligations under ERISA and
applicable Policies and Procedures, held discussions with JPMC
personnel regarding existing internal governance structures (and how
the Policies were uniquely tailored to accommodate individual JPMC
Affiliated QPAMs' investment strategies), and tested the JPMC
Affiliated QPAMs' operational compliance with the Policies.
In the First Audit, Newport determined that JPMC's ERISA Policies
are ``comprehensive in scope and adequately address all of the content
required by PTE 2017-03.'' Based on its review, Newport, ``determined
that the JPMC QPAMs developed, implemented and maintained Policies in
accordance with the conditions of the Exemption.'' In the Second Audit,
Newport concluded that ``[t]he ERISA Policy is comprehensive in scope
and adequately addresses all of the content required by the
Exemption.'' Newport identified no gaps or areas of insufficient
coverage within the ERISA Policy and concluded that the ERISA Policy is
clearly written and provides relevant personnel with an appropriate
amount of information about each topic.
Newport also reviewed JPMC's firmwide and line of business-specific
policies and procedures that supplement the ERISA Policy to better
understand how the ERISA Policy fits within JPMC's broader governance
structure. Newport concluded that the Policies, comprised of the ERISA
Policy and these supplemental policies and procedures, provide JPMC
personnel with clear guidance on relevant procedural requirements and
extensive documentation related to the management of assets held by
Covered Plans.
23. The Training. In its assessment of the Training, Newport states
that it held discussions with JPMC personnel regarding the
qualifications of the Training's developer and implementer, as well as
the format, timing, and schedule for the Training. Newport also
reviewed the online course material and attendance records. Newport
states that the JPMC Affiliated QPAMs developed and implemented a
comprehensive Training program before the deadline specified in PTE
2017-03 and rolled out a web-based e-learning training module more than
a year before the required deadline of July 9, 2018.
Newport further states that it reviewed the content of the Online
Training Module and noted that, in compliance with the requirement
specified in the ERISA Policies, the training covered: (a) the
Policies; (b) ERISA and Code compliance (including applicable fiduciary
duties and the prohibited transaction provisions); (c) ethical conduct;
(d) the consequences of not complying with the exemption conditions
(including any loss of exemptive relief); and (e) prompt reporting of
wrongdoing. During the period covered by the Second Audit, Newport
states that based upon a comparison of enrollment records against
completion records, the Training had a 99.89% attendance rate for the
designated individuals.
24. Compliance with ERISA and the Code. Newport states that it
selected individual prohibited transaction exemptions, principal
transactions, proprietary investments, and record retention as focus
areas for special scrutiny during the period covered by its audits.
Newport notes that it identified the following issues.
25. Issue: PTE 2003-24 Compliance. Newport states that, on December
2, 2021, JPMC personnel disclosed to Newport an issue related to
compliance with PTE 2003-24.\16\ As described by JPMC in a written
summary to Newport, during a review of certain bank regulatory
reporting requirements relating to affiliated transactions, JPMC's
Asset Management Line of Business (AM) identified 19 new issuances,\17\
constituting approximately 2% of the 946 total new issuances that JPMC
purchased on behalf of managed funds and accounts from July 2020 to
June 2021, that were underwritten by an affiliate but not included on
the respective 23B bank regulatory reporting.
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\16\ PTE 2003-24 permits the purchase of securities by an asset
management affiliate of the applicant (JPMorgan Chase Bank) on
behalf of employee benefit plans, including those investing in a
pooled fund, for which the applicant acts as a fiduciary, from any
person other than the applicant or an affiliate thereof, during the
existence of an underwriting or selling syndicate with respect to
such securities, where the affiliated broker-dealer is a manager or
member of such syndicate, and/or where an affiliated trustee serves
as trustee of a trust that issued the securities (whether or not
debt securities) or serves as indenture trustee of securities that
are debt securities.
\17\ The JPMC asset manager subsequently reviewed its quarterly
PTE 2003-24 reporting during the same period and determined that 12
of the 19 new issuances were reported but 7 were not reported.
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Newport states that JPMC is remediating this PTE 2003-24
underreporting issue consistent with its correction procedures and past
precedent by taking the following steps: (a) completing a review of
affiliated transactions; (b) reviewing all issuances purchased by the
asset manager on behalf of managed funds and accounts from July 2020
through June 2021 that were underwritten by an affiliate to confirm
compliance with reporting requirements; (c) further analyzing
exceptions to determine the root cause, identifying and implementing
procedural enhancements, and considering any redress as applicable and
necessary; and (d) re-issuing relevant PTE 2003-24 quarterly reporting
per the asset manager's internal procedures for reporting affiliated
transactions with an explanation to the impacted Covered Plans.
Based on its evaluation, Newport determined that AM complied with
the ERISA Policies and line of business-specific procedures with
respect to PTE 2003-24 for transactions involving Covered Plans during
the period covered by the audit. Newport states that it intends to
follow up to confirm that the proposed remediation was implemented as
planned.
26. Issue: Fee Offsetting Issues. Newport states that
representatives from JPMC's Private Banking line of business (PB)
identified three separate issues related to the offsetting process for
Covered Plans invested in proprietary investment products. On July 28,
2020, JPMC notified Newport that PB had identified gaps in the fee
offsetting
[[Page 63807]]
process during a historical review of the firm's fee offsetting process
conducted in late 2019. The review identified two primary gaps: (a) a
failure to flag certain proprietary funds as fee offset eligible in the
relevant systems and therefore not providing the relevant monthly
information regarding fee offsets; and (b) a failure to set up certain
accounts for fee offsetting. The review encompassed approximately
100,000 Covered Plans dating back to 2012 and identified 753 accounts
that were impacted.
Newport states that, before 2013, account coding errors were more
frequent because portfolio managers had to go through a manual process
to make sure account coding was set up for fee offsetting. After the
implementation of enhancements in 2013, the fee offset coding was
automatically applied to accounts identified as Covered Plans. In
addition, PB now performs weekly checks to ensure that all new Covered
Plans are fee offset eligible. With these enhancements, JPMC determined
that no further changes to the fee offsetting process were needed.
Newport states that PB Operations led the remediation process,
identified impacted accounts, calculated the amounts owed to each
client (the amount of fees that were not offset plus an interest charge
for lost earnings calculated using the Department's VFCP Calculator),
and notified clients. Newport also notes that PB fully credited all
impacted client accounts and prepared an excise tax filing.
27. JPMC identified two other PB issues related to fee offsetting
for proprietary investments and communicated those issues to Newport on
December 2, 2021. While preparing a response to one of Newport's
inquiries regarding the fee offsetting process for Sample Accounts, PB
representatives identified an issue with one proprietary exchange
traded fund (ETF) held in one of the Sample Accounts that closed in the
middle of a month during the period covered under the Second Audit. PB
conducted a review of all Covered Plans that had closed mid-month and
held ETFs and escalated the issue with legal, compliance, and
operations leadership.
Newport states that JPMC detected an error in the process for
calculating offset amounts associated with proprietary ETFs held at the
time accounts are closed, and that this issue has persisted since July
2018 when proprietary ETFs were first launched for use in managed
accounts. Specifically, the Closed Account Report used to determine the
credit amount owed to accounts that closed mid-month and that held
proprietary funds showed certain issues.
PB conducted an analysis of all Covered Plans managed by PB that
closed mid-month between July 2018 and September 2021. PB's analysis
found that over 550 accounts were under-credited for an aggregate
amount of approximately $4,500 and that over 1,400 accounts were over-
credited for an aggregate of approximately $144,000. PB representatives
notified Newport that the Closed Account Report has been corrected to
ensure accuracy going forward, and that PB is currently calculating the
total impact of the fee offset amounts owed (including lost earnings),
determining the approach for crediting accounts, developing a plan for
communication with clients and advisors for affected accounts, and
preparing an excise tax filing. Newport plans to follow up on the
anticipated timing of the remediation process and has requested that PB
update Newport throughout the remediation process.
28. Another issue was identified on August 9, 2021, when an
investor notified the PB fee billing team of a discrepancy in its
client's advisory fee calculation. Upon further analysis, the PB team
discovered that while the proprietary fund fee offset had been
correctly applied when the account was initially billed, the offset was
not reapplied following an update to (i.e., recalculation of) the
previously calculated fee. The issue arose when a coding change was
made following a conversion from an old fee to a new billing program in
March 2020. This resulted in offsets no longer being applied when there
was a rebilling of an incorrect advisory fee after onboarding.
PB representatives conducted a review of all Covered Plans that had
a fee update between September 2018 and July 2021 and calculated a
preliminary impact of approximately $2,000 across 80 accounts.\18\ PB
representatives notified Newport that the fee billing group has
corrected the program to ensure that all future fee updates include the
required offset. PB is currently calculating the total impact of the
offset amounts owed (including lost earnings), determining the approach
for crediting accounts, developing a plan for communication with
clients and advisors for affected accounts, and preparing an excise tax
filing.
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\18\ With respect to this last issue, the Applicant represents
that PB did not choose September 2018 as a beginning date for their
search. In March 2020, the functionality that enabled an advisory
fee to be recalculated was migrated from one system to another. In
connection with this migration, the functionality was not
implemented correctly in the new system. Thus, as of March 2020,
when an advisory fee was recalculated, the offset was not included
in the recalculated fee. Once this system issue was discovered, PB
reviewed all accounts that had an advisory fee that was updated/
recalculated between March 2020 and July 2021, the period during
which the functionality was faulty. The earliest dated invoice that
required rebilling through the new system--and thus impacted by the
defective system migration and functionality--was from September
2018.
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Newport states that it plans to follow up on the anticipated timing
of the remediation process and has requested that PB update Newport
throughout the process. Based on Newport's assessment, PB self-
identified several issues related to fee offsetting for proprietary
investment products and promptly took steps to remediate those issues
in accordance with its correction procedures. Therefore, Newport did
not find any instances of noncompliance related to proprietary
investment products within PB during the period covered by PTE 2017-03.
However, given the multiple issues that have been identified above,
Newport recommended that PB perform a comprehensive assessment of its
existing fee offsetting processes.
Deferred Prosecution Agreement
29. On September 29, 2020, JPMC, JPMorgan Chase Bank and J.P.
Morgan Securities LLC (JPMS) entered into a deferred prosecution
agreement with the Department of Justice (the DPA).\19\ As required by
the conditions of PTE 2017-03, JPMC provided written notification to
the Department regarding the DPA on that date. In response to a request
for information from Newport, and as set forth in the DPA, JPMC stated
that between 2008 and 2016, former employees of JPMC and JPMS who
worked on the Precious Metals Desk and U.S. Treasuries Desk within the
CIB in the Global Markets division, engaged in trading practices known
as ``spoofing'', in which the traders placed orders to buy or sell
precious metals or U.S. Treasury futures contracts, or U.S. Treasury
notes and bonds in the secondary cash market with the intent to cancel
those orders before execution in an effort to manipulate the market in
those instruments.
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\19\ The CFTC and SEC announced separate settlements in
connection with related, parallel proceedings on the same date as
the DPA.
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30. The Applicant represents that there is no connection between
the lines of business that manage assets through QPAMs in reliance on
PTE 84-14 and the conduct cited in the DPA. JPMC, as a firm, conducts
discretionary investment management activities through various lines of
business that engage in relevant transactions through several JPMC
legal entities. JPMorgan Chase Bank, NA is the legal entity that
manages cash collateral related to the
[[Page 63808]]
securities lending sub-line of business. Accordingly, JPMorgan Chase
Bank, NA is the QPAM in this instance, and it may rely on PTE 84-14 to
manage such cash collateral.
While all JPMC personnel ultimately report to common senior
leadership at some level, the Agency Securities Finance business (i.e.,
the asset management business) is distinct from the Global Markets
business (including the business groups that comprise the Precious
Metals and U.S. Treasuries Desks), and each such business has separate
heads and dedicated compliance and internal staff.\20\ The Applicant
states that the control functions have dedicated personnel covering
Agency Securities Finance, and those individuals do not perform those
services for the Global Markets Division, including the Precious Metals
and U.S. Treasuries Desks within that division. Ultimately, these
control function personnel report up to common senior leadership at
some level.
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\20\ All CIB Compliance function personnel roll up to the CCO
for CIB, and all firm-wide Compliance function personnel roll up to
the JPMorgan Global Chief Compliance Officer, who reports to the
firm's Chief Risk Officer. Similarly, business-aligned Internal
Audit function personnel roll up to the Chief Auditor-CIB and
ultimately to the General Auditor of JPMC. In addition, some
surveillance, monitoring, and testing functions utilize centralized
resources and personnel within Compliance, and business-aligned
Compliance personnel collaborate with other stakeholders across the
firm across many lines of business.
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31. The Applicant represents that, to the best of its knowledge,
there have been no instances where JPMC QPAMs entered into trades for
Covered Plans with the Precious Metals or U.S. Treasuries Desks.
Accordingly, the spoofing activity referred to in the DPA should not
have directly impacted any such Covered Plans. Further, JPMC states
that it is not aware of any impact to Covered Plans from the conduct
underlying the DPA. JPMC, however, states that the activities described
in the DPA may have had an indirect impact on participants in the
markets at issue, regardless of whether such market participants had
traded with the Precious Metals and U.S. Treasuries Desks.
32. Newport states that the trading conduct cited in the DPA ceased
in 2016, before the Audit periods covered under PTEs 2016-15 and 2017-
03. In addition, JPMC confirmed to Newport that, to its knowledge, none
of the JPMC Affiliated QPAMs traded directly with the CIB Global
Markets Precious Metals or U.S. Treasuries Desks during the period
between 2008 and 2016, nor do they today. JPMC states that it has found
no evidence of direct impact to Covered Plans managed on a
discretionary basis by JPMC QPAMs during the period cited in the DPA.
JPMC also stated that Covered Plans were not found to have been
affected in connection with precious metals barrier options
transactions.
33. Newport requested information regarding the structure and
functions of the JPMC compliance and internal audit controls pertaining
to the activities described in the DPA to determine whether oversight
measures are sufficient to prevent and detect future similar
activities. Based on its review, Newport concluded that the trading and
market conduct and personnel that are the subject of the DPA did not
have any direct bearing on the activities of the JPMC Affiliated QPAMs
subject to the Audits and that JPMC took measures designed to enhance
oversight and controls, prevent the occurrence of similar future
conduct, and detect any issues relating to trading activities cited in
the DPA.
Compliance With Other Conditions of PTE 2017-03
34. Newport determined that the JPMC QPAMs did not participate in
the Criminal Misconduct that is the subject of the Conviction.\21\
Rather, the Criminal Misconduct was the action of one trader working in
the FX trading business of JPMorgan Chase Bank who did not work at any
time for a fiduciary line of business within JPMC. Newport determined
further that there was no indication that the Criminal Misconduct
related to any identified transaction involving Covered Plans nor did
any JPMC QPAM personnel participate in such activities or receive
remuneration in connection with them. Newport further determined that
the JPMC QPAMs did not employ or knowingly engage the individual that
participated in the Criminal Misconduct.
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\21\ As noted earlier, the Criminal Misconduct is in connection
with FX spot market manipulation in violation of the Sherman
Antitrust Act, 15 U.S.C. 1, entered in the District Court for the
District of Connecticut (the District Court) (case number 3:15-cr-
79-SRU).
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35. The conditions of PTE 2017-03 require Newport to determine that
filings or statements made by the JPMC QPAMs to regulators, including
but not limited to the Department, the Treasury, the DOJ, and the PBGC,
on behalf of or in relation to Covered Plans, are materially accurate
and complete. Based on its review of regulator communications, Newport
determined that the JPMC QPAMs followed their ERISA Policies in
accordance with the communications requirements of PTE 2017-03.
36. Condition I(d) of PTE 2017-03 provides that JPMC must not use
its authority or influence to direct any investment fund subject to
ERISA or the Code and managed by a JPMC QPAM with respect to one or
more Covered Plans to enter into any transaction with JPMC, or to
engage JPMC to provide any service to such investment fund, for a
direct or indirect fee borne by such investment fund, regardless of
whether such transaction or service may otherwise be within the scope
of relief provided by an administrative or statutory exemption. Newport
determined that JPMC has met its obligations in these regards.
37. Based on its review of the client documentation and
representations made by JPMC personnel, Newport determined that the
JPMC Affiliated QPAMs have complied with the various contractual
requirements specified in Section I(j) of PTE 2017-03. Newport also
determined that the JPMC Affiliated QPAMs have complied with the
communication requirements of Section I(k) of PTE 2017-03.
38. With regard to the Compliance Officer requirements of PTE 2017-
03, Newport states that in April 2018, JPMC designated David S.
Villwock, JPMC's Head of Firmwide Fiduciary Compliance, to serve as the
Compliance Officer for purposes of PTE 2017-03. Newport states that Mr.
Villwock has the requisite experience with, and knowledge of, the
regulation of financial services and products (including under ERISA
and the Code) and has a direct reporting line to JPMC's highest-ranking
corporate officer in charge of legal compliance for asset management.
Newport concludes that, with the appointment of Mr. Villwock as the
Compliance Officer, JPMC complied with the relevant requirements of PTE
2017-03.
39. PTE 2017-03 also requires Newport to assess the adequacy of the
Annual Review conducted by the Compliance Officer. Newport states that
Mr. Villwock conducted an Annual Review for the most recent twelve-
month period that ended on January 9, 2021, which was memorialized in
an Annual Report provided to Newport on April 8, 2021. Based on its
review, Newport determined that: (a) the Annual Report covers all of
the content required under PTE 2017-03; (b) Mr. Villwock provided the
required written certifications regarding the Annual Report; and (c)
the recipients of the Annual Report included the appropriate corporate
officers of JPMC and each JPMC QPAM to which such report
[[Page 63809]]
relates. Further, Newport found that the Annual Report was thorough and
effectively leveraged JPMC's existing compliance apparatus.
40. Newport determined that the JPMC Affiliated QPAMs' record
retention activities were operationally compliant with Section I(n) of
PTE 2017-03 and with JPMC's Record Management Policies.
41. Newport states that it did not find any instance where a client
contract specifically contradicted the requirements of Section I(j)(7)
of PTE 2017-03. In this regard, Newport notes that JPMC provided a copy
of the Supplement to Account Agreement found on JPMC's client portal,
which specifically incorporates the contract requirements set out in
Section I(j) of PTE 2017-03. Newport states that JPMC representatives
confirmed that the JPMC Affiliated QPAMs provided notice to Covered
Plan clients informing them that a Supplement to Account Agreement was
available through its client portal, prior to July 9, 2018.
Hardship to Covered Plans
42. The Applicant represents that if the Department declines to
grant this proposed exemption, there would be adverse consequences for
ERISA-covered plans, public plans, and IRAs. In the absence of
exemptive relief, the JPMC Affiliated QPAMs may be unable to manage, or
manage as efficiently, the strategies for which they have contracted
with thousands of Covered Plans. Further, Covered Plans desiring to
withdraw from their arrangements could incur significant transaction
costs as well as costs associated with finding new managers and
reinvesting assets with those new managers. The Applicant states that
the transaction costs associated with changing managers are
significant, especially in many of the strategies employed by the JPMC
Affiliated QPAMs. In this regard, the cost of liquidating assets,
identifying and selecting new managers, and reinvesting assets would be
borne by the Covered Plans and their participants.
43. The Applicant states that, if the Department denies the
exemption request, transactions currently dependent on PTE 84-14 or
where PTE 84-14 was the counterparty's expected relief, could be in
default and terminated at a significant cost to Covered Plans.
According to the Applicant, Covered Plans that decide to retain the
JPMC Affiliated QPAMs as their asset manager could be prohibited from
engaging in certain potentially beneficial transactions such as hedging
transactions using over-the-counter options or derivatives. The
Applicant states that counterparties to such transactions are far more
comfortable with the QPAM Exemption than any other currently available
exemption, and the unavailability of the QPAM Exemption could trigger a
default or early termination by a Covered Plan or pooled trust.
44. The Applicant represents that in the event of an exemption
denial, certain derivatives transactions and other contractual
agreements automatically and immediately could be terminated without
notice or action or could become subject to termination upon notice
from a counterparty in the event the Applicant no longer qualifies for
relief under the QPAM Exemption.
45. The Applicant represents that some of its strategies tend to be
less liquid than others and, thus, the transition costs would be
significantly higher than, for example, liquidating a large-cap equity
portfolio. Real estate is an example of a strategy that could
experience significant disruption without the QPAM Exemption. Clients
of the JPMC Affiliated QPAMs have over $38.9 billion in ERISA and
public plan assets in commingled funds that are invested in real estate
strategies, with approximately 224 holdings. Many transactions in these
accounts rely on Parts I, II, and III of the QPAM Exemption as a backup
to the collective investment fund exemption \22\ (which may become
unavailable to the extent a related group of plans has a greater than
10% interest in the collective investment fund). The Applicant
estimates that there could be a significant loss in value if assets had
to be quickly liquidated. In that instance, the QPAM may end up having
to sell assets at a discount of more than 10% of their carrying price,
which is pegged at FMV. There could also be prepayment penalties on the
financing of these assets.
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\22\ 56 FR 31966 (July 12, 1991).
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46. The Applicant further asserts that JPMC Affiliated QPAMs rely
on the QPAM Exemption when buying and selling fixed income products.
Stable value strategies, for example, rely on the QPAM Exemption to
enter into wrappers and insurance contracts that permit the assets to
be valued at book value. Many counterparties specifically require a
representation that the QPAM Exemption applies, and those contracts
could be in default if the requested exemption were not granted.
Depending on the market value of the assets in these funds at the time
of termination, such termination could result in losses to the stable
value funds.
47. The Applicant states that as of March 31, 2021, approximately
500 accounts managed through the JPMC Affiliated QPAMs (including
commingled funds and separately managed accounts) invest in fixed
income products with a total portfolio of approximately $100 billion in
market value of ERISA and public plan assets in commingled funds. If
the QPAM Exemption were lost, the Applicant estimates that its clients'
costs of approximately could incur average weighted liquidation 50-75
basis points of the total market value in fixed income products. While
money markets and short and intermediate term bonds could be liquidated
for between 5-50 basis points, long duration bonds may be more
difficult to liquidate, and liquidation costs may range from 75-100
basis points. Further, the liquidation costs for high-yield and
emerging market investments could range from 75-150 basis points.
The Applicant notes that not all JPMC QPAM investment strategies
exclusively rely upon the QPAM exemption for prohibited transaction
relief. In fact, for equities, foreign exchange, and publicly traded
bond strategies, the JPMC Affiliated QPAMs have other exemptions upon
which they can rely. In the case of public bonds, the JPMC Affiliated
QPAMs can rely upon class exemption 75-1 Part II and the statutory
exemption under ERISA Section 408(b)(17).
48. While equity purchases in the market are not necessarily made
in reliance on the QPAM Exemption, such strategies often use
derivatives, foreign exchange (for non-U.S. strategies), and other
products that require the QPAM Exemption. The Applicant manages over
$50 billion in ERISA and public plan assets in equity strategies within
the Applicant's Asset Management business that could suffer different
liquidation costs depending on the strategy. On average, for all equity
strategies, the liquidation costs for a 30-day liquidation timeframe
might range from 40-80 basis points.
49. Agency securities lending is a business within JPMorgan Chase
Bank that makes loans of securities owned by clients, including Covered
Plans, secured by cash collateral. JPMorgan Chase Bank acts as
investment manager for such cash and invests it in short-term
instruments. The cash collateral is maintained in 32 separately managed
accounts with total ERISA assets under management of approximately $3.9
billion.\23\ JPMorgan Chase Bank may
[[Page 63810]]
rely on the QPAM Exemption with respect to the investment of cash
collateral for its agency securities lending business. The Applicant
believes that many brokers and counterparties with whom JPMorgan Chase
Bank deals in regard to cash collateral investments rely on JPMorgan
Chase Bank's QPAM status, because of the prevalence of the QPAM
Exemption as the industry standard exemption. If the QPAM Exemption
were unavailable, such brokers and counterparties could be reluctant to
continue doing business with Covered Plans.
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\23\ As of June 2021.
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50. Many accounts managed by the JPMC Affiliated QPAMs are
similarly invested in hedging instruments to deal with the risk of
currency exposure for investments in foreign markets. For example, the
JPMC Affiliated QPAMs engage in foreign exchange swap transactions and
in foreign exchange spot and forward transactions to hedge against
fluctuations in foreign exchange rates, for speculative or other alpha-
seeking purposes, to settle trades in foreign securities, and for other
reasons. The Applicant represents that it would not be in the interests
of Covered Plans to be invested in global strategies without being able
to hedge currency risk or otherwise engage in foreign exchange
transactions. While there may be other exemptions upon which to rely,
the market and regular counterparties may choose to rely on the QPAM
Exemption and refuse to trade or price the trade accordingly for any
greater risk they foresee in the absence of that exemption.
Applicant's Requested Modifications
52. With its exemption request, the Applicant requested that this
exemption incorporate certain modifications relative to the conditions
of PTE 2017-03. These modification requests and the Department's
responses to them are described in further detail below.
53. Newly Acquired Asset Managers. The Applicant represents that
from time to time, JPMC acquires asset managers that could rely on PTE
84-14. According to the Applicant, it would be nearly impossible for
such managers to come into full compliance with PTE 2017-03 or this
proposed exemption before any such acquisition closes considering all
the conditions regarding notices, training, policies, and compliance
regimes. Where the Applicant acquires a new asset manager that already
has its own plan clients for which it is using the QPAM Exemption as of
the closing date of the transaction, in the absence of relief, that
manager needs to comply with the terms of the individual QPAM exemption
immediately. Where the new asset manager is not in immediate
compliance, Covered Plan clients of the new asset manager with swaps
ongoing might have to terminate them immediately, and new transactions
could not be consummated, because the new asset manager is not in
compliance on day one with all of the conditions of the exemption
(e.g., contractual obligations and other investment management
agreement amendments; distribution of exemption notice, statement and
policy summary; drafting of policies and procedures; training; and
feasibility of audit coverage).
The Applicant states that the process of integrating an acquired
company can take many months or years. The company being acquired does
not in the normal course adopt policies, train on those policies, or
interfere with existing client communications or agreements before the
acquisitions close, particularly when the acquirer is a large and
complex financial institution such as the Applicant. According to the
Applicant, it is not free to communicate with a target's clients until
after the closing, nor can it communicate with a target's employees,
directors, officers, or agents to cause them to draft or adopt
policies, procedures, or training. Therefore, the Applicant requests
that the conditions of this proposed exemption would not apply until a
date that is six months after the closing date for an acquisition.\24\
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\24\ The Applicant further states that, the acquired manager
would continue to rely on PTE 84-14 during that six-month period,
which could be used to provide the necessary notices to the new
affiliate's clients, to provide training to the new affiliate's
employees, to make sure that systems are in place to implement the
ERISA policies, etc.
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Department's Response: The Department is unable to make the
requested change without detailed information regarding the specific
conditions implicated by the requested change, and an explanation
regarding why six months is an appropriate extension period.
54. Training Conducted Electronically. The Applicant requests
confirmation from the Department that the Training may be conducted
electronically or via a website. In reliance on a prior clarification
from the Department, the JPMC Affiliated QPAMs have been utilizing a
web-based training tool that the Auditor has already deemed sufficient
to provide JPMC Affiliated QPAM personnel with adequate training in
compliance with PTE 2017-03.
Department's Response: The Department confirms the Applicant's
request that the Training of JPMC personnel may be conducted either
electronically or via a website.
55. Timing of the Training. The Applicant requests that the
Department change the timing of the Training to once per calendar year
ending on December 31 as opposed to once every twelve months ending on
July 9, with the last training required during calendar year 2026. The
Applicant states that doing so will enable the JPMC Affiliated QPAMs to
measure compliance with the training requirement as of year-end (as
opposed to July 9). Per this request, relevant personnel would be
required to complete a Training under PTE 2017-03 by July 9, 2022, and
the next training would be completed under this proposed exemption by
December 31, 2023. Future Trainings would be required by December 31,
2024, 2025, and 2026.
Department's Response: The Department declines to make the
Applicant's requested change, which would result in approximately 18
months between deadlines for annual Training, without justification
that the requested change is equally protective of Covered Plans as the
current annual training requirement.
56. Flexibility to Abbreviate the Training for Returning Learners.
The Applicant requests confirmation that the content of Training need
not be the same for new learners as for JPMC Affiliated QPAM personnel
who have previously demonstrated proficiency with the subject matter of
the Training. The Applicant states that: (a) the Training fully covers
the subject matter required under PTE 2017-03 in significant detail and
concludes with a knowledge assessment; (b) the Training has been
administered for several years now; and (c) tenured employees have
demonstrated comprehension of the subject matter by successfully
completing the assessment. Accordingly, the Applicant requests
confirmation that less detailed training can be used for personnel who
have completed the full Training and successfully completed the
accompanying assessment in a prior year.
Department's Response: The Department declines to make this
requested change because the Applicant has not sufficiently
demonstrated that less detailed Training for relevant JPMC personnel
would be equally protective of Covered Plans as the training described
in this proposed exemption.
57. Notification Requirements. If this proposed exemption is
granted, the Applicant must provide a Notice to Interested Persons
(NTIP) to Covered
[[Page 63811]]
Plan clients shortly after the proposed exemption is published in the
Federal Register. The Applicant requests clarification that the NTIP
requirement will be deemed met for each Covered Plan client via notice
by Federal Register publication.
To the extent that the Department is unwilling to grant this
request, the Applicant requests clarification that the NTIP requirement
will be deemed met for each Covered Plan client by posting the required
NTIP materials on the JPMC Affiliated QPAM or JPMC Related QPAM's
website where the notice of obligations under PTE 2017-03 (Section
I(j)(7)), and notice of the Exemption (Section I(k)), are currently
posted provided such website is updated, as necessary, within 15 days
of the publication of this exemption in the Federal Register.
In addition, with respect to the Notice requirements of this
exemption, the Applicant requests clarification that such requirements
will be deemed met for each Covered Plan client that received the
equivalent notifications pursuant to PTE 2017-03, provided the website
currently containing the materials stipulated is updated, as necessary,
by May 10, 2023 (four months following the effective date of this
exemption, if granted). Accordingly, such clients would not need to be
notified again pursuant to this proposed exemption.
Department's Response: The Department declines to make the
requested changes. The Applicant has not demonstrated that simply
updating a website without sending a corresponding notification of the
update to Covered Plans would represent adequate notice. Without a
corresponding notice that directs Covered Plans to access the website,
certain Covered Plans may never become aware that a new proposed
exemption has been published.
58. New Covered Plan Clients. The Applicant represents that it is
likely that many clients that retain the JPMC Affiliated QPAMs shortly
after the effective date of this proposed exemption (January 10, 2023)
would enter into investment management or comparable agreements with
the JPMC Affiliated QPAMs that continue to include notification
language referencing PTE 2017-03 and a link to the required materials
thereunder. As the Department did through email clarification when PTE
2017-03 was published, the Applicant requests clarification that it
would meet the notification requirements in this exemption for such
clients that first become Covered Plan clients on or after January 10,
2023, but before May 10, 2023, to the extent the investment management
or comparable agreements with the JPMC Affiliated QPAMs include
notification language referencing PTE 2017-03 and a link to the
required materials, provided the website containing such materials
stipulated under the notification conditions in this proposed
exemption, if granted is updated, as necessary, by May 10, 2023. The
Applicant expects that clients that first become Covered Plan clients
on or after May 10, 2023, would enter into agreements with the JPMC
Affiliated QPAMs that include notification language specifically
referencing this exemption including links to the updated website
containing the materials stipulated under such conditions.
Department's Response: The Department concurs with the Applicant's
request regarding clients that first become Covered Plan clients on or
after January 10, 2023, but before May 10, 2023.
59. Audit and Compliance Officer Annual Review Timing. The
Applicant requests that the Department change the timing of the final
two audits to begin on July 1, rather than July 10. The Applicant
states that this change would enable the Auditor to request data and
other necessary information as of the end of calendar quarters,
facilitating the JPMC Affiliated QPAMs' ability to readily gather and
deliver such material. The Applicant also requests the beginning of the
Compliance Officer's Annual Review period to be delayed nine days, from
January 1 to January 10.
Department's Response: The Department concurs with the Applicant's
requests regarding the start date of the audit and the start date of
the Compliance Officer Annual Review.
60. Auditor Cooperation. The Applicant states that continued relief
under this exemption should not be conditioned upon the Auditor
cooperating with, or disclosing workpapers to, the Department. The
Applicant states that neither the JPMC Affiliated QPAMs nor Covered
Plans can control the Independent Auditor's actions in this regard.
Department's Response: The Department declines to make this
requested revision. JPMC should make every effort to ensure that the
Auditor fully cooperates with the Department. The Department, also, is
unaware of any instance where an Auditor failed to fully cooperate with
the Department in connection with a QPAM Section I(g) audit.
61. Definition of Covered Plan. The Applicant requests
clarification that a JPMC QPAM may include a disclaimer in a
modification of a contract, arrangement, or agreement with a Covered
Plan as follows: ``Notwithstanding the above, a JPMC Affiliated QPAM
may disclaim reliance on QPAM status or PTE 84-14 in a written
modification of a contract, arrangement, or agreement with an ERISA-
covered plan or IRA, where the modification is made in a bilateral
document signed by the client, the client's attention is specifically
directed toward the disclaimer, and the client is advised in writing
that, with respect to any transaction involving the client's assets,
the JPMC Affiliated QPAM will not represent that it is a QPAM, and will
not rely on the relief described in PTE 84-14.''
Department's Response: The Department concurs with the Applicant's
requested change.
62. Section I(j) requires each JPMC Affiliated QPAM to provide a
notice of its obligations under that section to each Covered Plan. The
Applicant requests the Department's confirmation that this condition
would be met where the JPMC Affiliated QPAM previously agreed to the
same obligations required by Section I(j) in an updated investment
management agreement between the JPMC Affiliated QPAM and a Covered
Plan.
Department's Response: The Department confirms that this condition
would be met where the JPMC Affiliated QPAM previously agreed to the
same obligations required by Section I(j) in an updated investment
management agreement between the JPMC Affiliated QPAM and a Covered
Plan.
Additional Changes to the Exemption's Conditions
63. Since granting PTE 2017-03, the Department has clarified and
updated certain conditions included in QPAM Section I(g) exemptions to
enhance protections for Covered Plans. These updated conditions appear
in Sections III(a) and (b) of this proposed exemption.
Proposed Exemption's Protective Conditions
64. In developing administrative exemptions under ERISA Section
408(a), the Department implements its statutory directive to grant only
exemptions that are appropriately protective and in the interest of
affected plans and IRAs. The Department is proposing this exemption
with conditions that would protect Covered Plans (and their
participants and beneficiaries) and allow them to continue to utilize
the services of the
[[Page 63812]]
JPMC Affiliated and Related QPAMs. If this proposed exemption is
granted as proposed, it would allow Covered Plans to avoid costs and
disruptions to investment strategies that may arise if such Covered
Plans are forced, on short notice, to hire a different QPAM or asset
manager because the JPMC Affiliated and Related QPAMs no longer are
able to rely on the relief provided by PTE 84-14 due to the Conviction.
65. The Department notes that the protective conditions of this
proposed exemption are essentially the same as the protective suite of
conditions set forth under PTE 2017-03, with certain modifications for
consistency with the Department's more recent individual exemptions
relating to Section I(g) of PTE 84-14. Given the seriousness of the
misconduct described in the DPA discussed above, the Department is
adding two new conditions. The first provides that, other than former
employees who worked on the Precious Metals Desk and U.S. Treasuries
Desk within the CIB in the Global Markets division, the JPMC Affiliated
QPAMs and the JPMC Related QPAMs (including their officers, directors,
agents and employees of such QPAMs who had responsibility for, or
exercised authority in connection with the management of plan assets)
did not know of, did not have reason to know of, and did not
participate in the conduct underlying the DPA. Further, any other party
engaged on behalf of the JPMC Affiliated QPAMs and JPMC Related QPAMs
who had responsibility for or exercised authority in connection with
the management of plan assets did not know or have reason to know of
and did not participate in the criminal conduct that is the subject of
the DPA.
The second provides that, apart from a non-fiduciary line of
business within JPMorgan Chase Bank, the JPMC Affiliated QPAMs and the
JPMC Related QPAMs (including their officers, directors, and agents,
and employees of such JPMC QPAMs who had responsibility for, or
exercised authority in connection with the management of plan assets)
did not receive direct compensation, or knowingly receive indirect
compensation, in connection with the conduct underlying the DPA.
Further, any other party engaged on behalf of the JPMC Affiliated QPAMs
and the JPMC Related QPAMs who had responsibility for, or exercised
authority in connection with the management of plan assets did not
receive direct compensation, or knowingly receive indirect
compensation, in connection with the conduct underlying the DPA.
Statutory Findings
66. Based on the conditions included in this proposed exemption,
the Department has tentatively determined that the relief sought by the
Applicant would satisfy the statutory requirements for an exemption
under ERISA Section 408(a).
67. The Proposed Exemption is ``Administratively Feasible.'' The
Department has tentatively determined that the proposed exemption is
administratively feasible because, among other things, a qualified
independent auditor would be required to perform an in-depth audit
covering each JPMC Affiliated QPAM's compliance with the terms of the
exemption, and a corresponding written audit report would be provided
to the Department and made available to the public. The Department
notes that the independent audit would incentivize compliance while
reducing the immediate need for review and oversight by the Department.
68. The Proposed Exemption is ``In the Interest of the Covered
Plans.'' The Department has tentatively determined that the proposed
exemption would be in the interests of the participants and
beneficiaries of affected Covered Plans. It is the Department's
understanding, based on representations from the Applicant, that if the
requested exemption is denied, Covered Plans may be forced to find
other managers at a potentially significant cost. According to the
Applicant, ineligibility under Section I(g) of PTE 84-14 would deprive
the Covered Plans of the investment management services that these
plans expected to receive when they appointed these managers. In this
regard, an exemption denial could result in the termination of
relationships that the fiduciaries of the Covered Plans have determined
to be in the best interests of those plans.
69. The Proposed Exemption Is ``Protective of the Plan.'' The
Department has tentatively determined that the proposed exemption is
protective of the interests of the participants and beneficiaries of
Covered Plans. As described above, the proposed exemption is subject to
a suite of conditions that include, but are not limited to: (a) the
development and maintenance of the Policies; (b) the continued
implementation of the Training; (c) a robust audit conducted by a
qualified independent auditor; (d) the provision of certain agreements
and warranties on the part of the JPMC Affiliated QPAMs; (e) specific
notices and disclosures that inform Covered Plans of the circumstances
necessitating the need for exemptive relief and the JPMC Affiliated
QPAMs' obligations under this exemption; and (f) the designation of a
Compliance Officer who must ensure the JPMC Affiliated QPAMs continue
to comply with the Policies and Training requirements of this
exemption.
Summary
70. This proposed exemption would provide relief from certain of
the restrictions set forth in ERISA Section 406 and Code Section
4975(c)(1). No relief or waiver of a violation of any other law would
be provided by this proposed exemption. The relief set forth in this
proposed exemption would terminate immediately if, among other things,
an entity within the JPMC corporate structure were convicted of any
crime covered by Section I(g) of PTE 84-14 (other than the Conviction).
While such an entity could request a new individual prohibited
transaction exemption in that event, the Department is not obligated to
grant such request. Consistent with this proposed exemption, the
Department's consideration of additional exemptive relief is subject to
the findings required under ERISA Section 408(a) and Code Section
4975(c)(2).
71. When interpreting and implementing this exemption, the
Applicant and the JPMC Affiliated QPAMs should resolve any ambiguities
in light of the exemption's protective purposes. To the extent
additional clarification is necessary, these persons or entities should
contact EBSA's Office of Exemption Determinations at 202-693-8540.
72. Based on the conditions that are included in this proposed
exemption, the Department has tentatively determined that the relief
sought by the Applicant would satisfy the statutory requirements for an
individual exemption under ERISA Section 408(a) and Code Section
4975(c)(2).
Notice to Interested Persons
Notice of the proposed exemption will be provided to all interested
persons within thirty (30) days of the publication of the notice of
proposed four-year exemption in the Federal Register. The notice will
be provided to all interested persons in the manner approved by the
Department and will contain the documents described therein and a
supplemental statement, as required pursuant to 29 CFR 2570.43(a)(2).
The supplemental statement will inform interested persons of their
right to comment on and to request a hearing with respect to the
pending exemption. All written
[[Page 63813]]
comments and/or requests for a hearing must be received by the
Department within sixty (60) days of the date of publication of this
proposed four-year exemption in the Federal Register. All comments will
be made available to the public.
Warning: If you submit a comment, EBSA recommends that you include
your name and other contact information in the body of your comment,
but DO NOT submit information that you consider to be confidential, or
otherwise protected (such as Social Security number or an unlisted
phone number) 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.
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 ERISA Section 408(a) and/or Code Section 4975(c)(2) does not
relieve a fiduciary or other party in interest or disqualified person
from certain other provisions of ERISA and/or the Code, including any
prohibited transaction provisions to which the exemption does not apply
and the general fiduciary responsibility provisions of ERISA Section
404, which, among other things, require a fiduciary to discharge their
duties respecting the plan solely in the interest of the participants
and beneficiaries of the plan and in a prudent fashion in accordance
with ERISA Section 404(a)(1)(B); nor does it affect the requirement of
Code Section 401(a) that the plan must operate for the exclusive
benefit of the employees of the employer maintaining the plan and their
beneficiaries;
(2) Before an exemption may be granted under ERISA Section 408(a)
and/or Code Section 4975(c)(2), the Department must find that the
exemption is administratively feasible, in the interests of the plan
and of its participants and beneficiaries, and protective of the rights
of participants and beneficiaries of the plan;
(3) The proposed exemption would be supplemental to, and not in
derogation of, any other provisions of ERISA and/or the 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
(4) The proposed exemption would be subject to the express
condition that the material facts and representations contained in the
application are true and complete at all times, and that the
application accurately describes all material terms of the transactions
which are the subject of the exemption.
Proposed Exemption
The Department is considering granting a four-year exemption under
the authority of ERISA Section 408(a) and Internal Revenue Code (or
Code) section 4975(c)(2), and in accordance with the procedures set
forth in exemption procedure regulation.\25\
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\25\ 29 CFR part 2570, subpart B (76 FR 66637, 66644, October
27, 2011). 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, this notice of proposed exemption is issued solely by the
Department.
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Section I. Definitions
(a) The term ``Conviction'' means the judgment of conviction
against JPMC for violation of the Sherman Antitrust Act, 15 U.S.C. 1,
entered in the District Court for the District of Connecticut (the
District Court) (case number 3:15-cr-79-SRU). For all purposes under
this exemption, ``conduct'' of any person or entity that is the
``subject of [a] Conviction'' encompasses the conduct described in
Paragraph 4(g)-(i) of the Plea Agreement filed in the District Court in
case number 3:15-cr-79-SRU (the Plea Agreement).
(b) The term ``Covered Plan'' means a plan subject to Part IV of
Title I of ERISA (an ``ERISA-covered plan'') or a plan subject to Code
section 4975 (an ``IRA''), in each case, with respect to which a JPMC
Affiliated QPAM relies on PTE 84-14, or with respect to which a JPMC
Affiliated QPAM (or any JPMC affiliate) has expressly represented that
the manager qualifies as a QPAM or relies on the QPAM class exemption
(PTE 84-14). A Covered Plan does not include an ERISA-covered plan or
IRA to the extent the JPMC Affiliated QPAM has expressly disclaimed
reliance on QPAM status or PTE 84-14 in entering into a contract,
arrangement, or agreement with the ERISA-covered plan or IRA. Further,
a JPMC Affiliated QPAM may disclaim reliance on QPAM status or PTE 84-
14 in a written modification of a contract, arrangement, or agreement
with an ERISA-covered plan or IRA, where the modification is made in a
bilateral document signed by the client, the client's attention is
specifically directed toward the disclaimer, and the client is advised
in writing that, with respect to any transaction involving the client's
assets, the JPMC Affiliated QPAM will not represent that it is a QPAM,
and will not rely on the relief described in PTE 84-14.
(c) The term ``Exemption Period'' means January 10, 2023, through
January 9, 2027.
(d) The term ``JPMC'' means JPMorgan Chase and Co.
(e) The term ``JPMC Affiliated QPAM'' means a ``qualified
professional asset manager,'' as defined in Section VI(a) of PTE 84-14,
that relies on the relief provided by PTE 84-14 or represents to
Covered Plans that it qualifies as a QPAM, and with respect to which
JPMC is a current or future ``affiliate'' (as defined in Section
VI(d)(1) of PTE 84-14). The term ``JPMC Affiliated QPAM'' excludes the
parent entity, JPMC, the entity implicated in the criminal conduct that
is the subject of the Conviction.
(f) The term ``JPMC Related QPAM'' means any current or future
``qualified professional asset manager'' (as defined in section VI(a)
of PTE 84-14) that relies on the relief provided by PTE 84-14, and with
respect to whom JPMC owns a direct or indirect five percent or more
interest but is not an ``affiliate'' (as defined in Section VI(d)(1) of
PTE 84-14).
Section II. Covered Transactions
Under this proposed exemption, the JPMC Affiliated QPAMs and the
JPMC Related QPAMs, as defined in Sections I(e) and I(f), respectively,
would not be precluded from relying on the exemptive relief provided by
Prohibited Transaction Class Exemption 84-14 (PTE 84-14 or the QPAM
Exemption) notwithstanding the Conviction, as defined in Section I(a),
during the Exemption Period,\26\ provided that the conditions set forth
in in Section III below are satisfied.
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\26\ Section I(g) of PTE 84-14 generally provides relief only if
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain felonies including violation of the Sherman
Antitrust Act, Title 15 United States Code, Section 1.
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Section III. Conditions
(a) Other than a single individual who worked for a non-fiduciary
business within JPMorgan Chase Bank and who had no responsibility for,
nor exercised any authority in connection with, the management of plan
assets, the JPMC Affiliated QPAMs and the JPMC Related QPAMs (including
their officers,
[[Page 63814]]
directors, agents other than JPMC, and employees of such QPAMs who had
responsibility for, or exercised authority in connection with the
management of plan assets) did not know of, did not have reason to know
of, and did not participate in the criminal conduct that is the subject
of the Conviction. Further, any other party engaged on behalf of the
JPMC Affiliated QPAMs and JPMC Related QPAMs who had responsibility for
or exercised authority in connection with the management of plan assets
did not know or have reason to know of and did not participate in the
criminal conduct that is the subject of the Conviction. For purposes of
this proposed exemption, ``participate in'' refers not only to active
participation in the criminal conduct of JPMC that is the subject of
the Conviction, but also to knowing approval of the criminal conduct or
knowledge of such conduct without taking active steps to prohibit it,
including reporting the conduct to such individual's supervisors, and
to the Board of Directors;
(b) Apart from a non-fiduciary line of business within JPMorgan
Chase Bank, the JPMC Affiliated QPAMs and the JPMC Related QPAMs
(including their officers, directors, and agents other than JPMC, and
employees of such JPMC QPAMs who had responsibility for, or exercised
authority in connection with the management of plan assets) did not
receive direct compensation, or knowingly receive indirect
compensation, in connection with the criminal conduct that is the
subject of the Conviction. Further, any other party engaged on behalf
of the JPMC Affiliated QPAMs and the JPMC Related QPAMs who had
responsibility for, or exercised authority in connection with the
management of plan assets did not receive direct compensation, or
knowingly receive indirect compensation, in connection with the
criminal conduct of that is the subject of the Conviction;
(c) The JPMC Affiliated QPAMs do not currently and will not in the
future employ or knowingly engage any of the individuals that
participated in the criminal conduct that is the subject of the
Conviction.
(d) At all times during the Exemption Period, no JPMC Affiliated
QPAM will use its authority or influence to direct an ``investment
fund'' (as defined in Section VI(b) of PTE 84-14) that is subject to
ERISA or the Code and managed by such JPMC Affiliated QPAM in reliance
on PTE 84-14, or with respect to which a JPMC Affiliated QPAM has
expressly represented to a Covered Plan that it qualifies as a QPAM or
relies on the QPAM class exemption, to enter into any transaction with
JPMC, or to engage JPMC to provide any service to such investment fund,
for a direct or indirect fee borne by such investment fund, regardless
of whether such transaction or service may otherwise be within the
scope of relief provided by an administrative or statutory exemption;
(e) Any failure of a JPMC Affiliated QPAM or a JPMC Related QPAM to
satisfy Section I(g) of PTE 84-14 arose solely from the Conviction;
(f) A JPMC Affiliated QPAM or a JPMC Related QPAM did not exercise
authority over the assets of any plan subject to Part 4 of Title I of
ERISA (an ERISA-covered plan) or Code Section 4975 (an IRA) in a manner
that it knew or should have known would: further the criminal conduct
that is the subject of the Conviction; or cause the JPMC Affiliated
QPAM, the JPMC Related QPAM, or their affiliates to directly or
indirectly profit from the criminal conduct that is the subject of the
Conviction;
(g) Other than with respect to employee benefit plans maintained or
sponsored for its own employees or the employees of an affiliate, JPMC
will not act as a fiduciary within the meaning of ERISA Section
3(21)(A)(i) or (iii), or Code Section 4975(e)(3)(A) and (C), with
respect to Covered Plan assets; provided, however, that JPMC will not
be treated as violating the conditions of this exemption solely because
it acted as an investment advice fiduciary within the meaning of ERISA
Section 3(21)(A)(ii) or Code Section 4975(e)(3)(B);
(h)(1) Each JPMC Affiliated QPAM must maintain, adjust (to the
extent necessary), implement, and follow the written policies and
procedures (the Policies). The Policies must require and be reasonably
designed to ensure that:
(i) The asset management decisions of the JPMC Affiliated QPAM are
conducted independently of the corporate management and business
activities of JPMC;
(ii) The JPMC Affiliated QPAM fully complies with ERISA's fiduciary
duties and with ERISA and the Code's prohibited transaction provisions,
as applicable with respect to each Covered Plan, and does not knowingly
participate in any violation of these duties and provisions with
respect to Covered Plans;
(iii) The JPMC Affiliated QPAM does not knowingly participate in
any other person's violation of ERISA or the Code with respect to
Covered Plans;
(iv) Any filings or statements made by the JPMC Affiliated QPAM to
regulators, including, but not limited to, the Department, the
Department of the Treasury, the Department of Justice, and the Pension
Benefit Guaranty Corporation, on behalf of or in relation to Covered
Plans, are materially accurate and complete to the best of such QPAM's
knowledge at that time;
(v) To the best of the JPMC Affiliated QPAM's knowledge at the
time, the JPMC Affiliated QPAM does not make material
misrepresentations or omit material information in its communications
with such regulators with respect to Covered Plans or make material
misrepresentations or omit material information in its communications
with Covered Plans;
(vi) The JPMC Affiliated QPAM complies with the terms of this
exemption; and
(vii) Any violation of or failure to comply with an item in
subparagraphs (ii) through (vi) is corrected as soon as reasonably
possible upon discovery or as soon after the QPAM reasonably should
have known of the noncompliance (whichever is earlier), and any such
violation or compliance failure not so corrected is reported, upon the
discovery of such failure to so correct, in writing, to the head of
compliance and the general counsel (or their functional equivalent) of
the relevant line of business that engaged in the violation or failure,
and the independent auditor responsible for reviewing compliance with
the Policies. A JPMC Affiliated QPAM will not be treated as having
failed to develop, implement, maintain, or follow the Policies,
provided it corrects any instance of noncompliance as soon as
reasonably possible upon discovery, or as soon as reasonably possible
after the QPAM reasonably should have known of the noncompliance
(whichever is earlier), and provided it adheres to the reporting
requirements set forth in this subparagraph (vii);
(2) Each JPMC Affiliated QPAM must continue to implement a training
program (the Training) conducted at least annually for all relevant
JPMC Affiliated QPAM asset/portfolio management, trading, legal,
compliance, and internal audit personnel. The Training required under
this exemption may be conducted electronically and must: (i) at a
minimum, cover the Policies, ERISA and Code compliance (including
applicable fiduciary duties and the prohibited transaction provisions),
ethical conduct, the consequences for not complying with the conditions
of this exemption (including any loss of exemptive relief provided
herein), and prompt reporting of wrongdoing; and (ii) be conducted by a
professional who has been prudently
[[Page 63815]]
selected and who has appropriate technical training and proficiency
with ERISA and the Code to perform the tasks required by this
exemption;
(i)(1) Each JPMC Affiliated QPAM must submit to an audit conducted
every two years by an independent auditor who has been prudently
selected and who has appropriate technical training and proficiency
with ERISA and the Code, to evaluate the adequacy of and each JPMC
Affiliated QPAM's compliance with the Policies and Training conditions
described herein. The audit requirement must be incorporated in the
Policies. Each audit must cover the preceding consecutive twelve (12)
month period. The first audit must cover the period from July 10, 2022,
through July 9, 2023, and must be completed by December 31, 2023. The
second audit must cover the period from July 1, 2024, through June 30,
2025, and must be completed by December 31, 2025. The third audit must
cover the period from July 1, 2026, through January 9, 2027, and must
be completed by July 8, 2027;
(2) Within the scope of the audit and to the extent necessary for
the auditor, in its sole opinion, to complete its audit and comply with
the conditions for relief described herein, each JPMC Affiliated QPAM
and, if applicable, JPMC, will grant the auditor unconditional access
to its businesses, including, but not limited to: its computer systems;
business records; transactional data; workplace locations; training
materials; and personnel. Such access will be provided only to the
extent that it is not prevented by state or federal statute, or
involves communications subject to attorney client privilege and may be
limited to information relevant to the auditor's objectives as
specified by the terms of this exemption;
(3) The auditor's engagement must specifically require the auditor
to determine whether each JPMC Affiliated QPAM has developed,
implemented, maintained, and followed the Policies in accordance with
the conditions of this exemption, and has developed and implemented the
Training, as required herein;
(4) The auditor's engagement must specifically require the auditor
to test each JPMC Affiliated QPAM's operational compliance with the
Policies and Training conditions. In this regard, the auditor must
test, for each QPAM, a sample of the QPAM's transactions involving
Covered Plans sufficient in size and nature to afford the auditor a
reasonable basis to determine the QPAM's operational compliance with
the Policies and Training;
(5) For each audit, on or before the end of the relevant period for
completing the audit described in Section I(i)(1), the auditor must
issue a written report (the Audit Report) to JPMC and the JPMC
Affiliated QPAM to which the audit applies that describes the
procedures performed by the auditor during the course of its
examination. At its discretion, the auditor may issue a single
consolidated Audit Report that covers all the JPMC Affiliated QPAMs.
The Audit Report must include the auditor's specific determinations
regarding:
(i) the adequacy of each JPMC Affiliated QPAM's Policies and
Training; each JPMC Affiliated QPAM's compliance with the Policies and
Training conditions; the need, if any, to strengthen such Policies and
Training; and any instance of the respective JPMC Affiliated QPAM's
noncompliance with the written Policies and Training described in
Section I(h) above. The JPMC Affiliated QPAM must promptly address any
noncompliance and promptly address or prepare a written plan of action
to address any determination by the auditor regarding the adequacy of
the Policies and Training and the auditor's recommendations (if any)
with respect to strengthening the Policies and Training of the
respective JPMC Affiliated QPAM. Any action taken, or the plan of
action to be taken, by the respective JPMC Affiliated QPAM must be
included in an addendum to the Audit Report (and such addendum must be
completed before the certification described in Section I(i)(7) below).
In the event such a plan of action to address the auditor's
recommendation regarding the adequacy of the Policies and Training is
not completed by the time the Audit Report is submitted, the following
period's Audit Report must state whether the plan was satisfactorily
completed. Any determination by the auditor that the respective JPMC
Affiliated QPAM has implemented, maintained, and followed sufficient
Policies and Training must not be based solely or in substantial part
on an absence of evidence indicating noncompliance. In this last
regard, any finding that a JPMC Affiliated QPAM has complied with the
requirements under this subparagraph must be based on evidence that the
particular JPMC Affiliated QPAM has actually implemented, maintained,
and followed the Policies and Training required by this exemption.
Furthermore, the auditor must not solely rely on the Annual Report
created by the compliance officer (the Compliance Officer), as
described in Section I(m) below, as the basis for the auditor's
conclusions in lieu of independent determinations and testing performed
by the auditor, as required by Section I(i)(3) and (4) above; and
(ii) The adequacy of the most recent Annual Review described in
Section I(m);
(6) The auditor must notify the respective JPMC Affiliated QPAM of
any instance of noncompliance identified by the auditor within five (5)
business days after such noncompliance is identified by the auditor,
regardless of whether the audit has been completed as of that date;
(7) With respect to each Audit Report, the general counsel, or one
of the three most senior executive officers of the line of business
engaged in discretionary asset management services through the JPMC
Affiliated QPAM with respect to which the Audit Report applies must
certify in writing, under penalty of perjury, that the officer has
reviewed the Audit Report and this exemption and that to the best of
such officer's knowledge at the time, the JPMC Affiliated QPAM has
addressed, corrected or remedied any noncompliance and inadequacy, or
has an appropriate written plan to address any inadequacy regarding the
Policies and Training identified in the Audit Report. The certification
must also include the signatory's determination that the Policies and
Training in effect at the time of signing are adequate to ensure
compliance with the conditions of this exemption and with the
applicable provisions of ERISA and the Code. Notwithstanding the above,
no person, including any person referenced in the Statement of Facts
that gave rise to the Conviction, who knew of, or should have known of,
or participated in, any misconduct described in the Statement of Facts
underlying the Conviction, by any party, may provide the certification
required by this exemption, unless the person took active documented
steps to stop the misconduct;
(8) The Risk Committee of JPMC's Board of Directors is provided a
copy of each Audit Report, and a senior executive officer with a direct
reporting line to the highest-ranking legal compliance officer of JPMC
must review the Audit Report for each JPMC Affiliated QPAM and certify
in writing, under penalty of perjury, that such officer has reviewed
each Audit Report;
(9) Each JPMC Affiliated QPAM provides its certified Audit Report,
by electronic mail to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="f194dc9e9495b1959e9ddf969e87">[email protected]</a>. This delivery must take place no
later than
[[Page 63816]]
thirty (30) days following completion of the Audit Report. The Audit
Report will be made part of the public record regarding this exemption.
Furthermore, each JPMC Affiliated QPAM must make its Audit Report
unconditionally available, electronically or otherwise, for examination
upon request by any duly authorized employee or representative of the
Department, other relevant regulators, and any fiduciary of a Covered
Plan;
(10) Each JPMC Affiliated QPAM and the auditor must submit to <a href="/cdn-cgi/l/email-protection#c9ace4868c8d89ada6a5e7aea6bf"><span class="__cf_email__" data-cfemail="85e0a8cac0c1c5e1eae9abe2eaf3">[email protected]</span></a> any engagement agreement(s) executed pursuant to the
engagement of the auditor under this exemption no later than two (2)
months after the execution of any such engagement agreement;
(11) The auditor must provide the Department, upon request access
to all the workpapers created and utilized in the course of the audit,
for inspection and review, provided such access and inspection is
otherwise permitted by law; and
(12) JPMC must notify the Department of a change in the independent
auditor no later than two (2) months after the engagement of a
substitute or subsequent auditor and must provide an explanation for
the substitution or change including a description of any material
disputes between the terminated auditor and JPMC;
(j) Throughout the Exemption Period, with respect to any
arrangement, agreement, or contract between a JPMC Affiliated QPAM and
a Covered Plan, the JPMC Affiliated QPAM agrees and warrants:
(1) To comply with ERISA and the Code, as applicable with respect
to such Covered Plan; refrain from engaging in prohibited transactions
that are not otherwise exempt (and to promptly correct any prohibited
transactions); and comply with the standards of prudence and loyalty
set forth in ERISA Section 404 with respect to each such Covered Plan,
to the extent that section is applicable;
(2) To indemnify and hold harmless the Covered Plan for any actual
losses resulting directly from a JPMC Affiliated QPAM's violation of
ERISA's fiduciary duties, as applicable, and of the prohibited
transaction provisions of ERISA and the Code, as applicable; a breach
of contract by the QPAM; or any claim arising out of the failure of
such JPMC Affiliated QPAM to qualify for the exemptive relief provided
by PTE 84-14 as a result of a violation of Section I(g) of PTE 84-14,
other than the Conviction. This condition applies only to actual losses
caused by the JPMC Affiliated QPAM's violations. Actual losses include
losses and related costs arising from unwinding transactions with third
parties and from transitioning Plan assets to an alternative asset
manager as well as costs associated with any exposure to excise taxes
under Code section 4975 as a result of a QPAM's inability to rely upon
the relief in the QPAM Exemption.
(3) Not to require (or otherwise cause) the Covered Plan to waive,
limit, or qualify the liability of the JPMC Affiliated QPAM for
violating ERISA or the Code or engaging in prohibited transactions;
(4) Not to restrict the ability of the Covered Plan to terminate or
withdraw from its arrangement with the JPMC Affiliated QPAM with
respect to any investment in a separately managed account or pooled
fund subject to ERISA and managed by the QPAM, with the exception of
reasonable restrictions, appropriately disclosed in advance, that are
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event such withdrawal or termination may have
adverse consequences for all other investors. In connection with any of
these arrangements involving investments in pooled funds subject to
ERISA entered into after the effective date of this exemption, the
adverse consequences must relate to a lack of liquidity of the
underlying assets, valuation issues, or regulatory reasons that prevent
the fund from promptly redeeming a Covered Plan's investment, and the
restrictions must be applicable to all such investors and effective no
longer than reasonably necessary to avoid the adverse consequences;
(5) Not to impose any fees, penalties, or charges for such
termination or withdrawal with the exception of reasonable fees,
appropriately disclosed in advance, that are specifically designed to
prevent generally recognized abusive investment practices or
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event the withdrawal or termination may have
adverse consequences for all other investors, provided that such fees
are applied consistently and in like manner to all such investors;
(6) Not to include exculpatory provisions disclaiming or otherwise
limiting liability of the JPMC Affiliated QPAM for a violation of such
agreement's terms. To the extent consistent with ERISA Section 410,
however, this provision does not prohibit disclaimers for liability
caused by an error, misrepresentation, or misconduct of a plan
fiduciary or other party hired by the plan fiduciary who is independent
of JPMC and its affiliates, or damages arising from acts outside the
control of the JPMC Affiliated QPAM; and
(7) Each JPMC Affiliated QPAM must provide a notice of its
obligations under this Section I(j) to each Covered Plan. For all other
prospective Covered Plans, the JPMC Affiliated QPAM must agree to its
obligations under this Section I(j) in an updated investment management
agreement between the JPMC Affiliated QPAM and such clients or other
written contractual agreement. This condition will be deemed met for
each Covered Plan that received a notice pursuant to PTE 2016-15 or PTE
2017-03 that meets the terms of this condition. This condition will
also be met where the JPMC Affiliated QPAM previously agreed to the
same obligations required by this Section I(j) in an updated investment
management agreement between the JPMC Affiliated QPAM and a Covered
Plan. Notwithstanding the above, a JPMC Affiliated QPAM will not
violate this condition solely because a Covered Plan refuses to sign an
updated investment management agreement;
(k) Within 60 days after the effective date of this exemption, each
JPMC Affiliated QPAM provides notice of the exemption as published in
the Federal Register, along with a separate summary describing the
facts that led to the Conviction (the Summary), which has been
submitted to the Department, and a prominently displayed statement (the
Statement) that the Conviction results in a failure to meet a condition
in PTE 84-14 to each sponsor and beneficial owner of a Covered Plan
that has entered into a written asset or investment management
agreement with a JPMC Affiliated QPAM, or the sponsor of an investment
fund in any case where a JPMC Affiliated QPAM acts as a sub-adviser to
the investment fund in which such ERISA-covered plan and IRA invests.
All prospective Covered Plan clients that enter into a written asset or
investment management agreement with a JPMC Affiliated QPAM after a
date that is 60 days after the effective date of this exemption must
receive a copy of the notice of the exemption, the Summary, and the
Statement before, or contemporaneously with, the Covered Plan's receipt
of a written asset or investment management agreement from the JPMC
Affiliated QPAM. The notices may be delivered electronically (including
by an email that has a link to the exemption). Notwithstanding the
above, a JPMC Affiliated QPAM will not violate the condition solely
because a Covered Plan refuses to sign an updated investment management
agreement.
[[Page 63817]]
For Covered Plan clients that first become clients on or after
January 10, 2023, but before May 10, 2023, a JPMC Affiliated QPAM will
meet the requirements of this Section (k) to the extent the investment
management or comparable agreements with the JPMC Affiliated QPAM
includes notification language referencing PTE 2017-03 and a link to
the required materials, provided the website containing such materials
stipulated under the notification conditions in this proposed
exemption, if granted, is updated, as necessary, by May 10, 2023;
(l) The JPMC Affiliated QPAM must comply with each condition of PTE
84-14, as amended, with the sole exception of the violation of Section
I(g) of PTE 84-14 that is attributable to the Conviction. If, during
the Exemption Period, an entity within the JPMC corporate structure is
convicted of a crime described in Section I(g) of PTE 84-14 (other than
the Conviction), relief in this exemption would terminate immediately;
(m)(1) Within 60 days after the effective date of this exemption,
each JPMC Affiliated QPAM must designate a senior compliance officer
(the Compliance Officer) who will be responsible for compliance with
the Policies and Training requirements described herein. For purposes
of this condition (m), each relevant line of business within a JPMC
Affiliated QPAM may designate its own Compliance Officer(s).
Notwithstanding the above, no person, including any person referenced
in the Statement of Facts that gave rise to the Plea Agreement, who
knew of, or should have known of, or participated in, any misconduct
described in the Statement of Facts, by any party, may be involved with
the designation or responsibilities required by this condition, unless
the person took active documented steps to stop the misconduct. The
Compliance Officer must conduct a review of each twelve-month period of
the Exemption Period (the Exemption Review), to determine the adequacy
and effectiveness of the implementation of the Policies and Training.
With respect to the Compliance Officer, the following conditions must
be met:
(i) The Compliance Officer must be a professional who has extensive
experience with, and knowledge of, the regulation of financial services
and products, including under ERISA and the Code; and
(ii) The Compliance Officer must have a direct reporting line to
the highest-ranking corporate officer in charge of legal compliance for
asset management.
(2) With respect to the Exemption Review, the following conditions
must be met:
(i) The annual Exemption Review includes a review of the JPMC
Affiliated QPAM's compliance with and effectiveness of the Policies and
Training and of the following: any compliance matter related to the
Policies or Training that was identified by, or reported to, the
Compliance Officer or others within the compliance and risk control
function (or its equivalent) during the previous year; the most recent
Audit Report issued pursuant to this exemption or PTE 2017-03; any
material change in the relevant business activities of the JPMC
Affiliated QPAMs; and any change to ERISA, the Code, or regulations
related to fiduciary duties and the prohibited transaction provisions
that may be applicable to the activities of the JPMC Affiliated QPAMs;
(ii) The Compliance Officer prepares a written report for the
Exemption Review (an Exemption Report) that (A) summarizes their
material activities during the prior year; (B) sets forth any instance
of noncompliance discovered during the prior year, and any related
corrective action; (C) details any change to the Policies or Training
to guard against any similar instance of noncompliance occurring again;
and (D) makes recommendations, as necessary, for additional training,
procedures, monitoring, or additional and/or changed processes or
systems, and management's actions on such recommendations;
(iii) In the Exemption Report, the Compliance Officer must certify
in writing that to the best of their knowledge at the time: (A) the
report is accurate; (B) the Policies and Training are working in a
manner which is reasonably designed to ensure that the Policies and
Training requirements described herein are met; (C) any known instance
of noncompliance during the prior year and any related correction taken
to date have been identified in the Exemption Report; and (D) the JPMC
Affiliated QPAMs have complied with the Policies and Training, and/or
corrected (or are correcting) any known instances of noncompliance in
accordance with Section III(h) above;
(iv) The Exemption Report must be provided to appropriate corporate
officers of JPMC and each JPMC Affiliated QPAM to which such report
relates; the head of compliance and the general counsel (or their
functional equivalent) of JPMC and the relevant JPMC Affiliated QPAM;
and must be made unconditionally available to the independent auditor
described in Section I(i) above;
(v) The annual Exemption Review, including the Compliance Officer's
written Report, must be completed within three (3) months following the
end of the period to which it relates. The annual Exemption Reviews
under this exemption must cover the following periods: January 10,
2023, through December 31, 2023; January 1, 2024, through December 31,
2024; January 1, 2025, through December 31, 2025; and January 1, 2026,
through January 9, 2027.
(n) JPMC imposes internal procedures, controls, and protocols to
reduce the likelihood of any recurrence of conduct that is the subject
of the Convictions;
(o) JPMC complies in all material respects with the requirements
imposed by a U.S. regulatory authority in connection with the
Conviction;
(p) Each JPMC Affiliated QPAM maintains records necessary to
demonstrate that the conditions of this exemption have been met for six
(6) years following the date of any transaction for which the JPMC
Affiliated QPAM relies upon the relief in this exemption;
(q) During the Exemption Period, JPMC must: (1) immediately
disclose to the Department any Deferred Prosecution Agreement (a DPA)
or Non-Prosecution Agreement (an NPA) with the U.S. Department of
Justice, entered into by JPMC or any of its affiliates (as defined in
Section VI(d) of PTE 84-14) in connection with conduct described in
Section I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately
provide the Department with any information requested by the
Department, as permitted by law, regarding the agreement and/or conduct
and allegations that led to the agreement;
(r) Within 60 days after the effective date of this exemption, each
JPMC Affiliated QPAM, in its agreements with, or in other written
disclosures provided to Covered Plans, will clearly and prominently
inform Covered Plan clients of their right to obtain a copy of the
Policies or a description (Summary Policies) which accurately
summarizes key components of the JPMC Affiliated QPAM's written
Policies developed in connection with this exemption. If the Policies
are thereafter changed, each Covered Plan client must receive a new
disclosure within six (6) months following the end of the calendar year
during which the Policies were changed. If the Applicant meets this
disclosure requirement through Summary Policies, changes to the
Policies shall not result in the
[[Page 63818]]
requirement for a new disclosure unless, as a result of changes to the
Policies, the Summary Policies are no longer accurate. With respect to
this requirement, the description may be continuously maintained on a
website, provided that such website link to the Policies or Summary
Policies is clearly and prominently disclosed to each Covered Plan;
(s) A JPMC Affiliated QPAM will not fail to meet the terms of this
exemption solely because a different JPMC Affiliated QPAM fails to
satisfy a condition for relief described in Sections III(c), (d), (h),
(i), (j), (k), (l), (p) or (r); or if the independent auditor described
in Section III(i) fails to comply with a provision of the exemption,
other than the requirement described in Section III(i)(11), provided
that such failure did not result from any actions or inactions of JPMC
or its affiliates; and
(t) All the material facts and representations set forth in the
Summary of Facts and Representations are true and accurate.
(u) Other than former employees who worked on the Precious Metals
Desk and U.S. Treasuries Desk within the CIB in the Global Markets
division, the JPMC Affiliated QPAMs and the JPMC Related QPAMs
(including their officers, directors, agents and employees of such
QPAMs who had responsibility for, or exercised authority in connection
with the management of plan assets) did not know of, did not have
reason to know of, and did not participate in the conduct underlying
the September 29, 2020, deferred prosecution agreement entered into
between the Department of Justice and JPMC, JPMorgan Chase Bank, and
JPMS (the DPA). Further, any other party engaged on behalf of the JPMC
Affiliated QPAMs and JPMC Related QPAMs who had responsibility for or
exercised authority in connection with the management of plan assets
did not know or have reason to know of and did not participate in the
criminal conduct that is the subject of the DPA.
(v) Apart from a non-fiduciary line of business within JPMorgan
Chase Bank, the JPMC Affiliated QPAMs and the JPMC Related QPAMs
(including their officers, directors, and agents, and employees of such
JPMC QPAMs who had responsibility for, or exercised authority in
connection with the management of plan assets) did not receive direct
compensation, or knowingly receive indirect compensation, in connection
with the conduct underlying the DPA. Further, any other party engaged
on behalf of the JPMC Affiliated QPAMs and the JPMC Related QPAMs who
had responsibility for, or exercised authority in connection with the
management of plan assets did not receive direct compensation, or
knowingly receive indirect compensation, in connection with the conduct
underlying the DPA.
Effective Date: If granted, the exemption will be effective for a
period of four years beginning on January 10, 2023, and ending on
January 9, 2027.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2022-22861 Filed 10-19-22; 8:45 am]
BILLING CODE 4510-29-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on October 20, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.