Notice2024-07128
Technical Correction to PTE 2016-11, Exemption From Certain Prohibited Transaction Restrictions: Northern Trust Corporation (Together With Its Current and Future Affiliates, Northern Trust or the Applicant)
Primary source
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Published
April 4, 2024
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
This document makes a technical correction to Prohibited Transaction Exemption (PTE) 2016-11 granted to Northern Trust Corporation (D-11875) on October 28, 2016.
Full Text
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<title>Federal Register, Volume 89 Issue 66 (Thursday, April 4, 2024)</title>
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[Federal Register Volume 89, Number 66 (Thursday, April 4, 2024)]
[Notices]
[Pages 23612-23614]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07128]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Technical Correction to PTE 2016-11, Exemption From Certain
Prohibited Transaction Restrictions: Northern Trust Corporation
(Together With Its Current and Future Affiliates, Northern Trust or the
Applicant)
AGENCY: Employee Benefits Security Administration (EBSA), Labor.
ACTION: Notice of Technical Correction.
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[[Page 23613]]
SUMMARY: This document makes a technical correction to Prohibited
Transaction Exemption (PTE) 2016-11 granted to Northern Trust
Corporation (D-11875) on October 28, 2016.
DATES:
Issuance Date: This technical correction is issued on April 4, 2024
without further action or notice.
Exemption Date: PTE 2016-11 will remain in effect for the period
beginning on the Conviction date (as corrected herein) until the
earlier of: (1) the date that is twelve months following the Conviction
date; or (2) the effective date of a final agency action made by the
Department in connection with an application for long-term exemptive
relief for the covered transactions described in PTE 2016-11.
FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the
Department, telephone (202) 693-8565. (This is not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On October 28, 2016, the Department published PTE 2016-11 in the
Federal Register.\1\ PTE 2016-11 is a temporary administrative
exemption that permits certain entities (the Northern Trust Qualified
Professional Asset Managers (QPAMs)) with specified relationships to
Northern Trust Fiduciary Services (Guernsey) ltd. (NTFS) to continue to
rely upon the relief provided by the Department's QPAM Exemption \2\
for a one-year period, notwithstanding a judgment of conviction against
NTFS for aiding and abetting tax fraud.\3\
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\1\ 81 FR 75150 (October 28, 2016).
\2\ PTE 84-14, 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), hereinafter
referred to as PTE 84-14 or the QPAM Exemption.
\3\ Section I(g) of PTE 84-14 prevents an entity that may
otherwise meet the definition of a QPAM from utilizing the exemptive
relief provided by PTE 84-14 for itself and its client plans, if
that entity or an ``affiliate'' thereof, or any owner, direct or
indirect, of a five percent or more interest in the QPAM has within
10 years immediately preceding the transaction, been either
convicted or released from imprisonment, whichever is later, as a
result of criminal activity described in that section.
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The Department granted PTE 2016-11 to protect Covered Plans \4\
from the harm that could result from the Northern Trust QPAMs' loss of
relief under PTE 84-14 due to the potential conviction of NTFS.
Exemptive relief was provided for a period of 12 months from the
potential Conviction date to provide the Department with sufficient
time to determine whether longer-term relief was appropriate.\5\ PTE
2016-11, as initially granted, defined the term ``Conviction'' as ``the
potential judgment of conviction against NTFS for aiding and abetting
tax fraud to be entered in France in the District Court of Paris,
French Special Prosecutor No. 1120392066, French Investigative Judge
No. JIRSIF/11/12.''
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\4\ A ``Covered Plan'' is a plan subject to Part 4 of Title 1 of
ERISA (``ERISA-covered plan'') or a plan subject to Section 4975 of
the Code (``IRA''), with respect to which a Northern Trust QPAM
relies on PTE 84-14, or with respect to which a Northern Trust QPAM
(or any Northern Trust affiliate) has expressly represented that the
manager qualifies as a QPAM or relies on the QPAM class exemption. A
Covered Plan does not include an ERISA-covered Plan or IRA to the
extent the Northern Trust QPAM has expressly disclaimed reliance on
QPAM status or PTE 84-14 in entering into its contract, arrangement,
or agreement with the ERISA-covered plan or IRA.
\5\ Northern Trust's exemption request (D-11875) is available by
contacting EBSA's Public Disclosure Room at (202) 693-8673.
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In January 2017, the trial court (the Paris District Court) in
France acquitted NTFS and all prosecuted parties of the aiding and
abetting tax fraud charge, so the exemptive relief provided in PTE
2016-11 was unnecessary. The Paris District Court's verdict was
appealed by the French government to the Paris Court of Appeal, which
in March 2018 conducted a retrial and in June 2018 upheld the acquittal
of all prosecuted parties on the basis that the offenses were time-
barred. The Paris Court of Appeal's verdict was appealed by the French
government to the Court of Cassation, the highest court in France,
which in January 2021, quashed the appellate court's judgment and found
that the offenses were not time-barred and there was a legal obligation
under French law to declare assets held in certain (but not all) types
of trusts.\6\ The Court of Cassation directed a re-trial of all
prosecuted parties, including NTFS, and tasked a different panel of the
Paris Court of Appeal with ascertaining the nature of the trusts in
question. In September-October 2023, the case was tried a third time in
front of a different panel of the Paris Court of Appeal. On March 5,
2024, the Paris Court of Appeal issued a judgment of conviction (the
2024 Conviction) against NTFS for aiding and abetting tax fraud. On the
same day, NTFS appealed the verdict to the Court of Cassation.
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\6\ The Applicant states that a key issue in this case was
whether trust assets were required to be declared as part of an
inheritance tax filing. The Court of Cassation held that the legal
requirement to declare trust assets as a part of an inheritance
applies to trusts where the settlor had not divested of the trust
assets during their lifetime. The Paris Court of Appeal analyzed the
features and operations of the applicable trusts to determine
whether Mr. Wildenstein had effectively divested himself of the
trusts' assets in connection with its March 5, 2024 decision. The
Applicant states that the Paris Court of Appeal concluded that Mr.
Wildenstein had not effectively divested himself of trust assets.
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As a result of the most recent legal proceedings, Northern Trust
requests the Department to issue a technical correction to PTE 2016-11
to change the definition of the term ``Conviction'' in PTE 2016-11 by
replacing references to the ``District Court of Paris'' with references
to the ``Paris Court of Appeal.'' Northern Trust represents that all
other identifying information, including the identity of the case and
the underlying facts, remain the same.
Before the 2024 Conviction, a separate defendant in the case
against Northern Trust, Royal Bank of Canada, requested and received a
technical correction to PTE 2016-10.\7\ Northern Trust requested the
Department to make the same technical correction to PTE 2016-11 that it
made to PTE 2016-10, because PTE 2016-11 also references the ``District
Court of Paris'' case rather than the Paris Court of Appeal case.
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\7\ See PTE 2016-10, 81 FR 75147 (October 28, 2016). The
Department issued a technical correction on December 11, 2023 at 88
FR 85931 that corrected the definition of ``Conviction'' in PTE
2016-10 to correct the name of the court in France hearing the case
as well as the date of conviction.
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As noted above, PTE 2016-11 was granted in order to protect Covered
Plans from harm if Northern Trust were convicted for the crime
described in that exemption. PTE 2016-11 would have provided 12 months
of exemptive relief to Northern Trust in order to afford the Department
sufficient time to evaluate whether a longer-term exemption would be in
the interest of, and protective of the rights of, Covered Plans and
their participants and beneficiaries. This same harm would arise now
that NTFS is convicted for the same crime, pursuant to the 2024
Conviction. Therefore, to ensure that Covered Plans are protected from
any harm arising from the Conviction while the Department evaluates
whether longer-term relief is appropriate, the Department is correcting
the definition of ``Conviction'' in PTE 2016-11 to refer to ``the
judgment of conviction against NTFS for aiding and abetting tax fraud
entered in France in the Court of Appeal, French Special Prosecutor No.
1120392066, French Investigative Judge No. JIRSIF/11/12 or another
court of competent jurisdiction.'' PTE 2016-11, as corrected, will be
effective for a period of 12 months from the date of such Conviction.
The Applicant represents to the Department that, to the best of
Northern Trust's knowledge, there have been no material changes since
February 29, 2016, the date of submission of Northern Trust's exemption
application
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that serves as the record upon which PTE 2016-11 was proposed and
granted, that are relevant to that application or the technical
corrections set forth herein, other than changes in Northern Trust's
numbers of clients and assets managed. In addition, the Applicant
represents that Northern Trust is and has been subject to a variety of
legal proceedings, including civil claims and lawsuits, regulatory
examinations, investigations, audits, and requests for information by
various governmental regulatory agencies and law enforcement
authorities in various jurisdictions. To the best of its knowledge at
this time, however, Northern Trust does not believe that the outcome of
any current investigation would cause the exemption to be unavailable.
Moreover, the Applicant represents that no affiliate of Northern Trust
has been convicted of any crime described in section I(g) of the QPAM
Exemption and, to the best of Northern Trust's knowledge, neither
Northern Trust nor any affiliate has entered into a deferred
prosecution agreement (DPA) or non-prosecution agreement (NPA) since
February 29, 2016.
The Department notes that it is making this technical correction
based upon Northern Trust's certified representation that since
February 29, 2016: (1) there have in fact been no material changes
other than those changes noted above; (2) no affiliate of Northern
Trust has been convicted of any crime described in section I(g) of the
QPAM Exemption, other than the conviction covered under PTE 2016-11 as
corrected herein; (3) neither Northern Trust nor any of its affiliates
have entered into a DPA or NPA; and (4) to the best of its knowledge at
this time, Northern Trust does not believe that the outcome of any
current investigation by any of the various governmental regulatory
agencies and law enforcement authorities in various jurisdictions would
cause the exemption to be unavailable. If, at any time, Northern Trust
discovers that any of these representations are no longer true,
Northern Trust must immediately contact the Department and separately
submit a written statement that provides the Department with the
complete details on the circumstances discovered that led any
representations to become untrue.
The Department is not taking a position on whether the outcome of
any proceedings will cause the exemption to be unavailable and also
notes that the availability of PTE 2016-11 is conditioned upon Northern
Trust's compliance with all of the conditions included therein,
including the condition that expressly states: ``During the effective
period of this temporary exemption, Northern Trust: (1) Immediately
discloses to the Department any DPA or NPA that Northern Trust enters
into with the U.S. Department of Justice, to the extent such DPA or NPA
involves conduct described in Section I(g) of PTE 84-14 or section 411
of ERISA.'' As noted in the preceding paragraph, if Northern Trust
discovers that Northern Trust or any of its affiliates have entered
into a DPA or NPA at any time on or after February 29, 2016, Northern
Trust must inform the Department promptly upon Northern Trust or its
affiliates' discovery of such fact.
Furthermore, if Northern Trust later submits an exemption
application requesting longer term exemptive relief from Section I(g)
of PTE 84-14 due to the Conviction, the Department would consider
relevant any legal proceedings, including civil claims and lawsuits,
regulatory examinations, investigations, audits, and requests for
information by various governmental regulatory agencies and law
enforcement authorities in various jurisdictions that may be pending at
that time notwithstanding whether such proceedings would trigger
ineligibility. In this regard, any such proceedings would be relevant
to the Department's analysis of whether the Northern Trust QPAMs (and
those who may be in a position to influence the QPAMs' policies)
maintain the high standard of integrity required to operate as a QPAM.
Technical Correction
Section II(a) of PTE 2016-11 is corrected to read as follows:
``(a) The term ``Conviction'' means the judgment of conviction
against NTFS for aiding and abetting tax fraud entered in France in the
Court of Appeal, French Special Prosecutor No. 1120392066, French
Investigative Judge No. JIRSIF/11/12 or another court of competent
jurisdiction.''
Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2024-07128 Filed 4-3-24; 8:45 am]
BILLING CODE 4510-29-P
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</html>Indexed from Federal Register on April 4, 2024.
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