Notice2024-06125
Exemption From Certain Prohibited Transaction Restrictions Involving TT International Asset Management Ltd (TTI or the Applicant) Located in London, United Kingdom
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
March 22, 2024
Effective
February 13, 2024
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This document contains a notice of exemption issued by the Department of Labor (the Department) from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). This exemption allows TTI to continue to rely 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 SMBC Nikko Securities, Inc. (Nikko Tokyo), as described below.
Full Text
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<title>Federal Register, Volume 89 Issue 57 (Friday, March 22, 2024)</title>
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[Federal Register Volume 89, Number 57 (Friday, March 22, 2024)]
[Notices]
[Pages 20493-20502]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06125]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2024-01; Exemption Application No. D-
12096]
Exemption From Certain Prohibited Transaction Restrictions
Involving TT International Asset Management Ltd (TTI or the Applicant)
Located in London, United Kingdom
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of exemption.
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SUMMARY: This document contains a notice of exemption issued by the
Department of Labor (the Department) from certain of the prohibited
transaction restrictions of the Employee Retirement Income Security Act
of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986
(the Code). This exemption allows TTI to continue to rely 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 SMBC Nikko Securities, Inc. (Nikko Tokyo), as
described below.
DATES: The exemption will be in effect for a period of five years,
beginning on February 13, 2024, and ending on February 12, 2029.
FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department
at (202) 693-8456. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: On December 20, 2023, the Department
published a notice of proposed exemption in the Federal Register \1\
that would permit TTI to continue its reliance on the exemptive relief
provided by the QPAM Exemption \2\ for a period of five years,
notwithstanding the judgment of conviction against TTI's affiliate,
Nikko Tokyo for attempting to peg, fix or stabilize the prices of
certain Japanese equity securities that Nikko Tokyo was attempting to
place in a block offering (the Conviction).\3\ After considering the
Applicant's comment on the proposal, the Department is granting this
exemption to protect the interests of participants and beneficiaries of
ERISA-covered Plans and IRAs managed by TTI (together, Covered
Plans).\4\
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\1\ 88 FR 88115 (December 20, 2023).
\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 crimes.
\4\ 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
TTI relies on PTE 84-14, or with respect to which TTI has expressly
represented that the manager qualifies as a QPAM or relies on PTE
84-14. A Covered Plan does not include an ERISA-covered plan or IRA
to the extent that TTI 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.
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This exemption provides only the relief specified in the text of
the exemption and does not provide relief from violations of any law
other than the prohibited transaction provisions of Title I of ERISA
and the Code expressly stated herein.
[[Page 20494]]
The Department intends for the terms of this exemption to promote
adherence by TTI to basic fiduciary standards under Title I of ERISA
and the Code. An important objective in granting this exemption is to
ensure that Covered Plans can terminate their relationships with TTI in
an orderly and cost-effective fashion if the fiduciary of a Covered
Plan determines it is prudent to do so.
Based on the Applicant's adherence to all the conditions of PTE
2023-13 and this exemption, the Department makes the requisite findings
under ERISA section 408(a) that the exemption is: (1) administratively
feasible for the Department, (2) in the interest of Covered Plans and
their participants and beneficiaries, and (3) protective of the rights
of the participants and beneficiaries of Covered Plans. Accordingly,
affected parties should be aware that the conditions incorporated in
this exemption are necessary, individually and taken as a whole, for
the Department to grant the relief requested by the Applicant. Absent
these or similar conditions, the Department would not have granted this
exemption.
The Applicant requested an individual exemption pursuant to ERISA
section 408(a) in accordance with the Department's exemption procedures
set forth in 29 CFR part 2570, subpart B.\5\
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\5\ 76 FR 66637, 66644, (October 27, 2011).
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Background
1. The Sumitomo Mitsui Banking Corporation group (SMBC) is a
Japanese financial services firm that provides asset management
services through two subsidiaries. The first is TTI, which is managed
independently of the broader SMBC group. The second is Sumitomo Mitsui
DS Asset Management Company, Limited, an investment manager
headquartered in Tokyo. The SMBC group also conducts securities market
activities through the SMBC Nikko Securities franchise, which includes
Nikko Tokyo, a Japanese broker-dealer.
2. TTI is a global investment firm headquartered in London, UK that
manages approximately $7.1 billion in assets. TTI and its subsidiaries
have operations in the United States, Hong Kong, and Japan.\6\ TTI was
wholly acquired by Sumitomo Mitsui Financial Group, Inc. (SMFG) on
February 28, 2020, and is currently a member of the SMBC Group. Since
the acquisition, TTI has remained a stand-alone business with distinct
reporting lines, governance structures, and control frameworks.
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\6\ TTI subsidiaries include TT International Investment
Management LLP, TT International (Hong Kong) Ltd, TT Crosby Ltd, and
TT International Advisors Inc.
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3. TTI is an SEC-registered investment advisor that specializes in
managing portfolios for institutional investors, including ERISA-
covered Plans, public retirement plans, and other collective investment
vehicles through a variety of investment strategies and industry
sectors.
4. When offering investment management services, TTI operates as a
QPAM in reliance on PTE 84-14.\7\ TTI advises four segregated ERISA
accounts on behalf of the ERISA-covered plans of two major U.S.
employers \8\ and operates a single public pension plan account with
approximately $40 million in assets. TTI also manages two funds as
ERISA ``plan asset'' funds: the TT Emerging Markets Opportunities Fund
II Limited, which is operational and holds ERISA assets; \9\ and the TT
Environmental Solutions Equity Master Fund II Limited, which TTI is in
the process of launching.
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\7\ TTI is currently the only member of the SMBC group that
relies on the QPAM Exemption.
\8\ Together, these two ERISA-covered plans currently hold
approximately $352.7 million in assets.
\9\ As of February 29, 2024, the total value of ERISA plan
assets in TT Emerging Markets Opportunities Fund II Limited was
$135,959,197.43.
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ERISA and Code Prohibited Transactions and PTE 84-14
5. 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.\10\ ERISA
section 3(14) defines parties in interest with respect to a plan to
include, among others, the plan fiduciary and a sponsoring employer of
the plan, and certain of their affiliates.\11\ 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.\12\
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\10\ 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.
\11\ Under the Code, such parties, or similar parties, are
referred to as ``disqualified persons.''
\12\ 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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6. Under the authority of ERISA section 408(a) and Code section
4975(c)(2), the Department has the authority to grant an exemption from
such ``prohibited transactions'' in accordance with the procedures set
forth in its exemption procedure regulation, if the Department finds
that an exemption is: (a) administratively feasible, (b) in the
interests of the plan and of its participants and beneficiaries, and
(c) protective of the rights of the plan's participants and
beneficiaries.\13\
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\13\ The Department's exemption procedure regulation is codified
at 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27,
2011).
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7. 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 managing the investment fund satisfies the definition of a
``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.\14\
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\14\ See 75 FR 38837, 38839 (July 6, 2010).
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8. Section I(g) of PTE 84-14 prevents an entity that may otherwise
meet the QPAM definition from utilizing the exemptive relief for itself
and its client plans if that entity, an ``affiliate'' thereof, 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 a transaction.\15\
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\15\ 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).
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Nikko Tokyo Conviction and PTE 84-14 Disqualification
9. On February 13, 2023, Nikko Tokyo was convicted in Tokyo
District Court of violating Japan's Financial Instruments and Exchange
Act (the FIEA) for attempting to peg, fix, or stabilize \16\ the
[[Page 20495]]
prices of certain Japanese equity securities that Nikko Tokyo was
attempting to place in a block offering (the Conviction). Nikko Tokyo
was convicted of 10 violations of the FIEA and was ordered to pay a
[yen]700 million fine (approximately $5.3 million) and a surcharge of
approximately [yen]4.5 billion (approximately $33.7 million).\17\
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\16\ According to the Applicant, the unofficial English-language
translation of Article 159, paragraph 3 of the FIEA, available on
the Japanese Financial Services Agency website, provides that no
person may ``conduct a series of Sales and Purchase of Securities,
etc. or make offer, Entrustment, etc. or Accepting an Entrustment,
etc. therefore in violation of a Cabinet Order for the purpose of
pegging, fixing or stabilizing prices of Listed Financial
Instruments, etc. in a Financial Instruments Exchange Market or
prices of Over-the-Counter Traded Securities in an Over-the-Counter
Securities Market.''
\17\ A block offering is a type of limited public offering that
is common in Japan whereby a dealer typically applies a spread to
the price at which it purchases the shares from the seller and the
price at which it sells them in the block offering.
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Between December 2019 and November 2021, Nikko Tokyo, through the
actions of relevant officers and employees, purchased shares of ten
issuers for its own account in an attempt to peg, fix, or stabilize the
prices of those securities in anticipation of a block offer. This
activity was intended to ensure that the price of the securities being
sold through the block offering did not decline significantly, which
would have potentially harmed Nikko Tokyo's interests.\18\
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\18\ The Tokyo Public Prosecutor alleged that these
``stabilization transactions'' violated Article 197 Paragraph 1,
Item 5, Article 159, Paragraph 3, and Article 207, Paragraph 1, Item
1 of the FIEA and Article 60 of the Penal Code.
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Nikko Tokyo Affiliation and Loss of QPAM Status
10. Both TTI and Nikko Tokyo are direct subsidiaries of SMFG and
thus are affiliates for purposes of Section I(g) of PTE 84-14. When the
Tokyo District Court sentenced Nikko Tokyo in connection with the
Conviction, Section I(g) of PTE 84-14 was triggered, and TTI became
ineligible to rely on the QPAM Exemption to service its plan clients
without receiving an individual prohibited transaction exemption from
the Department.
PTE 2023-13
11. On April 28, 2023, the Department granted PTE 2023-13,\19\
which permits TTI to continue to rely upon the relief provided in the
QPAM exemption for a one-year period from the date of the Conviction.
The Department declined TTI's request for a longer five-year exemption
term and instead granted a limited one-year term that applies
exclusively to TTI, to provide the Department with the opportunity to
review TTI's adherence to the conditions set out in the one-year
exemption before considering whether to provide TTI with longer-term
relief after TTI submitted an exemption request for further relief.
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\19\ See PTE 2023-13, 88 FR 26336 (April 28, 2023).
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TTI's Compliance With the Conditions of PTE 2023-13
12. PTE 2023-13 contains a set of conditions that are designed to
protect Covered Plans that entrust their assets to TTI despite the
serious nature of the criminal misconduct underlying the Conviction of
Nikko Tokyo. TTI states that it has complied with the conditions of PTE
2023-13 and, therefore, should be permitted to continue to rely upon
PTE 84-14 to avoid substantial costs and other disruptions that would
occur if TTI could no longer act as a QPAM. TTI represents that it has
taken the following concrete steps described in items 13-17 below to
comply with the requirements of PTE 2023-13.
13. Adoption of Comprehensive Policies. TTI represents that it has
developed and implemented specific policies (the ERISA Policies) that
ensure that asset management decisions of TTI are conducted
independently of Nikko Tokyo. TTI represents that its ERISA Policies
promote compliance with ERISA's fiduciary duties and prohibited
transaction provisions, including with respect to co-fiduciary
liability, and ensure accuracy in communications with regulators and
Covered Plan clients. TTI further represents that its ERISA Policies
require monitoring to ensure compliance with the specific terms of PTE
2023-13 and the prompt identification and correction of any policy
violations.
TTI represents that it maintains policies and procedures that are
reasonably designed to ensure that all TTI personnel comply with
applicable regulations and act in the best interests of TTI's clients,
including ERISA plan participants. TTI represents that it does not
share trading decisions and investment strategies for its clients with
personnel outside of TTI's asset management businesses and does not
consult with other parts of the SMBC group in connection with the
investment decisions it makes on behalf of its clients.
14. Implementation of a Training Program. TTI represents that it
has implemented a comprehensive, mandatory training program for all
relevant TTI asset/portfolio management, trading, legal, compliance,
and internal audit personnel (the ERISA Training). TTI submits that
initial ERISA Training sessions under PTE 2023-13 have been completed,
with mandatory attendance for relevant personnel. TTI represents
further that it has made electronic training modules available for new
relevant personnel and that follow-ups are made to ensure that all
relevant personnel complete the Training.
15. Disclosure to Client and Amendment of Client Agreements. TTI
represents that it has provided its Covered Plan clients with a copy of
PTE 2023-13, a summary of TTI's written ERISA Policies developed in
connection therewith, a summary of the conduct leading to the
Conviction, and notice that the requirements of the QPAM Exemption were
not satisfied as a result of the Conviction. TTI states further that it
has amended its agreements with Covered Plan clients to allow for the
termination of the relationship with TTI without penalty to the Covered
Plan clients, and to incorporate all other conditions of PTE 2023-13.
TTI notes that, throughout this process, no Covered Plan client has
decided to terminate its relationship with TTI.
16. Strengthening of Compliance within TTI. TTI represents that it
has designated its Chief Compliance Officer as the initial Compliance
Officer under PTE 2023-13 to oversee TTI's ERISA Policies and ERISA
Training and ensure that each conforms to the requirements set out in
PTE 2023-13. TTI states that its Chief Compliance Officer has a direct
reporting line to senior management.
17. Strengthening of Compliance within the SMBC Group. TTI
represents that TTI and the SMBC group have strengthened their group-
wide coordination regarding potentially disqualifying conduct to ensure
compliance with the conditions of PTE 2023-13, including identification
of deferred prosecution or non-prosecution agreements. Further, to
prevent the possibility of reoccurrence, Nikko Tokyo has ceased block
offerings while completing remedial measures supervised by Japanese
regulators, including a verification process to assess whether the root
causes of the problems have been addressed. For more information on
TTI's compliance with the requirements of PTE 2023-13, please see
Representations 14-20 of the proposed exemption.\20\
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\20\ See 88 FR at 88118 (December 20, 2023).
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Remedial Efforts by Nikko Tokyo and SMFG
18. According to TTI, Nikko Tokyo has taken significant steps to
address the issues that led to the Conviction and has enhanced its
policies and procedures related to proprietary trading and enhanced its
surveillance over that activity, including hiring additional compliance
officers. In addition, Nikko Tokyo refused to renew its employment
contracts with each of
[[Page 20496]]
the four executive officers who were alleged to have been involved in
the misconduct underlying the Conviction and has dismissed the
remaining two employees on disciplinary grounds.
Separation of TTI and Nikko Tokyo
19. TTI represents that: none of the misconduct underlying the
Nikko Tokyo Conviction involved TTI or the SMBC group's asset
management businesses; no TTI personnel were involved in the
misconduct; and no individual officer or employee of Nikko Tokyo had
any role at TTI. According to the Applicant, TTI and Nikko Tokyo have
separate businesses, operations, management teams, systems, premises,
and legal and compliance personnel. Since its acquisition by SMFG on
February 28, 2020, TTI has remained a stand-alone business with
distinct reporting lines, governance structures, and control
frameworks. Further, TTI is not directly owned by or in the same
vertical ownership chain as Nikko Tokyo, and TTI and Nikko Tokyo do not
share personnel or office space.
20. According to the Applicant, TTI personnel remain fully and
independently responsible for TTI's material functions, including
portfolio and risk management activities, investment and trading
decisions, compliance, marketing, and the provision of client services.
TTI states that it has detailed policies setting forth its process for
handling ERISA assets, identifying and addressing conflicts of
interest, and best execution. TTI also represents that it has a
dedicated Compliance Manual that sets forth, among other things, firm
policies related to whistleblowing, handling internal and external
complaints, client onboarding, and the process for approving new
products or instruments.
TTI further represents that Nikko Tokyo is not a QPAM, does not
manage any ERISA assets, and that no ERISA assets were involved in the
misconduct underlying the Nikko Tokyo Conviction. Further, TTI has not
engaged in trading activity with Nikko Tokyo on behalf of ERISA
accounts at any point since TTI became affiliated with Nikko Tokyo. For
more information on the separation of TTI and Nikko Tokyo, please see
Representations 22-26 of the proposed exemption.\21\
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\21\ See 88 FR at 88118-88119 (December 20, 2023).
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Hardship to Covered Plans
21. TTI represents that Covered Plans would suffer certain
hardships if TTI loses its eligibility to rely on the QPAM Exemption.
TTI's representations regarding these hardships are set forth below in
paragraphs 22 through 29.
22. According to the Applicant, loss of the QPAM Exemption would
severely limit the investment transactions available to the accounts
that TTI manages on behalf of Covered Plans, hindering TTI's ability to
efficiently manage the strategies for which it contracted with Covered
Plan clients. Further, if TTI were ineligible to rely on the QPAM
Exemption, it could receive less advantageous pricing for transactions
it engages in on behalf of Covered Plans.
23. TTI represents that the QPAM Exemption is the only exemption
available to provide relief for certain types of investment
transactions it enters into on behalf of Covered Plans. TTI represents
that counterparties to the swaps and other transactions in which TTI-
managed accounts engage require compliance with, and a representation
as to satisfaction of the conditions of, the QPAM Exemption.
24. TTI represents that considering the nature of emerging market
investments and swap, options, and other derivative transactions,
Covered Plan clients and counterparties are reluctant to utilize more
recent alternative exemptions, such as the service provider exemption
under ERISA section 408(b)(17). This reluctance is due to uncertainty
about the application of the adequate consideration requirements of the
statutory exemption and the resulting possibility that the use of the
exemption could later be challenged by the Department on those grounds.
25. TTI states that it relies on the QPAM Exemption to conduct a
variety of transactions on behalf of Covered Plans, including buying
and selling equity securities; preferred stock; American Depository
Receipts, and related options; U.S. and foreign fixed-income
instruments, including unregistered offerings; various derivatives,
including futures, options on futures, and swaps; and foreign exchange
products, including spot currencies, forwards, and swaps.\22\
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\22\ TTI also relies upon the QPAM Exemption for the purchase
and sale of both foreign and domestic equity securities, registered
and sold under Rule 144A or otherwise (e.g., traditional private
placement).
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26. TTI represents that if it loses its ability to rely upon the
QPAM Exemption, it would no longer be able to hedge currency for its
private and public plan asset clients, preventing it from managing
absolute and relative currency risk for such clients in such clients'
best interests. TTI states that it specializes in international and
emerging market strategies that depend on TTI's ability to translate
and maintain the value of Covered Plan investments from the local
currency in which the investment is made into U.S. dollars, the
benchmark currency in which performance is measured. To limit plan risk
exposure to the underlying securities without simultaneously exposing
them to the risk of currency fluctuation, TTI makes substantial use of
foreign exchange (FX) hedges by using forward transactions and other FX
derivatives. If this exemption is not granted, TTI states that nearly
$900 million in ERISA plans and separately managed accounts for private
and public employers would likely be affected, either directly or as a
result of TTI's inability to effectively hedge risk. For all but one of
the ERISA funds that TTI manages, virtually all assets are either
actively or dynamically hedged based on exposures and market
conditions.\23\
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\23\ The actual percentage of AUM in each fund that is hedged at
any given time varies.
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As of November 3, 2022, approximately 16% of the assets under
management (AUM) in each of the four segregated ERISA accounts that TTI
manages are hedged with respect to Indian, Taiwanese, and Chinese
currency, which translates to approximately $35 million in hedges.
Further, the TT Emerging Markets Opportunities Fund II has over the
past two years hedged risks associated with British, Indian, Taiwanese,
Chinese, Mexican, and Polish currencies. Without these positions, the
Applicant states that the TT Emerging Markets Opportunities Fund II
would have incurred nearly $5.5 million in losses due to unhedged FX
exposures, negatively impacting overall returns.
27. TTI represents that the loss of the QPAM Exemption would also
impact TTI's agreements with the swap dealers it executes these hedges
with pursuant to International Swaps and Derivatives Association
Agreements (ISDA Agreements). ISDA agreements require TTI to represent
that it meets all conditions of the QPAM Exemption, and a breach of
this representation would entitle the counterparty to terminate the
transaction. TTI states that, as a practical matter, swap dealers would
be nearly certain to exercise their right to terminate because TTI's
loss of the QPAM Exemption would increase the swap dealers' exposure to
risk. Thus, these agreements would be unwound and TTI would no longer
be able to employ the hedging activities on which its strategies
depend. If these ISDA Agreements were terminated, TTI
[[Page 20497]]
states that it would immediately need to unwind approximately
$73,784,388 million in hedges.
28. TTI submits that if this exemption is not granted, Covered
Plans could incur transaction costs, costs associated with finding and
evaluating other managers, and costs associated with reinvesting assets
with those new managers. These costs, according to TTI include the
following: (a) consultant fees, legal fees, and other due diligence
expenses associated with identifying new managers; (b) transaction
costs associated with a change in investment manager, including the
sale and purchase of portfolio investments to accommodate the
investment policies and strategy of the new manager, and the cost of
entering into new custodial arrangements; and (c) lost investment
opportunities as a result of the change in investment managers.
The Applicant states that, given the sophistication of TTI's
investment strategies, Covered Plan clients would likely engage in a
full RFP process that could take several months to complete. TTI states
that plans generally incur tens of thousands of dollars in consulting
and legal fees in connection with a search for a new manager and that
consultants may charge more for searches involving specialized
strategies, such as TTI's international, emerging markets, and
environmentally conscious portfolios.
29. TTI provides estimated liquidation costs associated with a loss
of QPAM status as dollar cost estimates for its emerging market equity
portfolios only, which represents the predominant strategy for ERISA
Clients. TTI states that its estimates on equity liquidation costs
listed below are based on the gross values of the portfolio, utilizing
the basis point figures, without analysis as to the specific portfolio
components.
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Min. 30-day
Emerging market equity Max. 30-day Min. intermediate
ERISA client portfolio AUM at liquidation cost liquidation cost liquidation cost
12/7/23 (30 bps) (50 bps) (40 bps)
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1................................... $54,845,803 $164,537 $274,229 $219,383
2................................... 172,160,384 516,481 860,801 688,641
3................................... 102,787,100 308,361 513,935 411,148
(Plan Asset Fund)................... 441,117,644 1,323,352 2,205,588 1,764,470
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Total........................... 770,910,931 2,312,731 3,854,553 3,083,642
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Max. intermediate Liquidation cost
ERISA client liquidation cost Commission fees of currency hedge
(80 bps) (10 bps) (50 bps)
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1...................................................... $438,766 $54,845 $27,788
2...................................................... 1,377,283 172,160 86,914
3...................................................... 822,296 102,787 51,982
Plan Asset Fund........................................ 3,528,941 441,117 202,235
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Total.............................................. 6,167,286 770,909 368,919
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The Department notes that this exemption includes protective
conditions that allow Covered Plans to continue to utilize the services
of TTI if they determine that it is prudent to do so. In this regard,
this exemption allows Covered Plans to avoid cost and disruption to
investment strategies that may arise if such Covered Plans are forced,
on short notice, to hire a different QPAM or asset manager because TTI
is no longer able to rely on the relief provided by PTE 84-14 due to
the Conviction.
Written Comments
In the proposed exemption, the Department invited all interested
persons to submit written comments and/or requests for a public hearing
with respect to the notice of proposed exemption by February 2, 2024.
The Department received one written comment from the Applicant and no
requests for a public hearing.
I. Comments From the Applicant
Comment 1: SMFG Review of the Audit Report (Section (III)(i)(8))
The Applicant requests that condition (i)(8) of the proposed
exemption be modified to permit the General Manager of the Corporate
Planning Department to review and certify the Audit Report. The
Applicant asserts that the General Manager of the Corporate Planning
Department is senior to the joint general manager of SMFG's Corporate
Planning Department.
Department's Response: The Department agrees with the Applicant's
request and has modified Section (III)(i)(8) accordingly.
Comment 2: Summary of Facts and Representations
The Applicant notes the following updates and clarifications to the
Summary of Facts and Representations.
<bullet> Paragraph 4: TTI currently has a single public plan
account with approximately $40 million in assets, and the TT Non-U.S.
Equity Master Fund Limited is now closed.
<bullet> Paragraph 9: Because the Conviction that occurred on
February 13, 2023, only included Nikko Tokyo and not Nikko Tokyo and
four of its officers and employees as stated in the proposed exemption,
the first sentence of Paragraph 9 should state, ``On February 13, 2023,
Nikko Tokyo was convicted . . .''
<bullet> Paragraph 9: the second sentence of the second paragraph
should be updated as follows: ``Between December 2019 and April 2021,
Nikko Tokyo, through the actions of relevant officers and employees,
purchased shares of ten issuers for its own account . . .''
<bullet> Paragraph 21: the words ``its employment contracts''
should be ``its contracts''.
<bullet> Paragraph 23: the TTI Board now consists of six directors,
made up of three TTI directors and three representatives of the SMBC
group.
Department's Response: The Department accepts the Applicant's
updates and clarifications to the Summary of Facts and Representations.
The complete application file (D-12096) is available for public
inspection in the Public Disclosure Room of the
[[Page 20498]]
Employee Benefits Security Administration, Room N-1515, U.S. Department
of Labor, 200 Constitution Avenue NW, Washington, DC 20210. For a more
complete statement of the facts and representations supporting the
Department's decision to grant this exemption, please refer to the
notice of proposed exemption published on December 20, 2023, at 88 FR
88115.
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) does not relieve a fiduciary or other party
in interest from certain requirements of other ERISA provisions,
including but not limited to 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 plan's participants and
beneficiaries and in a prudent fashion in accordance with ERISA section
404(a)(1)(B).
(2) As required by ERISA section 408(a), the Department hereby
finds that the exemption is: (a) administratively feasible for the
Department; (b) in the interests of Covered Plans and their
participants and beneficiaries; and (c) protective of the rights of the
Covered Plans' participants and beneficiaries.
(3) This exemption is supplemental to, and not in derogation of,
any other ERISA provisions, 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 for determining whether the transaction is in fact a
prohibited transaction.
(4) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describe all material terms of the transactions
that are the subject of the exemption and are true at all times.
Accordingly, after considering the entire record developed in
connection with the Applicant's exemption application, the Department
has determined to grant the following exemption under the authority of
ERISA section 408(a) in accordance with the Department's exemption
procedures set forth in 29 CFR part 2570, subpart B: \24\
---------------------------------------------------------------------------
\24\ 76 FR 66637, 66644 (October 27, 2011).
---------------------------------------------------------------------------
Exemption
Section I. Definitions
(a) The term ``Conviction'' means the judgment of conviction
against SMBC Nikko Securities, Inc. (Nikko Tokyo) in Tokyo District
Court for attempting to peg, fix or stabilize the prices of certain
Japanese equity securities that Nikko Tokyo was attempting to place in
a block offering that occurred on February 13, 2023.
(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 TTI
relies on PTE 84-14, or with respect to which TTI has expressly
represented that the manager qualifies as a QPAM or relies on the QPAM
class exemption (PTE 84-14 or the QPAM Exemption). A Covered Plan does
not include an ERISA-covered plan or IRA to the extent that TTI has
expressly disclaimed reliance on QPAM status or PTE 84-14 when entering
into a contract, arrangement, or agreement with the ERISA-covered plan
or IRA.
(c) The term ``Exemption Period'' means the five-year period
beginning on February 13, 2024, and ending on February 12, 2029.
(d) The term ``TTI'' means TT International Asset Management Ltd,
and does not include SMBC Nikko Securities, Inc. (Nikko Tokyo), or any
other entity affiliated with TT International Asset Management Ltd.
Section II. Covered Transactions
Under this exemption, TTI 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 Conviction, as
defined in Section I(a), during the Exemption Period, as defined in
Section I(c), provided that it satisfies the conditions set forth in
Section III below.
Section III. Conditions
(a) TTI (including its officers, directors, agents other than Nikko
Tokyo, and employees) 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 TTI 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 exemption, ``participate in'' refers
not only to active participation in the criminal conduct of Nikko Tokyo
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 TTI's Board of Directors;
(b) TTI (including its officers, directors, employees, and agents,
other than Nikko Tokyo) 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 TTI 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;
(c) TTI does not currently and will not in the future employ or
knowingly engage any of the individuals who participated in the
criminal conduct that is the subject of the Conviction;
(d) At all times during the Exemption Period, TTI will not 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 TTI in reliance on PTE 84-14, or with respect to which TTI
has expressly represented to a Covered Plan that it qualifies as a QPAM
or relies on the QPAM Exemption, to enter into any transaction with
Nikko Tokyo, or to engage Nikko Tokyo 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 TTI to satisfy Section I(g) of PTE 84-14 arose
solely from the Conviction;
(f) TTI did not exercise authority over the assets of any Covered
Plan in a manner that it knew or should have known would further the
criminal conduct that is the subject of the Conviction or cause TTI or
its 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, Nikko
Tokyo 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.
[[Page 20499]]
(h)(1) TTI must continue to implement, maintain, adjust (to the
extent necessary), 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 TTI are conducted
independently of the corporate management and business activities of
Nikko Tokyo;
(ii) TTI 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) TTI 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 TTI to regulators,
including, but not limited to, the Department of Labor (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 TTI's knowledge at the time, TTI 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) TTI 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 TTI 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
TTI, and the independent auditor responsible for reviewing compliance
with the Policies. TTI 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 TTI 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) TTI must continue to implement an annual training program (the
Training) during the Exemption Period for all relevant TTI asset/
portfolio management, trading, legal, compliance, and internal audit
personnel. The Training required under this exemption may be conducted
electronically and must: (a) 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 (b) be conducted by a professional who has been
prudently selected and who has appropriate technical training and
proficiency with ERISA and the Code to perform the tasks required by
this exemption;
(i)(1) TTI must submit to biennial audits conducted 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 TTI's compliance with the Policies and
Training conditions described herein. The audit requirement must be
incorporated into the Policies. The first audit covered under this
exemption must cover the period of February 13, 2025, through February
12, 2026, and must be completed by August 12, 2026. The second audit
covered under this exemption must cover the period of February 13,
2027, through February 12, 2028, and must be completed by August 12,
2028.
(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, TTI 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 TTI has developed, implemented, maintained, and
followed the Policies in accordance with the conditions of the
exemption, and has developed and implemented the Training, as required
herein;
(4) The auditor's engagement must specifically require the auditor
to test TTI's operational compliance with the Policies and Training
conditions. In this regard, the auditor must test, for TTI,
transactions involving Covered Plans sufficient in size, number, and
nature to afford the auditor a reasonable basis to determine TTI's
operational compliance with the Policies and Training;
(5) Before the end of the relevant period for completing the audit,
the auditor must issue a written report (the Audit Report) to TTI that
describes the procedures performed by the auditor during the course of
its examination. The Audit Report must include the auditor's specific
determinations regarding:
(i) the adequacy of TTI's Policies and Training; TTI's compliance
with the Policies and Training conditions; the need, if any, to
strengthen such Policies and Training; and any instance of TTI's
noncompliance with the written Policies and Training described in
Section III(h) above. TTI 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. Any action taken, or the plan
of action to be taken by TTI must be included in an addendum to the
Audit Report (and such addendum must be completed before the
certification described in Section III(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 TTI 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 TTI has complied with the
requirements under this subparagraph must be based on evidence that TTI
has actually implemented, maintained, and followed the Policies and
Training required by the exemption. Furthermore, the auditor must not
solely rely on the Report created by the compliance officer (the
Compliance Officer), as described in Section III(m) below, as the basis
for the auditor's conclusions in lieu of independent determinations and
testing performed
[[Page 20500]]
by the auditor, as required by Section III(i)(3) and (4) above; and
(ii) The adequacy of the Review described in Section III(m);
(6) The auditor must notify TTI 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 the Audit Report, the general counsel, or one
of the three most senior executive officers of TTI must certify in
writing, under penalty of perjury, that the officer has reviewed the
Audit Report and the exemption and that to the best of such officer's
knowledge at the time, TTI 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 identified by Japanese authorities, who knew of, or should have
known of, or participated in, any misconduct underlying the Conviction,
by any party, may provide the certification required by the exemption,
unless the person took active documented steps to stop the misconduct
underlying the Conviction;
(8) TTI's Board of Directors must be provided a copy of the Audit
Report and the general manager or the joint general manager of SMFG's
Corporate Planning Department must review the Audit Report for TTI and
certify in writing, under penalty of perjury, that such officer has
reviewed the Audit Report. With respect to this subsection (8), such
certifying general manager or joint general manager must not have known
of, had reason to know of, or participated in, any misconduct
underlying the Conviction. If the certifying general manager or joint
general manager was aware of the misconduct, they must have taken
documented steps to stop the misconduct underlying the Conviction;
(9) TTI must provide its certified Audit Report, by electronic mail
to <a href="/cdn-cgi/l/email-protection#20450d4f454460444f4c0e474f56"><span class="__cf_email__" data-cfemail="6d08400208092d090201430a021b">[email protected]</span></a>. This delivery must take place no later than thirty
(30) days following completion of the Audit Report. The Audit Report
will be made part of the public record regarding this exemption.
Furthermore, TTI 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) TTI and the auditor must submit to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="3c59117379787c585350125b534a">[email protected]</a>, any
engagement agreement(s) entered into pursuant to the engagement of the
auditor under the 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 it 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) TTI must notify the Department of a change in the independent
auditor no later than 60 days 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 TTI;
(j) Throughout the Exemption Period, with respect to any
arrangement, agreement, or contract between TTI and a Covered Plan, TTI
agrees and warrants:
(1) To comply with ERISA and the Code, as applicable with respect
to such Covered Plan; to refrain from engaging in prohibited
transactions that are not otherwise exempt (and to promptly correct any
prohibited transactions); and to 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 with respect
to: any actual losses resulting directly from TTI'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 TTI; or any claim arising out of the failure of TTI 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 TTI'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 because of TTI'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 TTI 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 TTI with respect to any investment
in a separately managed account or pooled fund subject to ERISA and
managed by TTI, 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 the liability of TTI 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 TTI and its
affiliates, or damages arising from acts outside the control of TTI;
and
(7) TTI must provide a notice of its obligations under this Section
III(j) to each Covered Plan. For all other prospective Covered Plans,
TTI must agree to its obligations under this Section III(j) in an
updated investment management agreement between TTI and such clients or
other written
[[Page 20501]]
contractual agreement. Notwithstanding the above, TTI 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, TTI
must provide notice of the exemption as published in the Federal
Register to each sponsor and beneficial owner of a Covered Plan that
has entered into a written asset or investment management agreement
with TTI, along with a separate summary describing the facts that led
to the Conviction (the Summary), which has been submitted to the
Department. The Summary must contain a prominently displayed statement
(the Statement) that the Conviction resulted in TTI's failure to meet a
condition in PTE 84-14. All prospective Covered Plan clients that enter
into a written asset or investment management agreement with TTI within
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 TTI. The notices may be
delivered electronically (including by an email that has a website link
to the exemption). Notwithstanding the above, TTI will not violate the
condition solely because a Covered Plan refuses to sign an updated
investment management agreement.
(l) TTI 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 an affiliate of TTI (as
defined in Section VI(d) of PTE 84-14) is convicted of a crime
described in Section I(g) of PTE 84-14 (other than the Conviction)
during the Exemption Period, relief in the exemption would terminate
immediately;
(m)(1) TTI must continue to designate a senior compliance officer
(the Compliance Officer) to be responsible for compliance with the
Policies and Training requirements described herein. The Compliance
Officer previously designated by TTI under PTE 2023-13 may continue to
serve in the role of Compliance Officer provided they meet all the
requirements of this Section (m)(1). Notwithstanding the above, no
person, including any person referenced in the indictment that gave
rise to the Conviction, who knew of, or should have known of, or
participated in, any misconduct described in the indictment, 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 the Exemption Period (the Exemption Review), to determine the
adequacy and effectiveness of TTI's implementation of the Policies and
Training. With respect to the Compliance Officer, TTI must meet the
following conditions:
(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, TTI must meet the
following conditions:
(i) The Exemption Review must include a review of TTI'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; any material change in the
relevant business activities of TTI; 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 TTI;
(ii) The Compliance Officer must prepare a written report for the
Exemption Review (an Exemption Report) that (A) summarizes their
material activities during the Exemption Period; (B) sets forth any
instance of noncompliance discovered during the Exemption Period 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 in response to
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, has been identified in the Exemption Report; and (D) TTI
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 TTI; the head of compliance and the general counsel (or
their functional equivalent) of TTI; and must be made unconditionally
available to the independent auditor described above;
(v) The Exemption Review, including the Compliance Officer's
written Report, must be completed within 90 days following the end of
the period to which it relates.
(n) TTI must impose internal procedures, controls, and protocols to
reduce the likelihood of a recurrence of conduct that is the subject of
the Conviction;
(o) Nikko Tokyo must comply in all material respects with any
requirements imposed by a U.S. regulatory authority in connection with
the Conviction;
(p) TTI must maintain records necessary to demonstrate that it has
met the conditions of the exemption for six (6) years following the
date of any transaction for which TTI relies upon the relief provided
in this exemption;
(q) During the Exemption Period, TTI must: (1) immediately disclose
to the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA), TTI or any of its affiliates (as
defined in Section VI(d) of PTE 84-14) enter into with the U.S.
Department of Justice in connection with the conduct described in
Section I(g) of PTE 84-14 or ERISA section 411; and (2) immediately
provide the Department with any information requested by the
Department, as permitted by law, regarding the conduct and allegations
that led to the NPA or DPA;
(r) Within 60 days after the effective date of this exemption, TTI,
must clearly and prominently inform Covered Plan clients in its
agreements with, or in other written disclosures provided to Covered
Plans of their right to obtain a copy of the Policies or a description
(Summary Policies) which accurately summarizes key components of TTI'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 180 days following the end of the calendar year
during which the Policies were changed. If TTI meets this disclosure
requirement by providing Summary Policies, changes to
[[Page 20502]]
the Policies will not result in the requirement for TTI to provide a
new disclosure to Covered Plans unless the Summary Policies are no
longer accurate as a result of changes to the Policies. With respect to
this requirement, TTI may maintain the description continuously on a
website, provided that TTI clearly and prominently provides a website
link to the Policies or Summary Policies to each Covered Plan;
(s) TTI must provide the Department with the records necessary to
demonstrate that each condition of this exemption has been met within
30 days of a request by the Department; and
(t) All the material facts and representations set forth in the
Summary of Facts and Representations must be true and accurate at all
times.
Exemption Date: This exemption is in effect for a period of five
years beginning on February 13, 2024, and ending on February 12, 2029.
Signed at Washington, DC, this 19th day of March 2024.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2024-06125 Filed 3-21-24; 8:45 am]
BILLING CODE 4510-29-P
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</html>Indexed from Federal Register on March 22, 2024.
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.