Exemption From Certain Prohibited Transaction Restrictions Involving UBS Asset Management (Americas) Inc.; UBS Realty Investors LLC; UBS Hedge Fund Solutions LLC; UBS O'Connor LLC; and Certain Future Affiliates in UBS's Asset Management and Global Wealth Management U.S. Divisions (collectively, the Applicants or the UBS QPAMs) Located in Chicago, Illinois; Hartford, Connecticut; New York, New York; and Chicago, Illinois, Respectively

Citation85 FR 8020
Record Number2020-02834
Published date12 February 2020
SectionNotices
CourtEmployee Benefits Security Administration,Labor Department
Federal Register, Volume 85 Issue 29 (Wednesday, February 12, 2020)
[Federal Register Volume 85, Number 29 (Wednesday, February 12, 2020)]
                [Notices]
                [Pages 8020-8029]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-02834]
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                DEPARTMENT OF LABOR
                Employee Benefits Security Administration
                [Prohibited Transaction Exemption 2020-01; Exemption Application No. D-
                11998]
                Exemption From Certain Prohibited Transaction Restrictions
                Involving UBS Asset Management (Americas) Inc.; UBS Realty Investors
                LLC; UBS Hedge Fund Solutions LLC; UBS O'Connor LLC; and Certain Future
                Affiliates in UBS's Asset Management and Global Wealth Management U.S.
                Divisions (collectively, the Applicants or the UBS QPAMs) Located in
                Chicago, Illinois; Hartford, Connecticut; New York, New York; and
                Chicago, Illinois, Respectively
                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). The exemption affects the ability of certain entities with
                specified relationships to UBS AG (UBS), UBS Securities Japan Co., Ltd.
                (UBS Securities Japan), and UBS (France) S.A. (UBS France) to continue
                to rely upon relief provided by Prohibited Transaction Exemption 84-14.
                DATES: This exemption will be in effect for five years beginning on
                February 20, 2020 and ending on February 20, 2025.
                FOR FURTHER INFORMATION CONTACT: Mr. Brian Mica of the Department at
                (202) 693-8402. (This is not a toll-free number.)
                SUPPLEMENTARY INFORMATION: On September 30, 2019, the Department
                published a notice of proposed exemption in the Federal Register at 84
                FR 51621, permitting certain entities with specified relationships to
                UBS to continue to rely upon the relief provided by PTE 84-14 \1\ for a
                period of five years, notwithstanding certain criminal convictions, as
                described herein (the Convictions) and the 2019 French Conviction.
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                 \1\ 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.
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                 The Department is granting this exemption to ensure that Covered
                Plans \2\ with assets managed by an asset manager within the corporate
                family of UBS may continue to benefit from the relief provided by PTE
                84-14. This exemption will be in effect for five years from February
                20, 2020 (the date the relief in PTE 2019-01\3\ expires) through
                February 20, 2025. The grant of this five-year exemption does not
                imply, and is not intended to imply, that the Department will grant
                additional relief for UBS QPAMs to continue to rely on the relief in
                PTE 84-14 following the end of the five-year period.
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                 \2\ ``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 UBS QPAM relies on PTE
                84-14, or with respect to which a UBS QPAM (or any UBS affiliate)
                has expressly represented that the manager qualifies as a QPAM or
                relies on the QPAM class exemption (PTE 84-14). A Covered Plan does
                not include an ERISA-covered plan or IRA to the extent the UBS 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.
                 \3\ See PTE 2019-01; 84 FR 6163, February 26, 2019.
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                 This exemption provides only the relief specified in the text of
                the exemption, and only with respect to the criminal convictions or
                criminal conduct described herein. It provides no relief from
                violations of any law other
                [[Page 8021]]
                the prohibited transaction provisions of ERISA and the Code.
                Furthermore, the Department cautions that the relief in this exemption
                will terminate immediately if, among other things, an entity within the
                UBS corporate structure is convicted of a crime described in Section
                I(g) of PTE 84-14 (other than the Convictions or the 2019 French
                Conviction) during the Exemption Period. The Department intends for the
                terms of this exemption to promote adherence to basic fiduciary
                standards under ERISA and the Code. This exemption also aims to ensure
                that Covered Plans can terminate relationships in an orderly and cost-
                effective fashion in the event the fiduciary of a Covered Plan
                determines it is prudent to terminate the relationship with a UBS QPAM.
                The Department makes the requisite findings under ERISA section 408(a)
                based on adherence to all of the conditions of the exemption.
                Accordingly, affected parties should be aware that the conditions
                incorporated in this exemption are, taken as a whole, necessary 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 Applicants requested an individual exemption pursuant to
                section 408(a) of ERISA and section 4975(c)(2) of the Code, and in
                accordance with the procedures set forth in 29 CFR part 2570, subpart B
                (76 FR 66637, 66644, October 27, 2011). Effective December 31, 1978,
                section 102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1
                (1996), transferred the authority of the Secretary of the Treasury to
                issue administrative exemptions under section 4975(c)(2) of the Code to
                the Secretary of Labor. Accordingly, the Department grants this
                exemption under its sole authority.
                Department's Comment
                 The Department cautions that the relief in this exemption will
                terminate immediately if an entity within the UBS corporate structure
                is convicted of a crime described in Section I(g) of PTE 84-14 (other
                than the Convictions and the 2019 French Conviction) during the
                Exemption Period. Although the UBS QPAMs could apply for a new
                exemption in that circumstance, the Department would not be obligated
                to grant the exemption. The Department specifically designed the terms
                of this exemption to permit plans to terminate their relationships in
                an orderly and cost effective fashion in the event of an additional
                conviction, or the expiration of this exemption without additional
                relief, or a determination that it is otherwise prudent for a plan to
                terminate its relationship with an entity covered by the exemption.
                Written Comments
                 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. All comments and requests for a hearing
                were due by November 14, 2019. The Department received written comments
                from the Applicants and a member of the public. After considering the
                entire record developed in connection with the Applicant's exemption
                request, the Department has determined to grant the exemption, as
                described below.
                UBS QPAMs' Comments
                I. The Term of the Exemption
                 The Applicants request that the Department grant exemptive relief
                for the full term of the PTE 84-14 Section I(g) disqualification period
                by extending the term of the exemption from five years to either nine
                years or, if UBS is successful in its appeal of the 2019 French
                Conviction, to 10 years, beginning on January 10, 2017 (the 2017
                Conviction Date).
                 The UBS QPAMs state the ``reasons articulated in the notice of the
                Proposed Exemption do not support the Department's determination that
                an additional exemption for a 5-year period--but not through the end of
                the 9-year disqualification period--`would be protective [of] and in
                the best interest of participants and beneficiaries.' '' The UBS QPAMs
                argue that the conditions of the exemption, such as the independent
                audit and the Audit Report, are designed to provide the Department with
                sufficient opportunities to review the UBS QPAMs compliance with the
                exemption. The UBS QPAMs state that the ``basis for the Department's
                determination that the Proposed Exemption is administratively feasible
                is that these same conditions `will provide an incentive for, and a
                measure of,' the UBS QPAMs' ongoing compliance with the exemption
                without any `immediate need for review and oversight by the
                Department.' ''.\4\ The UBS QPAMs argue that limiting the term of the
                exemption to five years provides no additional protections given the
                exemption's comprehensive internal and external monitoring requirements
                and the protections provided by the Department's exemption regulations.
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                 \4\ The Department notes that UBS QPAMs incorrectly restated the
                relevant language in the proposed exemption. The actual language of
                the proposed exemption states ``The Department has tentatively
                determined that the proposal is administratively feasible since,
                among other things, a qualified independent auditor will be required
                to perform an in-depth audit covering, among other things, each UBS
                QPAM's compliance with the exemption, and a corresponding written
                audit report will be provided to the Department and available to the
                public. The independent audit will provide an incentive for, and a
                measure of, compliance, while reducing the immediate need for review
                and oversight by the Department.'' See 84 FR 51621 at 51627
                (September 30, 2019).
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                 The UBS QPAMs argue that the Department justifies the five-year
                term in the proposed exemption by referring to a finding by the
                independent auditors that a UBS QPAM failed to follow the conditions of
                class exemption PTE 86-128 when using affiliated brokers for securities
                transactions,\5\ but that the Department failed to explain the
                relevance of the auditor's findings to the five-year term. The UBS
                QPAMs represent that they fully corrected the audit finding, including
                reimbursement of approximately $11,000 of commissions plus interest for
                the relevant period. The UBS QPAMs also state that the following year's
                audit report submitted on October 3, 2019, noted the correction and
                stated that the relevant UBS QPAM adopted a policy prohibiting ERISA
                accounts from trading with affiliates.
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                 \5\ In that audit report dated August 7, 2018, Fiduciary
                Counselors, Inc. states, on page 26: ``Asset Management [QPAM]
                informed us that during the Audit Period it utilized PTE 86-128 with
                respect to effecting securities transactions using affiliated
                brokers for one ERISA Plan client. However, it does not appear that
                Asset Management correctly followed all of the requirement of PTE
                86-128. Specifically, it does not appear that Asset Management
                provided its client with the required annual termination notice.
                Additionally, it does not appear that Asset Management timely
                provided its client with the required annual disclosure summary.''
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                 Furthermore, the UBS QPAMs state that the Department did not
                explain how or why the detailing of UBS's prior convictions and conduct
                in the proposed exemption was relevant and how the prior convictions
                and conduct persuaded the Department to conclude that a only a five-
                year exemption would be appropriate even though the UBS QPAMs have
                represented that no UBS QPAM personnel participated in or had knowledge
                of the underlying conduct in those matters. Lastly, the UBS QPAMs,
                repeating their previous comments on the proposal for PTE 2017-07,\6\
                claim that granting a limited-term exemption would create uncertainty
                among covered plans regarding the duration of relief and therefore
                cause potential harm to the covered plans from having to
                [[Page 8022]]
                expend the time and resources to be sure that they can replace the UBS
                QPAMs in the event that the Department does not grant permanent relief.
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                 \6\ 82 FR 61903 (December 29, 2017). PTE 2017-07 is an exemption
                that permits UBS QPAMs to rely on the exemptive relief provided by
                PTE 84-14, notwithstanding the 2013 and 2017 Convictions. See also
                the notice of proposed exemption at 81 FR 83385 (November 21, 2016).
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                 Department's Response:
                 The Department is not persuaded that a nine-year exemption period
                would be protective and in the interest of Covered Plans. UBS entities
                were criminally convicted three times, including twice in U.S. courts,
                for illegal behavior that, collectively, involved billions of dollars
                and spanned numerous years, across different UBS entities. Given the
                duration and magnitude of the UBS entities' criminal behavior, the
                Department cannot determine that the conditions in this exemption
                anticipate all of the protections that may be necessary to protect
                Covered Plans over the entire nine-year disqualification period. The
                Department remains convinced that the prospect of the Department's
                prospective in-depth review of any future exemption request by the UBS
                QPAMs provides a strong incentive for the UBS QPAMs to diligently
                monitor compliance with the conditions of this exemption, to the
                benefit of Covered Plans.
                 The audits required by this exemption will provide the Department
                with valuable insight into the UBS QPAMs' compliance history and
                operations. If those audits identify deficiencies, the audits' findings
                may well provide a basis for imposing different or additional
                conditions, or for the denial of a new exemption application after
                expiration of this exemption's five-year term.
                 However, the Department would not view a cycle of several positive
                audits alone as dispositive proof that this exemption meets, and will
                continue to meet, the requirements of Section 408(a) of ERISA over the
                entire remaining UBS QPAM disqualification period. An exemption request
                submitted by the UBS QPAMs containing all current, accurate, relevant
                material will be another necessary and important basis for any such
                determination.
                 A failure to comply with the Department's prohibited transaction
                class exemption 86-128 is a failure to comply with ERISA. The
                Department considers any instance of an exemption applicant's
                noncompliance with ERISA when contemplating whether the requested
                exemption is appropriate. Information regarding an applicant's non-
                compliance with ERISA, even if corrected, heightens the Department's
                scrutiny of the exemption request. The Department's ability to review
                the Audit Reports annually and for any noncompliance reported therein,
                whether isolated, continuing or corrected, along with the limited term
                of the exemption, provides the Department the opportunity to add,
                modify, and enhance any conditions, as necessary, in a potential future
                exemption and assists in determining if a future exemption is
                appropriate.
                 The Department considers the entire record before it when
                determining the appropriate term of the exemption. The record in this
                instance contains an abundance of factual information detailing the
                severity of the misconduct, repeated criminal violations, supervisory
                failures, and the breach of two previous exemptions, which themselves
                were necessitated by criminal conduct. Such a detailed record of
                criminal behavior reflects on the offending organization's compliance
                culture, which is a factor at the core of the Department's
                determinations and certainly is a large factor in the Department's
                consideration of the length of any exemptive relief provided.
                 The Department additionally notes that, if the UBS QPAMs' appeal of
                the 2019 French Conviction is successful, the UBS QPAMs may rely on PTE
                2017-07 or this exemption during their respective effective periods, as
                long as the applicable conditions therein are met.\7\
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                 \7\ In this circumstance, the Department would consider good
                faith compliance with the conditions of this exemption as compliance
                with the conditions of PTE 2017-07.
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                II. Advisory Opinion Request
                 Along with their comments to the proposed exemption the UBS QPAMs
                reiterated their request that the Department issue an advisory opinion
                as to whether foreign convictions are disqualifying convictions under
                section I(g) of PTE 84-14. The UBS QPAMs state the request presents
                questions of law and policy that are critically important regardless of
                the Department's determinations on the term and condition of this
                exemption. The Department acknowledges the request, and is separately
                considering it pursuant to ERISA Procedure 76-1.
                III. Requested Revisions to the Exemption's Conditions
                 The UBS QPAMs requested certain specific revisions based on their
                request that the Department increase the exemption's term from five
                years to nine years. As discussed above, the Department has decided not
                to modify the term of the exemption to nine years. Accordingly, it is
                not making these requested revisions.
                 The UBS QPAMs also requested other revisions to the proposed
                exemption's operative language in certain conditions, as discussed
                below.
                Section I(a)
                 The UBS QPAMs requested that the Department modify text in Section
                I(a) of the proposed exemption, which in part conditions relief on the
                premise that third parties engaged ``on behalf of'' the UBS QPAMs did
                not ``know of, have reason to know of, or participate in'' the criminal
                conduct that is the subject of the 2019 French Conviction.
                Specifically, the UBS QPAMs request deletion of the sentence in Section
                I(a) stating ``[f]urther, any other party engaged on behalf of such UBS
                QPAMs who had responsibility for, or exercised authority in connection
                with the management of plan assets did not know of, did not have reason
                to know of, or participate in the criminal conduct of UBS and UBS
                France that is the subject of the 2019 French Conviction.''
                Furthermore, the UBS QPAMs requested modification of the last sentence
                of Section I(a), which provides that a person ``participated in'' the
                criminal misconduct not only if the person actively engaged in the
                misconduct, but also if he or she knowingly approved of the criminal
                conduct or, with knowledge of the misconduct, failed to take active
                steps to prohibit it, such as reporting the conduct to supervisors. The
                UBS QPAMs request that the phrase ``or knowledge of such conduct
                without taking active steps to prohibit such conduct, including
                reporting the conduct to such individual's supervisors, and to the
                Board of Directors'' be deleted from Section I(a).
                 The Department declines to make the requested modifications to
                Section I(a). The Department expects the QPAMs, their employees, and
                agents to adhere to high standards of integrity. These standards are
                not satisfied merely by avoiding actively engaging in misconduct, but
                also extends to taking measures to stop misconduct that is known or
                should be known. Silent acquiescence to criminal conduct falls far
                short of the standards expected of parties relying on the exemption.
                Accordingly, the condition treats as knowing participation a party's
                failure to take active steps to prevent the criminal conduct that is
                the subject of the Convictions and the 2019 French Conviction.
                Moreover, it is the Department's view that the UBS QPAMs are
                appropriately held accountable in this manner for the conduct of the
                third parties they engaged on their behalf to manage or exercise
                authority over plan assets. If such parties knowingly participated in
                the criminal conduct
                [[Page 8023]]
                that is the subject of the 2019 French Conviction, the QPAMs'
                culpability is potentially greater than the Department assumed in
                drafting the exemption conditions, and there may be need for greater
                protections or reduced relief. The condition was specifically designed
                to give assurance that the UBS QPAMs and third parties engaged on the
                UBS QPAMs' behalf did not participate in, approve, or facilitate
                criminal misconduct.
                Section I(b)
                 The UBS QPAMs have also requested that the Department modify text
                in Section I(b) of the proposed exemption, which in part provides that
                the parties engaged to act on behalf of the UBS QPAMs must not have
                received compensation in connection with the criminal conduct that is
                the subject of the 2019 French Conviction. The UBS QPAMs have requested
                deletion of the last sentence of Section I(b), which provides:
                ``[f]urther, any other party engaged on behalf of such UBS QPAMs who
                had responsibility for, or exercised authority in connection with the
                management of plan assets did not receive direct compensation, or
                knowingly receive indirect compensation, in connection with the
                criminal conduct of UBS and UBS France that is the subject of the 2019
                French Conviction.''
                 Section I(b) also reflects the Department's view that the QPAMs and
                the parties engaged on their behalf to manage or exercise authority
                over plan assets must adhere to high standards of integrity.
                Accordingly, these parties engaged by the UBS QPAMs should neither have
                participated in nor profited from the criminal conduct that is the
                subject of the 2019 French Conviction. If such parties, in fact,
                received direct or indirect compensation in connection with the
                criminal conduct, their culpability, and the culpability of the UBS
                QPAMs, is potentially greater than the Department assumed in
                formulating this exemption's conditions, and there may be need for
                greater protections or reduced relief. Therefore, Section I(b) of the
                exemption will continue to extend the prohibition against the receipt
                of compensation in connection with the conduct that is the subject of
                the 2019 French Conviction to third parties with responsibility or
                authority over plan assets.
                Section I(k)--Written Notice
                 Section I(k) of the exemption requires the UBS QPAMs to provide
                each sponsor and beneficial owner of a Covered Plan that has entered
                into a written asset or investment management agreement with a UBS
                QPAM, or the sponsor of an investment fund in any case where a UBS QPAM
                acts as a sub-advisor to the investment fund in which such ERISA-
                covered plan and IRA invests, with a copy of the notice of exemption, a
                summary describing the facts that led to the Convictions and the 2019
                French Conviction (the Summary), and a statement (the Statement) that
                the Convictions, and in the Department's view, the 2019 French
                Conviction, each separately result in a failure to meet a condition in
                PTE 84-14 and PTE 2017-07. The UBS QPAMs request the condition's
                language be revised to reflect that this disclosure is to be provided
                within 60 days of the effective date of the five-year exemption to
                Covered Plans that currently have a written investment or asset
                management agreement and that covered plans that enter a written
                investment or asset management agreement with a UBS QPAM after such 60-
                day time period must receive a copy of the exemption, the Summary, and
                the Notice prior to or contemporaneously with the Covered Plan's
                receipt of a written asset management agreement from the UBS QPAM.
                 The Department agrees with the request and has revised Section I(k)
                accordingly.
                Section I(m)(1)(ii)--Compliance Officer
                 Section I(m)(1)(ii) states that ``[t]he Compliance Officer must
                have a reporting line within UBS's Compliance and Operational Risk
                Control (C&ORC) function to the Head of Compliance and Operational Risk
                Control, Asset Management. The C&ORC function is organizationally
                independent of UBS's business divisions--including Asset Management,
                the Investment Bank, and Global Wealth Management--and is led by the
                head of Group Compliance, Regulatory and Governance, or another
                appropriate member of the Group Executive Board.'' The UBS QPAMs
                requested that the phrase ``to the Head of Compliance and Operational
                Risk Control, Asset Management'' in the first sentence of Section
                I(m)(1)(ii) be deleted.
                 The Department declines to make the requested change. The UBS QPAMs
                did not provide any substantive reason for the removal of the language
                from this condition and therefore have not demonstrated why the
                deletion of the language would be in the interest of and protective of
                affected plans and their participants and beneficiaries. The Department
                formulated this condition to ensure that the Compliance Officer
                designated by UBS is an individual who is directly accountable to
                senior management. The Department considers the Compliance Officer, the
                Exemption Reviews, and the Exemption Reports integral parts of this
                five-year exemption, without which the Department could not have made
                its findings that the exemption is in the interest of and protective of
                affected plans and their participants and beneficiaries. The
                exemption's conditions ensure that senior management is aware of and
                knowledgeable about compliance with this five-year exemption and the
                Policies and Training mandate. The reporting and accountability of the
                Compliance Officer to senior management is a part of that process.
                References to ``2017 Conviction''
                 The term ``2018 Conviction'' was used in the proposed exemption to
                describe the judgment of conviction against UBS in case number 3:15-cr-
                00076-RNC in the U.S. District Court for the District of Connecticut
                for one count of wire fraud in violation of Title 18, United States
                Code, Sections 1343 and 2 in connection with UBS's submission of Yen
                London Interbank Offered Rates and other benchmark interest rates
                between 2001 and 2010. The UBS QPAMs request the term be changed from
                ``2018 Conviction'' to the term ``2017 Conviction'' which was used in
                PTE 2017-07 and because the date of this conviction is January 10,
                2017. The UBS QPAMs also request the Department add a definitional
                Section to the exemption stating the term ``2017 Conviction Date''
                means ``January 10, 2017.''
                 The Department accepts the UBS QPAMs' request, and for clarity has
                added a definitional section to the five-year exemption stating that
                ``[a]ll references to `the 2017 Conviction Date' means January 10,
                2017.'' In addition, the Department has replaced the references to the
                ``2018 Conviction'' with the term ``2017 Conviction.''
                Section II(b)--``2019 French Conviction''
                 On its own motion and for clarity, the Department is modifying
                Section II(b) defining the term ``2019 French Conviction'' to include
                the sentence ``The term `2019 French Conviction' also includes a
                decision upholding the February 20, 2019 judgment of the French First
                Instance Court.''
                Comment From the Public
                 The Department received one anonymous comment from the public that
                did not raise any substantive issue.
                 After full consideration and review of the entire record, the
                Department has decided to grant the exemption, with
                [[Page 8024]]
                the modifications discussed above. The complete application file (D-
                11998) is available for public inspection in the Public Disclosure Room
                of the 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, refer to
                the notice of proposed exemption published on September 30, 2019, at 84
                FR 51621.
                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 section 408(a) of the Act or section 4975(c)(2) of the Code does
                not relieve a fiduciary or other party in interest or disqualified
                person from certain other provisions of the Act and/or the Code,
                including any prohibited transaction provisions to which the exemption
                does not apply and the general fiduciary responsibility provisions of
                section 404 of the Act, which, among other things, require a fiduciary
                to discharge his duties respecting the plan solely in the interest of
                the participants and beneficiaries of the plan and in a prudent fashion
                in accordance with section 404(a)(1)(B) of the Act; nor does it affect
                the requirement of section 401(a) of the Code that the plan must
                operate for the exclusive benefit of the employees of the employer
                maintaining the plan and their beneficiaries;
                 (2) In accordance with section 408(a) of ERISA and section
                4975(c)(2) of the Code, the Department makes the following
                determinations: The exemption is administratively feasible, the
                exemption is in the interests of affected plans and of their
                participants and beneficiaries, and the exemption is protective of the
                rights of participants and beneficiaries of such plans;
                 (3) The exemption is supplemental to, and not in derogation of, any
                other provisions of ERISA, including statutory or administrative
                exemptions and transitional rules. Furthermore, the fact that a
                transaction is subject to an administrative or statutory exemption is
                not dispositive of whether the transaction is in fact a prohibited
                transaction; and
                 (4) The 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 transaction
                which is the subject of the exemption.
                 Accordingly, the following exemption is granted under the authority
                of section 408(a) of ERISA and section 4975(c)(2) of the Code and in
                accordance with the procedures set forth in 29 CFR part 2570, subpart B
                (76 FR 66637, 66644, October 27, 2011):
                Exemption
                Section I. Covered Transactions
                 Certain entities with specified relationships to UBS (hereinafter,
                the UBS QPAMs, as defined in Section II(e)) 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) \8\ during the
                Exemption Period, notwithstanding the 2013 Conviction of UBS Securities
                Japan Co., Ltd., the 2017 Conviction of UBS (collectively the
                Convictions, as defined in Section II(a)), and the 2019 French
                Conviction of UBS and UBS France (as defined in Section II(b)),
                provided that the following conditions are satisfied:
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                 \8\ 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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                 (a) The UBS QPAMs (including their officers, directors, agents
                other than UBS and UBS Securities Japan and UBS France, and the
                employees of such UBS QPAMs) did not know of, did not have reason to
                know of, or did not participate in: (1) The FX Misconduct; or (2) the
                criminal conduct of UBS Securities Japan and UBS that is the subject of
                the Convictions; or (3) the criminal conduct of UBS and UBS France that
                is the subject of the 2019 French Conviction. Further, any other party
                engaged on behalf of such UBS QPAMs who had responsibility for, or
                exercised authority in connection with the management of plan assets
                did not know of, did not have reason to know of, or participate in the
                criminal conduct of UBS and UBS France that is the subject of the 2019
                French Conviction. For purposes of this exemption, ``participate in''
                refers not only to active participation in the FX Misconduct, the
                criminal conduct that is the subject of the Convictions, and the
                criminal conduct that is the subject of the 2019 French Conviction, but
                also to knowing approval of the criminal conduct, or knowledge of such
                conduct without taking active steps to prohibit such conduct, including
                reporting the conduct to such individual's supervisors, and to the
                Board of Directors;
                 (b) The UBS QPAMs (including their officers, directors, agents
                other than UBS, UBS Securities Japan, and UBS France, and employees of
                such UBS QPAMs) did not receive direct compensation, or knowingly
                receive indirect compensation, in connection with: (1) The FX
                Misconduct; (2) the criminal conduct of UBS Securities Japan and UBS
                that is the subject of the Convictions; or (3) the criminal conduct of
                UBS and UBS France that is the subject of the 2019 French Conviction.
                Further, any other party engaged on behalf of such UBS QPAMs who had
                responsibility for, or exercised authority in connection with the
                management of plan assets did not receive direct compensation, or
                knowingly receive indirect compensation, in connection with the
                criminal conduct of UBS and UBS France that is the subject of the 2019
                French Conviction;
                 (c) The UBS QPAMs will not employ or knowingly engage any of the
                individuals who participated in: (1) The FX Misconduct; (2) the
                criminal conduct of UBS Securities Japan and UBS that is the subject of
                the Convictions; or (3) the criminal conduct of UBS and UBS France that
                is the subject of the 2019 French Conviction;
                 (d) At all times during the Exemption Period, no UBS QPAM will use
                its authority or influence to direct an ``investment fund'' (as defined
                in Section VI(b) of PTE 84-14) that is subject to ERISA or the Code and
                managed by such UBS QPAM with respect to one or more Covered Plans (as
                defined in Section II(c)) to enter into any transaction with UBS, UBS
                Securities Japan, or UBS France or to engage UBS, UBS Securities Japan,
                or UBS France 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 the UBS QPAMs to satisfy Section I(g) of PTE 84-
                14 arose solely from the Convictions and the 2019 French Conviction;
                 (f) A UBS QPAM did not exercise authority over the assets of any
                plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan) or
                section 4975 of the Code (an IRA) in a manner that it knew or should
                have known would: Further the FX Misconduct, the criminal conduct that
                is the subject of the Convictions, or the criminal conduct that is the
                subject of the 2019 French Conviction; or cause the UBS QPAM or its
                affiliates to directly or indirectly profit from the FX Misconduct, the
                criminal conduct that is the subject of the Convictions, or the
                criminal conduct that is the subject of the 2019 French Conviction;
                [[Page 8025]]
                 (g) Other than with respect to employee benefit plans maintained or
                sponsored for its own employees or the employees of an affiliate, UBS,
                UBS Securities Japan, and UBS France will not act as fiduciaries within
                the meaning of section 3(21)(A)(i) or (iii) of ERISA, or section
                4975(e)(3)(A) and (C) of the Code, with respect to ERISA-covered plan
                and IRA assets; provided, however, that UBS, UBS Securities Japan, and
                UBS France will not be treated as violating the conditions of this
                exemption solely because they acted as an investment advice fiduciary
                within the meaning of section 3(21)(A)(ii) of ERISA or section
                4975(e)(3)(B) of the Code;
                 (h)(1) Each UBS QPAM must continue to maintain, adjust (to the
                extent necessary), implement, and follow written policies and
                procedures (the Policies). The Policies must require, and must be
                reasonably designed to ensure that:
                 (i) The asset management decisions of the UBS QPAM are conducted
                independently of UBS's corporate management and business activities,
                including the corporate management and business activities of the
                Investment Bank division, UBS Securities Japan, and UBS France. This
                condition does not preclude a UBS QPAM from receiving publicly
                available research and other widely available information from a UBS
                affiliate;
                 (ii) The UBS QPAM fully complies with ERISA's fiduciary duties, and
                with ERISA and the Code's prohibited transaction provisions, in each
                case as applicable with respect to each Covered Plan, and does not
                knowingly participate in any violation of these duties and provisions
                with respect to Covered Plans;
                 (iii) The UBS QPAM does not knowingly participate in any other
                person's violation of ERISA or the Code with respect to Covered Plans;
                 (iv) Any filings or statements made by the UBS QPAM to regulators,
                including, but not limited to, the Department, the Department of the
                Treasury, the Department of Justice, and the Pension Benefit Guaranty
                Corporation, on behalf of or in relation to Covered Plans, are
                materially accurate and complete, to the best of such QPAM's knowledge
                at that time;
                 (v) To the best of the UBS QPAM's knowledge at that time, the UBS
                QPAM does not make material misrepresentations or omit material
                information in its communications with such regulators with respect to
                Covered Plans, or make material misrepresentations or omit material
                information in its communications with Covered Plans; and
                 (vi) The UBS QPAM complies with the terms of this five-year
                exemption;
                 (2) Any violation of, or failure to comply with an item in
                subparagraphs (h)(1)(ii) through (vi), is corrected as soon as
                reasonably possible upon discovery, or as soon after the QPAM
                reasonably should have known of the noncompliance (whichever is
                earlier), and any such violation or compliance failure not so corrected
                is reported, upon the discovery of such failure to so correct, in
                writing. Such report shall be made to the head of compliance and the
                General Counsel (or their functional equivalent) of the relevant UBS
                QPAM that engaged in the violation or failure, and the independent
                auditor responsible for reviewing compliance with the Policies. A UBS
                QPAM will not be treated as having failed to develop, implement,
                maintain, or follow the Policies, provided that it corrects any
                instance of noncompliance as soon as reasonably possible upon
                discovery, or as soon as reasonably possible after the UBS QPAM
                reasonably should have known of the noncompliance (whichever is
                earlier), and provided that it adheres to the reporting requirements
                set forth in this subparagraph (2);
                 (3) Each UBS QPAM will maintain, adjust (to the extent necessary)
                and implement a program of training during the Exemption Period, to be
                conducted at least annually, for all relevant UBS QPAM asset/portfolio
                management, trading, legal, compliance, and internal audit personnel.
                The Training must:
                 (i) At a minimum, cover the Policies, ERISA and Code compliance
                (including applicable fiduciary duties and the prohibited transaction
                provisions), ethical conduct, the consequences for not complying with
                the conditions of this exemption (including any loss of exemptive
                relief provided herein), and prompt reporting of wrongdoing; and
                 (ii) Be conducted by a professional who has been prudently selected
                and who has appropriate technical training and proficiency with ERISA
                and the Code;
                 (i)(1) Each UBS QPAM submits to an audit 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 each UBS QPAM's compliance with, the
                Policies and Training described herein. The audit requirement must be
                incorporated in the Policies. The initial audit must cover the 13-month
                period that begins on February 20, 2020 and ends on March 19, 2021, and
                must be completed by September 19, 2021. The second audit must cover
                the period March 20, 2021 through March 19, 2022 and must be completed
                by September 19, 2022. The third audit must cover the period March 20,
                2022 through March 19, 2023 and must be completed by September 19,
                2023. The fourth audit must cover the period March 20, 2023 through
                March 19, 2024 and must be completed by September 19, 2024. The fifth
                audit must cover the period March 20, 2024 through February 20, 2025
                and must be completed by August 20, 2025. The corresponding certified
                Audit Reports must be submitted to the Department no later than 45 days
                following the completion of the audit.\9\ For time periods ending prior
                to February 20, 2020, and covered by the audit required pursuant to PTE
                2019-01,\10\ the audit requirements in Section I(i) PTE 2019-01 will
                remain in effect.\11\
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                 \9\ The initial Audit Report must be submitted to the Department
                by November 3, 2021. The second Audit Report must be submitted to
                the Department by November 3, 2022. The third Audit Report must be
                submitted to the Department by November 3, 2023. The fourth Audit
                Report must be submitted to the Department by November 3, 2024. The
                fifth Audit Report must be submitted to the Department by October 4,
                2025.
                 \10\ 84 FR 6163 (February 26, 2019). PTE 2019-01 is an exemption
                that permits the UBS QPAMs to rely on the exemptive relief provided
                by PTE 84-14 notwithstanding the 2013 and 2017 Convictions and the
                2019 French Conviction.
                 \11\ Accordingly, pursuant to PTE 2019-01, the required audit
                must cover the period beginning February 20, 2019 and ending on
                February 19, 2020. The corresponding Audit Report must be completed
                by August 19, 2020 and submitted to the Department by October 3,
                2020.
                ---------------------------------------------------------------------------
                 (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, and only to the extent such
                disclosure is not prevented by state or federal statute, or involves
                communications subject to attorney-client privilege, each UBS QPAM and,
                if applicable, UBS, will grant the auditor unconditional access to its
                business, including, but not limited to: Its computer systems; business
                records; transactional data; workplace locations; training materials;
                and personnel. Such access is limited to information relevant to the
                auditor's objectives as specified by the terms of this exemption;
                 (3) The auditor's engagement must specifically require the auditor
                to determine whether each UBS QPAM has developed, implemented,
                maintained, and followed the Policies in accordance with the conditions
                of this five-year exemption, and has developed and implemented the
                Training, as required herein;
                 (4) The auditor's engagement must specifically require the auditor
                to test
                [[Page 8026]]
                each UBS QPAM's operational compliance with the Policies and Training.
                In this regard, the auditor must test, for each UBS QPAM, a sample of
                such UBS QPAM's transactions involving Covered Plans, sufficient in
                size and nature to afford the auditor a reasonable basis to determine
                such UBS QPAM's operational compliance with the Policies and Training;
                 (5) For the audit, on or before the end of the relevant period
                described in Section I(i)(1) for completing the audit, the auditor must
                issue a written report (the Audit Report) to UBS and the UBS QPAM to
                which the audit applies that describes the procedures performed by the
                auditor in connection with its examination. The auditor, at its
                discretion, may issue a single consolidated Audit Report that covers
                all the UBS QPAMs. The Audit Report must include the auditor's specific
                determinations regarding:
                 (i) The adequacy of each UBS QPAM's Policies and Training; each UBS
                QPAM's compliance with the Policies and Training; the need, if any, to
                strengthen such Policies and Training; and any instance of the
                respective UBS QPAM's noncompliance with the written Policies and
                Training described in Section I(h) above. The UBS QPAM must promptly
                address any noncompliance. The UBS QPAM must promptly address or
                prepare a written plan of action to address any determination as to the
                adequacy of the Policies and Training and the auditor's recommendations
                (if any) with respect to strengthening the Policies and Training of the
                respective UBS QPAM. Any action taken or the plan of action to be taken
                by the respective UBS QPAM must be included in an addendum to the Audit
                Report (such addendum must be completed prior to the certification
                described in Section I(i)(7) below). In the event such a plan of action
                to address the auditor's recommendation regarding the adequacy of the
                Policies and Training is not completed by the time of submission of the
                Audit Report, the following period's Audit Report must state whether
                the plan was satisfactorily completed. Any determination by the auditor
                that a UBS QPAM has implemented, maintained, and followed sufficient
                Policies and Training must not be based solely or in substantial part
                on an absence of evidence indicating noncompliance. In this last
                regard, any finding that a UBS QPAM has complied with the requirements
                under this subparagraph must be based on evidence that the particular
                UBS QPAM has actually implemented, maintained, and followed the
                Policies and Training required by this exemption. Furthermore, the
                auditor must not solely rely on the Exemption Report created by the
                Compliance Officer, as described in Section I(m) below, as the basis
                for the auditor's conclusions in lieu of independent determinations and
                testing performed by the auditor as required by Section I(i)(3) and (4)
                above; and
                 (ii) The adequacy of the Exemption Review described in Section
                I(m);
                 (6) The auditor must notify the respective UBS QPAM of any instance
                of noncompliance identified by the auditor within five (5) business
                days after such noncompliance is identified by the auditor, regardless
                of whether the audit has been completed as of that date;
                 (7) With respect to the Audit Report, the General Counsel, or one
                of the three most senior executive officers of the UBS QPAM to which
                the Audit Report applies, must certify in writing, under penalty of
                perjury, that the officer has reviewed the Audit Report and this
                exemption; that, to the best of such officer's knowledge at the time,
                such UBS QPAM has addressed, corrected, and 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. Such certification must also include the signatory's
                determination that, to the best of such officer's knowledge at the
                time, 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;
                 (8) The Risk Committee of UBS's Board of Directors is provided a
                copy of the Audit Report; and a senior executive officer of UBS's
                Compliance and Operational Risk Control function must review the Audit
                Report for each UBS QPAM and must certify in writing, under penalty of
                perjury, that such officer has reviewed the Audit Report;
                 (9) Each UBS QPAM provides its certified Audit Report, by regular
                mail to: Office of Exemption Determinations (OED), 200 Constitution
                Avenue NW, Suite 400, Washington, DC 20210; or by private carrier to:
                122 C Street NW, Suite 400, Washington, DC 20001-2109. This delivery
                must take place no later than 45 days following completion of the Audit
                Report. The Audit Reports will be made part of the public record
                regarding this five-year exemption. Furthermore, each UBS QPAM must
                make its Audit Reports 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) Any engagement agreement with an auditor to perform the audit
                required by this exemption that is entered into subsequent to the
                effective date of this exemption must be submitted to OED no later than
                two months after the execution of such agreement;
                 (11) The auditor must provide the Department, upon request, for
                inspection and review, access to all the workpapers created and used in
                connection with the audit, provided such access and inspection is
                otherwise permitted by law; and
                 (12) UBS must notify the Department of a change in the independent
                auditor no later than two months after the engagement of a substitute
                or subsequent auditor and must provide an explanation for the
                substitution or change including a description of any material disputes
                between the terminated auditor and UBS;
                 (j) As of the effective date of this five-year exemption, with
                respect to any arrangement, agreement, or contract between a UBS QPAM
                and a Covered Plan, the UBS QPAM agrees and warrants to Covered Plans:
                 (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
                inadvertent prohibited transactions); and to comply with the standards
                of prudence and loyalty set forth in section 404 of ERISA with respect
                to each such ERISA-covered plan and IRA to the extent that section 404
                is applicable;
                 (2) To indemnify and hold harmless the Covered Plan for any actual
                losses resulting directly from: A UBS QPAM's violation of ERISA's
                fiduciary duties, as applicable, and of the prohibited transaction
                provisions of ERISA and the Code, as applicable; a breach of contract
                by the QPAM; or any claim arising out of the failure of such UBS QPAM
                to qualify for the exemptive relief provided by PTE 84-14 as a result
                of a violation of Section I(g) of PTE 84-14 other than the Convictions
                and the 2019 French Conviction. This condition applies only to actual
                losses caused by the UBS QPAM's violations.
                 (3) Not to require (or otherwise cause) the Covered Plan to waive,
                limit, or qualify the liability of the UBS QPAM for violating ERISA or
                the Code or engaging in prohibited transactions;
                 (4) Not to restrict the ability of such Covered Plan to terminate
                or withdraw
                [[Page 8027]]
                from its arrangement with the UBS QPAM with respect to any investment
                in a separately managed account or pooled fund subject to ERISA and
                managed by such QPAM, with the exception of reasonable restrictions,
                appropriately disclosed in advance, that are specifically designed to
                ensure equitable treatment of all investors in a pooled fund in the
                event such withdrawal or termination may have adverse consequences for
                all other investors. In connection with any such arrangements involving
                investments in pooled funds subject to ERISA entered into after the
                effective date of PTE 2017-07,\12\ 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 an
                ERISA-covered plan's or IRA's investment, and such restrictions must be
                applicable to all such investors and be effective no longer than
                reasonably necessary to avoid the adverse consequences;
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                 \12\ 82 FR 61903 (December 29, 2017). PTE 2017-07 is an
                exemption that permits UBS QPAMs to rely on the exemptive relief
                provided by PTE 84-14, notwithstanding the 2013 and 2017
                Convictions.
                ---------------------------------------------------------------------------
                 (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 such withdrawal or termination may have
                adverse consequences for all other investors, provided that such fees
                are applied consistently and in a like manner to all such investors;
                and
                 (6) Not to include exculpatory provisions disclaiming or otherwise
                limiting liability of the UBS QPAM for a violation of such agreement's
                terms. To the extent consistent with Section 410 of ERISA, 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 UBS and its
                affiliates, or damages arising from acts outside the control of the UBS
                QPAM;
                 (7) For Covered Plans that enter into a written asset or investment
                management agreement with a UBS QPAM on or after the effective date of
                this exemption, the UBS QPAM will agree to its obligations under this
                Section I(j) in an updated investment management agreement between the
                UBS QPAM and such clients or other written contractual agreement. This
                condition will be deemed met for each Covered Plan that received a
                notice pursuant to PTE 2016-17, PTE 2017-07, and/or PTE 2019-01 that
                meets the terms of this condition. Notwithstanding the above, a UBS
                QPAM will not violate the condition solely because a Plan or IRA
                refuses to sign an updated investment management agreement.
                 (k) Within 60 days of the effective date of this five-year
                exemption, each UBS QPAM will provide a Federal Register copy of the
                notice of the exemption, along with a separate summary describing the
                facts that led to the Convictions and the 2019 French Conviction (the
                Summary), which have been submitted to the Department, and a
                prominently displayed statement (the Statement) that the Convictions
                and, in the Department's view, the 2019 French Conviction, each
                separately result in a failure to meet a condition in PTE 84-14 and PTE
                2017-07, to each sponsor and beneficial owner of a Covered Plan that
                has entered into a written asset or investment management agreement
                with a UBS QPAM, or the sponsor of an investment fund in any case where
                a UBS QPAM acts as a sub-advisor to the investment fund in which such
                ERISA-covered plan and IRA invests. All Covered Plan clients that enter
                into a written asset or investment management agreement with a UBS QPAM
                after that date must receive a copy of the exemption, the Summary, and
                the Statement prior to, or contemporaneously with, the Covered Plan's
                receipt of a written asset or investment management agreement from the
                UBS QPAM. The notices may be delivered electronically (including by an
                email that has a link to the five-year exemption);
                 (l) The UBS QPAMs must comply with each condition of PTE 84-14, as
                amended, with the sole exception of the violations of Section I(g) of
                PTE 84-14 that are attributable to the Convictions and the 2019 French
                Conviction. If, during the Exemption Period, an entity within the UBS
                corporate structure is convicted of a crime described in Section I(g)
                of PTE 84-14 (other than the 2013 Conviction, 2017 Conviction, and the
                2019 French Conviction), relief in this exemption would terminate
                immediately;
                 (m)(1) UBS continues to designate a senior compliance officer (the
                Compliance Officer) who will be responsible for compliance with the
                Policies and Training requirements described herein. The Compliance
                Officer must conduct an annual review during the Exemption Period (the
                Exemption Review), to determine the adequacy and effectiveness of the
                implementation of the Policies and Training. With respect to the
                Compliance Officer, the following conditions must be met:
                 (i) The Compliance Officer must be a professional who has extensive
                experience with, and knowledge of, the regulation of financial services
                and products, including under ERISA and the Code; and
                 (ii) The Compliance Officer must have a reporting line within UBS's
                Compliance and Operational Risk Control (C&ORC) function to the Head of
                Compliance and Operational Risk Control, Asset Management. The C&ORC
                function is organizationally independent of UBS's business divisions--
                including Asset Management, the Investment Bank, and Global Wealth
                Management--and is led by the head of Group Compliance, Regulatory and
                Governance, or another appropriate member of the Group Executive Board;
                 (2) With respect to the Exemption Review, the following conditions
                must be met:
                 (i) The Exemption Review includes a review of the UBS QPAMs'
                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 C&ORC function during the previous year; the most
                recent Audit Report issued pursuant to this exemption or PTE 2019-01;
                any material change in the relevant business activities of the UBS
                QPAMs; and any change to ERISA, the Code, or regulations related to
                fiduciary duties and the prohibited transaction provisions that may be
                applicable to the activities of the UBS QPAMs;
                 (ii) The Compliance Officer prepares a written report for the
                Exemption Review (an Exemption Report) that (A) summarizes his or her
                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 on such
                recommendations;
                 (iii) In the Exemption Report, the Compliance Officer must certify
                in writing that to the best of his or her
                [[Page 8028]]
                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 Exemption Period and
                any related correction taken to date have been identified in the
                Exemption Report; and (D) the UBS QPAMs have complied with the Policies
                and Training, and/or corrected (or are correcting) any known instances
                of noncompliance in accordance with Section I(h) above;
                 (iv) The Exemption Report must be provided to appropriate corporate
                officers of UBS and each UBS QPAM to which such report relates, and to
                the head of compliance and the General Counsel (or their functional
                equivalent) of the relevant UBS QPAM; and the report must be made
                unconditionally available to the independent auditor described in
                Section I(i) above;
                 (v) The first Exemption Review, including the Compliance Officer's
                written Exemption Report, must cover the thirteen-month period
                beginning on February 20, 2020 and ending on March 19, 2021, and must
                be completed by June 19, 2021. The second Exemption Review and
                Exemption Report must cover the period beginning on March 20, 2021 and
                ending on March 19, 2022, and must be completed by June 19, 2022. The
                third Exemption Review and Exemption Report must cover the period
                beginning on March 20, 2022 and ending on March 19, 2023, and must be
                completed by June 19, 2023. The fourth Exemption Review and Exemption
                Report must cover the period beginning on March 20, 2023 and ending on
                March 19, 2024, and must be completed by June 19, 2024. The fifth
                Exemption Review and Exemption Report must cover the period beginning
                on March 20, 2024 and ending on February 20, 2025, and must be
                completed by May 20, 2025. The Exemption review undertaken pursuant to
                PTE 2019-01 must cover the period February 20, 2019 through February
                19, 2020 and be completed by May 19, 2020; \13\
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                 \13\ The Exemption Reviews for the period February 20, 2019
                through February 19, 2020 must be conducted and completed pursuant
                to the requirements of PTE 2019-01.
                ---------------------------------------------------------------------------
                 (n) UBS imposes its internal procedures, controls, and protocols on
                UBS Securities Japan to: (1) Reduce the likelihood of any recurrence of
                conduct that is the subject of the 2013 Conviction, and (2) comply in
                all material respects with the Business Improvement Order, dated
                December 16, 2011, issued by the Japanese Financial Services Authority;
                 (o) UBS complies in all material respects with the audit and
                monitoring procedures imposed on UBS by the U.S. Commodity Futures
                Trading Commission Order, dated December 19, 2012;
                 (p) Each UBS QPAM will maintain records necessary to demonstrate
                that the conditions of this exemption have been met for six years
                following the date of any transaction for which such UBS QPAM relies
                upon the relief in the exemption;
                 (q) During the Exemption Period, UBS must: (1) Immediately disclose
                to the Department any Deferred Prosecution Agreement (a DPA) or Non-
                Prosecution Agreement (an NPA) with the U.S. Department of Justice,
                entered into by UBS or any of its affiliates (as defined in Section
                VI(d) of PTE 84-14) in connection with conduct described in Section
                I(g) of PTE 84-14 or section 411 of ERISA; and (2) immediately provide
                the Department any information requested by the Department, as
                permitted by law, regarding the agreement and/or conduct and
                allegations that led to the agreement;
                 (r) Each UBS QPAM, in its agreements with, or in other written
                disclosures provided to Covered Plans, will clearly and prominently
                inform Covered Plan clients of their right to obtain a copy of the
                Policies or a description (Summary Policies) which accurately
                summarizes key components of the UBS QPAM's written Policies developed
                in connection with this exemption. If the Policies are thereafter
                changed, each Covered Plan client must receive a new disclosure within
                six months following the end of the calendar year during which the
                Policies were changed.\14\ With respect to this requirement, the
                description may be continuously maintained on a website, provided that
                such website link to the Policies or Summary Policies is clearly and
                prominently disclosed to each Covered Plan; and
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                 \14\ In the event the Applicant meets this disclosure
                requirement through Summary Policies, changes to the Policies shall
                not result in the requirement for a new disclosure unless, as a
                result of changes to the Policies, the Summary Policies are no
                longer accurate.
                ---------------------------------------------------------------------------
                 (s) A UBS QPAM will not fail to meet the terms of this exemption
                solely because a different UBS QPAM fails to satisfy a condition for
                relief described in Sections I(c), (d), (h), (i), (j), (k), (l), (p),
                or (r); or if the independent auditor described in Section I(i) fails a
                provision of the exemption other than the requirement described in
                Section I(i)(11), provided that such failure did not result from any
                actions or inactions of UBS or its affiliates.
                Section II. Definitions
                 (a) The term ``Convictions'' means the 2013 Conviction and the 2017
                Conviction. The term ``2013 Conviction'' means the judgment of
                conviction against UBS Securities Japan Co. Ltd. in case number 3:12-
                cr-00268-RNC in the U.S. District Court for the District of Connecticut
                for one count of wire fraud in violation of Title 18, United States
                Code, sections 1343 and 2 in connection with submission of YEN London
                Interbank Offered Rates and other benchmark interest rates. The term
                ``2017 Conviction'' means the judgment of conviction against UBS in
                case number 3:15-cr-00076-RNC in the U.S. District Court for the
                District of Connecticut for one count of wire fraud in violation of
                Title 18, United States Code, Sections 1343 and 2 in connection with
                UBS's submission of Yen London Interbank Offered Rates and other
                benchmark interest rates between 2001 and 2010. For all purposes under
                this exemption, ``conduct'' of any person or entity that is the
                ``subject of the Convictions'' encompasses any conduct of UBS and/or
                their personnel that is described in (i) Exhibit 3 to the Plea
                Agreement entered into between UBS and the Department of Justice
                Criminal Division, on May 20, 2015, in connection with case number
                3:15-cr-00076-RNC, and (ii) Exhibits 3 and 4 to the Plea Agreement
                entered into between UBS Securities Japan and the Department of Justice
                Criminal Division, on December 19, 2012, in connection with case number
                3:12-cr-00268-RNC;
                 (b) The term ``2019 French Conviction'' means the adverse judgment
                on February 20, 2019 against UBS and UBS France in case Number
                1105592033 in the French First Instance Court. For all purposes under
                this exemption, ``conduct'' of any person or entity that is the
                ``criminal conduct that is the subject of the 2019 French Conviction'',
                includes any conduct of UBS, its affiliates, or UBS France and/or their
                personnel that is described in any such judgment. The term ``2019
                French Conviction'' also includes a decision upholding the February 20,
                2019 judgment of the French First Instance Court;
                 (c) 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
                section 4975 of the Code (an ``IRA''), in each case, with respect to
                which a UBS QPAM relies on PTE 84-14, or with respect to which a UBS
                QPAM (or any UBS affiliate) has
                [[Page 8029]]
                expressly represented that the manager qualifies as a QPAM or relies on
                the QPAM class exemption (PTE 84-14). A Covered Plan does not include
                an ERISA-covered plan or IRA to the extent the UBS QPAM has expressly
                disclaimed reliance on QPAM status or PTE 84-14 in entering into a
                contract, arrangement, or agreement with the ERISA-covered plan or IRA.
                 (d) The term ``FX Misconduct'' means the conduct engaged in by UBS
                personnel described in Exhibit 1 of the Plea Agreement (Factual Basis
                for Breach) entered into between UBS and the U.S. Department of Justice
                Criminal Division, on May 20, 2015 in connection with Case Number 3:15-
                cr-00076-RNC filed in the U.S. District Court for the District of
                Connecticut.
                 (e) The term ``UBS QPAM'' means UBS Asset Management (Americas)
                Inc., UBS Realty Investors LLC, UBS Hedge Fund Solutions LLC, UBS
                O'Connor LLC, and any future entity within the Asset Management or the
                Global Wealth Management Americas U.S. divisions of UBS that qualifies
                as a ``qualified professional asset manager'' (as defined in Section
                VI(a) of PTE 84-14) \15\ and that relies on the relief provided by PTE
                84-14, and with respect to which UBS is an ``affiliate'' (as defined in
                Part VI(d) of PTE 84-14). The term ``UBS QPAM'' excludes UBS Securities
                Japan, the entity implicated in the criminal conduct that is the
                subject of the 2013 Conviction; UBS, the entity implicated in the
                criminal conduct that is the subject of the 2017 Conviction and
                implicated in the criminal conduct of UBS and UBS France that is the
                subject of the 2019 French Conviction; and UBS France, the entity
                implicated in the criminal conduct of UBS and UBS France that is the
                subject of the 2019 French Conviction.
                ---------------------------------------------------------------------------
                 \15\ In general terms, a QPAM is an independent fiduciary that
                is a bank, savings and loan association, insurance company, or
                investment adviser that meets certain equity or net worth
                requirements and other licensure requirements and that has
                acknowledged in a written management agreement that it is a
                fiduciary with respect to each plan that has retained the QPAM.
                ---------------------------------------------------------------------------
                 (f) The term ``UBS'' means UBS AG.
                 (g) The term ``UBS France'' means ``UBS (France) S.A.,'' a wholly-
                owned subsidiary of UBS incorporated under the laws of France.
                 (h) The term ``UBS Securities Japan'' means UBS Securities Japan
                Co. Ltd, a wholly-owned subsidiary of UBS incorporated under the laws
                of Japan.
                 (i) All references to ``the 2019 French Conviction Date'' means
                February 20, 2019;
                 (j) All references to ``the 2017 Conviction Date'' means January
                10, 2017.
                 (k) The term ``Exemption Period'' means the five-year period
                beginning on February 20, 2020 and ending on February 20, 2025;
                 (l) The term ``Plea Agreement'' means the Plea Agreement (including
                Exhibits 1 and 3 attached thereto) entered into between UBS and the
                U.S. Department of Justice Criminal Division, on May 20, 2015 in
                connection with Case Number 3:15-cr-00076-RNC filed in the U.S.
                District Court for the District of Connecticut.
                 Effective Date: This exemption will be in effect for a period of
                five years beginning on February 20, 2020.
                 Signed at Washington, DC, this 7th day of February, 2020.
                Lyssa Hall,
                Director, Office of Exemption Determinations, Employee Benefits
                Security Administration, U.S. Department of Labor.
                [FR Doc. 2020-02834 Filed 2-11-20; 8:45 am]
                 BILLING CODE 4510-29-P
                

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