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Department of Labor: 98001790

Department of Labor: 98001790

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Published by: Department of Labor on Jan 26, 2008
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   f  e   d  e  r  a   l  r  e  g   i  s   t  e  r
4037
TuesdayJanuary 27, 1998
Part III
Department of Labor
Pension and Welfare BenefitsAdministrationProposed Exemptions; MBNA AmericaBank, National Association (MBNA);Notice
 
4038
Federal Register
 /Vol. 63, No. 17/Tuesday, January 27, 1998/Notices
1
Section I.A. provides no relief from sections406(a)(1)(E), 406(a)(2) and 407 for any personrendering investment advice to an Excluded Planwithin the meaning of section 3(21)(A)(ii) andregulation 29 CFR 2510.3–21(c).
DEPARTMENT OF LABORPension and Welfare BenefitsAdministration
[Application No. D–10304, et al.]
Proposed Exemptions; MBNA AmericaBank, National Association (MBNA)
AGENCY
:
Pension and Welfare BenefitsAdministration, Labor.
ACTION
:
Notice of Proposed Exemptions.
SUMMARY
:
This document containsnotices of pendency before theDepartment of Labor (the Department) of proposed exemptions from certain of theprohibited transaction restrictions of theEmployee Retirement Income SecurityAct of 1974 (the Act) and/or the InternalRevenue Code of 1986 (the Code).
Written Comments and HearingRequests
Unless otherwise stated in the Noticeof Proposed Exemption, all interestedpersons are invited to submit writtencomments, and with respect toexemptions involving the fiduciaryprohibitions of section 406(b) of the Act,requests for hearing within 45 days fromthe date of publication of this
FederalRegister
Notice. Comments and requestsfor a hearing should state: (1) The name,address, and telephone number of theperson making the comment or request,and (2) the nature of the person’sinterest in the exemption and themanner in which the person would beadversely affected by the exemption. Arequest for a hearing must also state theissues to be addressed and include ageneral description of the evidence to bepresented at the hearing.
ADDRESSES
:
All written comments andrequest for a hearing (at least threecopies) should be sent to the Pensionand Welfare Benefits Administration,Office of Exemption Determinations,Room N–5649, U.S. Department of Labor, 200 Constitution Avenue, NW.,Washington, DC 20210. Attention:Application No. stated in each Notice of Proposed Exemption. The applicationsfor exemption and the commentsreceived will be available for publicinspection in the Public DocumentsRoom of Pension and Welfare BenefitsAdministration, U.S. Department of Labor, Room N–5507, 200 ConstitutionAvenue, NW., Washington, DC 20210.
Notice to Interested Persons
Notice of the proposed exemptionswill be provided to all interestedpersons in the manner agreed upon bythe applicant and the Departmentwithin 15 days of the date of publicationin the
Federal Register
. Such noticeshall include a copy of the notice of proposed exemption as published in the
Federal Register
and shall informinterested persons of their right tocomment and to request a hearing(where appropriate).
SUPPLEMENTARY INFORMATION
:
Theproposed exemptions were requested inapplications filed pursuant to section408(a) of the Act and/or section4975(c)(2) of the Code, and inaccordance with procedures set forth in29 CFR Part 2570, Subpart B (55 FR32836, 32847, August 10, 1990).Effective December 31, 1978, section102 of Reorganization Plan No. 4 of 1978 (43 FR 47713, October 17, 1978)transferred the authority of the Secretaryof the Treasury to issue exemptions of the type requested to the Secretary of Labor. Therefore, these notices of proposed exemption are issued solelyby the Department.The applications containrepresentations with regard to theproposed exemptions which aresummarized below. Interested personsare referred to the applications on filewith the Department for a completestatement of the facts andrepresentations.
MBNA America Bank, National Association(MBNA), Located in Newark, Delaware,(Application No. D–10304)
Proposed Exemption
The Department is consideringgranting an exemption under theauthority of section 408(a) of the Actand section 4975(c)(2) of the Code andin accordance with the procedures setforth in 29 CFR part 2570, subpart B (55FR 32836, 32847, August 10, 1990).
Section I—Transactions
A. Effective as of the date thisproposed exemption is granted, therestrictions of sections 406(a) and 407(a)of the Act and the taxes imposed bysection 4975(a) and (b) of the Code, byreason of section 4975(c)(1)(A) through(D) of the Code, shall not apply to thefollowing transactions involving trustsand certificates evidencing intereststherein:(1) The direct or indirect sale,exchange or transfer of certificates in theinitial issuance of certificates betweenthe trust, the sponsor or an underwriterand an employee benefit plan subject tothe Act or section 4975 of the Code (aplan) when the sponsor, servicer, trusteeor insurer of a trust, the underwriter of the certificates representing an interestin the trust, or an obligor is a party ininterest with respect to such plan;(2) The direct or indirect acquisitionor disposition of certificates by a plan inthe secondary market for suchcertificates; and(3) The continued holding of certificates acquired by a plan pursuantto Section I.A.(1) or (2).Notwithstanding the foregoing,Section I.A. does not provide anexemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and 407for the acquisition or holding of acertificate on behalf of an ExcludedPlan, as defined in Section III.K. below,by any person who has discretionaryauthority or renders investment advicewith respect to the assets of theExcluded Plan that are invested incertificates.
1
B. Effective as of the date thisproposed exemption is granted, therestrictions of sections 406(b)(1) and406(b)(2) of the Act and the taxesimposed by section 4975(a) and (b) of the Code, by reason of section4975(c)(1)(E) of the Code, shall notapply to:(1) The direct or indirect sale,exchange or transfer of certificates in theinitial issuance of certificates betweenthe trust, the sponsor or an underwriterand a plan when the person who hasdiscretionary authority or rendersinvestment advice with respect to theinvestment of plan assets in thecertificates is (a) an obligor with respectto receivables contained in the trustconstituting 0.5 percent or less of thefair market value of the obligations orreceivables contained in the aggregateundivided interest in the trust allocatedto the certificates of the relevant series,or (b) an affiliate of a person describedin (a); if (i) The plan is not an Excluded Plan;(ii) Solely in the case of an acquisitionof certificates in connection with theinitial issuance of the certificates, atleast 50 percent of each class of certificates in which plans haveinvested is acquired by personsindependent of the members of theRestricted Group, as defined in SectionIII.L., and at least 50 percent of theaggregate undivided interest in the trustallocated to the certificates of a series isacquired by persons independent of theRestricted Group;(iii) A plan’s investment in each classof certificates of a series does not exceed25 percent of all of the certificates of that class outstanding at the time of theacquisition;(iv) Immediately after the acquisitionof the certificates, no more than 25percent of the assets of a plan with
 
4039
Federal Register
 /Vol. 63, No. 17/Tuesday, January 27, 1998/Notices
2
For purposes of this proposed exemption, eachplan participating in a commingled fund (such asa bank collective trust fund or insurance companypooled separate account) shall be considered toown the same proportionate undivided interest ineach asset of the commingled fund as itsproportionate interest in the total assets of thecommingled fund as calculated on the most recentpreceding valuation date of the fund.
3
In the case of a private placement memorandum,such memorandum must contain substantially thesame information that would be disclosed in aprospectus if the offering of the certificates weremade in a registered public offering under theSecurities Act of 1933. In the Department’s view,the private placement memorandum must containsufficient information to permit plan fiduciaries tomake informed investment decisions. For purposesof this proposed exemption, all references to‘‘prospectus’’ include any related supplementthereto, and any documents incorporated byreference therein, pursuant to which certificates areoffered to investors.
respect to which the person hasdiscretionary authority or rendersinvestment advice is invested incertificates representing the aggregateundivided interest in a trust allocated tothe certificates of a series andcontaining receivables sold or servicedby the same entity;
2
and(v) Immediately after the acquisitionof the certificates, not more than 25percent of the assets of a plan withrespect to which the person hasdiscretionary authority or rendersinvestment advice is invested incertificates representing an interest inthe trust, or trusts containingreceivables sold or serviced by the sameentity. For purposes of paragraphsB.(1)(iv) and B.(1)(v) only, an entityshall not be considered to servicereceivables contained in a trust if it ismerely a subservicer of that trust;(2) The direct or indirect acquisitionor disposition of certificates by a plan inthe secondary market for suchcertificates, provided that conditions setforth in Section I. B.(1)(i), (iii) through(v) are met; and(3) The continued holding of certificates acquired by a plan pursuantto Section I.B.(1) or (2).C. Effective as of the date that theproposed exemption is granted, therestrictions of sections 406(a), 406(b)and 407(a) of the Act and the taxesimposed by section 4975(a) and (b) of the Code, by reason of section 4975(c)of the Code, shall not apply totransactions in connection with theservicing, management and operation of a trust, including reassigningreceivables to the sponsor, removingfrom the trust receivables in accountspreviously designated to the trust,changing the underlying terms of accounts designated to the trust, addingnew receivables to the trust, designatingnew accounts to the trust, the retentionof a retained interest by the sponsor inthe receivables, the exercise of the rightto cause the commencement of amortization of the principal amount of the certificates, or the use of any eligibleswap transactions, provided that:(1) Such transactions are carried outin accordance with the terms of abinding pooling and servicingagreement;(2) The pooling and servicingagreement is provided to, or describedin all material respects in the prospectusor private placement memorandumprovided to, investing plans before theypurchase certificates issued by thetrust;
3
(3) The addition of new receivables ordesignation of new accounts, or theremoval of receivables in previously-designated accounts, meets the termsand conditions for such additions,designations or removals as aredescribed in the prospectus or privateplacement memorandum of suchcertificates, which terms and conditionshave been approved by Standard &Poor’s Ratings Services, Moody’sInvestors Service, Inc., Duff & PhelpsCredit Rating Co., or Fitch InvestorsService, L.P., or their successors(collectively, the Rating Agencies), anddoes not result in the certificatesreceiving a lower credit rating from theRating Agencies than the then currentrating of the certificates; and(4) The series of which the certificatesare a part will be subject to anEconomic Pay Out Event’’ (as definedin Section III.X.), which is set forth inthe pooling and servicing agreement anddescribed in the prospectus or privateplacement memorandum associatedwith the series, the occurrence of whichwill cause any revolving period,scheduled amortization period orscheduled accumulation periodapplicable to the certificates to end, andprincipal collections to be applied tomonthly payments of principal to, or theaccumulation of principal for the benefitof, the certificateholders of such seriesuntil the earlier of payment in full of theoutstanding principal amount of thecertificates of such series or the seriestermination date specified in theprospectus or private placementmemorandum.Notwithstanding the foregoing,Section I.C. does not provide anexemption from the restrictions of section 406(b) of the Act, or from thetaxes imposed under section 4975(a)and (b) of the Code, by reason of section4975(c)(1)(E) or (F) of the Code, for thereceipt of a fee by the servicer of thetrust, in connection with the servicingof the receivables and the operation of the trust, from a person other than thetrustee or sponsor, unless such feeconstitutes a qualified administrativefee’as defined in Section III.U. below.D. Effective as of the date that theproposed exemption is granted, therestrictions of sections 406(a) and 407(a)of the Act and the taxes imposed bysections 4975(a) and (b) of the Code, byreason of sections 4975(c)(1)(A) through(D) of the Code, shall not apply to anytransaction to which those restrictionsor taxes would otherwise apply merelybecause a person is deemed to be a partyin interest or disqualified person(including a fiduciary) with respect to aplan by virtue of providing services tothe plan (or by virtue of having arelationship to such service provider asdescribed in section 3(14)(F), (G), (H) or(I) of the Act or section 4975(e)(2)(F),(G), (H) or (I) of the Code), solelybecause of the plans ownership of certificates.
Section II—General Conditions
A. The relief provided under SectionI is available only if the followingconditions are met:(1) The acquisition of certificates by aplan is on terms (including thecertificate price) that are at least asfavorable to the plan as such termswould be in an arm’s-length transactionwith an unrelated party;(2) The rights and interests evidencedby the certificates are not subordinatedto the rights and interests evidenced byother certificates of the same trust;(3) The certificates acquired by theplan have received a rating at the timeof such acquisition that is either: (i) inone of the two highest generic ratingcategories from any one of the RatingAgencies; or (ii) for certificates with aduration of one year or less, the highestshort-term generic rating category fromany one of the Rating Agencies;provided that, notwithstanding suchratings, this exemption (if granted) shallapply to a particular class of certificatesonly if such class (an Exempt Class) ispart of a series in which credit supportis provided to the Exempt Class througha senior-subordinated series structure orother form of third-party credit supportwhich, at a minimum, represents five (5)percent of the outstanding principalbalance of certificates issued for theExempt Class, so that an investor in theExempt Class will not bear the initialrisk of loss;(4) The trustee is not an affiliate of any other member of the RestrictedGroup. However, the trustee shall not beconsidered to be an affiliate of a servicersolely because the trustee has succeededto the rights and responsibilities of theservicer pursuant to the terms of a

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