Notice of Exemption Involving Credit Suisse Group AG (CSG) and Its Current and Future Affiliates, Including Credit Suisse AG (CSAG) (Collectively, Credit Suisse or the Applicant), Located in Zurich, Switzerland
| Published date | 14 November 2019 |
| Citation | 84 FR 61928 |
| Record Number | 2019-24750 |
| Section | Notices |
| Court | Employee Benefits Security Administration,Labor Department |
Federal Register, Volume 84 Issue 220 (Thursday, November 14, 2019)
[Federal Register Volume 84, Number 220 (Thursday, November 14, 2019)]
[Notices]
[Pages 61928-61940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24750]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2019-07; Exemption Application No. D-
11962]
Notice of Exemption Involving Credit Suisse Group AG (CSG) and
Its Current and Future Affiliates, Including Credit Suisse AG (CSAG)
(Collectively, Credit Suisse or the Applicant), Located in Zurich,
Switzerland
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Notice of individual exemption.
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SUMMARY: This document contains an exemption issued by the Department
of Labor (the Department) from certain of the prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code).
This notice is for the following granted exemption: 2019-07, Credit
Suisse AG, D-11962.
DATES: This five-year exemption will be in effect for five years
beginning on the expiration of PTE 2015-14.
FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the
Department, telephone (202) 693-8567. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: A notice was published in the Federal
Register of the pendency before the Department of a proposal to grant
this exemption. The notice set forth a summary of facts and
representations contained in the application for exemption and referred
interested persons to the application for a complete statement of the
facts and representations. The application has been available for
public inspection at the Department in Washington, DC. The notice also
invited interested persons to submit comments on the requested
exemption to the Department. In addition, the notice stated that any
interested person might submit a written request that a public hearing
be held (where appropriate). The applicant has represented that it has
complied with the requirements of the notification to interested
persons. One request for a hearing was received by the Department.
Public comments were received by the Department as described in the
granted exemption.
The notice of proposed exemption was issued and the exemption is
being granted solely by the Department because, effective December 31,
1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1
(1996), transferred the authority of the Secretary of the Treasury to
issue exemptions of the type proposed to the Secretary of Labor.
Discussion
On July 16, 2019, the Department of Labor (the Department)
published a notice of proposed exemption in the Federal Register at 84
FR 33966, for certain entities with specified relationships to CSAG (CS
Affiliated QPAMs) to continue to rely upon the relief provided by PTE
84-14 for a period of five years,\1\ notwithstanding CSAG's criminal
conviction, as described herein. The Department is granting this
exemption in order to ensure that Covered Plans \2\ whose
[[Page 61929]]
assets are managed by a CS Affiliated QPAM may continue to benefit from
the relief provided by PTE 84-14. The exemption is effective from
November 21, 2019 through November 20, 2024 (the Exemption Period).
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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.
\2\ The term ``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 CS
Affiliated QPAM relies on PTE 84-14, or with respect to which a CS
Affiliated QPAM (or any CS 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 CS Affiliated 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.
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No relief from a violation of any other law is provided by this
exemption, including any criminal conviction described in the proposed
exemption, as clarified herein. Furthermore, the Department cautions
that the relief in this exemption will terminate immediately if, among
other things, an entity within the Credit Suisse corporate structure is
convicted of a crime described in Section I(g) of PTE 84-14 (other than
the Conviction) during the Exemption Period. The terms of this
exemption have been specifically designed to promote conduct that
adheres to basic fiduciary standards under ERISA and the Code. The
exemption also aims to ensure that plans and IRAs can terminate
relationships in an orderly and cost effective fashion in the event a
plan or IRA fiduciary determines it is prudent for the plan or IRA to
sever 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 August 30, 2019. The Department received three comment
letters in response to the proposed exemption.\3\ One letter did not
identify substantive issues. Credit Suisse commented, and requested
numerous revisions to the proposed exemption. Three individuals (Dr.
Paul Morjanoff, James S. Henry and Andreas Frank) joined together in
one letter (the Morjanoff Letter).\4\ In the Morjanoff Letter, the
individuals: Requested a hearing; commented on Credit Suisse's letter;
and requested revisions to the proposed exemption.\5\
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\3\ The letters are summarized below. The commenters' letters
are available in their entirety by contacting 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, and referencing Application No. D-11962.
\4\ The letter included a statement that, ``Mr. Bartlett Naylor,
Senior Financial Policy Advocate, Public Citizen's Congress Watch,
also formally requests a hearing.'' However, Mr. Naylor did not
submit any information that validates or supports this request.
\5\ The Department requested that Credit Suisse respond, on the
record, to the Morjanoff Letter. Credit Suisse's response may be
requested through the Public Disclosure Office in the Employee
Benefits Security Administration, Room N-1515, U.S. Department of
Labor, 200 Constitution Avenue NW, Washington, DC 20210, by
referencing Application No. D-11962.
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After considering these submissions, the Department has determined
to grant the proposed exemption, with revisions, as described below.
I. The Credit Suisse Comment Letter
Credit Suisse Comment 1. Credit Suisse requested that the
Department reconsider its decision to impose the exemption's annual
audit requirement. Credit Suisse contends: (1) The conviction occurred
outside of the CS Affiliated QPAMs, in an entity that is separate from
the asset management business; (2) the audit proposed for the second
five-year term of relief is more burdensome than the audit imposed
under the existing exemption for the first five-year term; and (3) the
exemption's Compliance Officer requirement is a reasonable substitute
for a full audit. Credit Suisse represents that it has demonstrated a
strong culture of compliance and commitment to addressing the
Department's articulated concerns.
Department's Response: The Department is not eliminating the
exemption's audit requirement. CSAG, which is the corporate parent of
the CS Affiliated QPAMs, knowingly and willfully engaged in serious,
substantial, pervasive and decades-long criminal misconduct. The audits
required by this exemption are structured to ensure that CS Affiliated
QPAMs remain insulated from CSAG and the criminal misconduct that gave
rise to the Conviction. Each future annual audit is essential to the
Department's determination that, prospectively, this exemption will be
in the interest of, and protective of, Covered Plans, and will be
administratively feasible, as required by Section 408(a) of ERISA.
Credit Suisse Comment 2. Credit Suisse requests that, if the audit
requirement is not eliminated, the Department revise the certification
process for an Audit Report's addendum. In this regard, Section I(i)(5)
of the exemption provides, in pertinent part, that the CS Affiliated
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 CS Affiliated
QPAM. Any action taken or the plan of action to be taken by the
respective CS Affiliated 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).
Section I(i)(7) of the exemption requires, in relevant part, that a
senior executive officer of the CS Affiliated QPAM certify in writing,
under penalty of perjury, that the CS Affiliated QPAM addressed,
corrected, or remedied any noncompliance and inadequacy, or has an
appropriate written plan to address any inadequacy regarding the
Policies and Training identified in the Audit Report.
Credit Suisse states that ``it would be preferable'' to require
that the addendum be completed as part of the senior executive officer
certification process, rather than prior to it. According to Credit
Suisse, requiring completion of addenda as part of the certification
process would allow for meaningful, comprehensive input by the
certifying officer.
Department's Response: The Department is not making the requested
modification. The certification of a completed addendum by a CS
executive officer ensures that a senior, knowledgeable corporate
officer with relevant experience has reviewed the actual actions taken,
or the actual plans of action that will be taken, by the CS Affiliated
QPAM, to address any instances of the CS Affiliated QPAM's
noncompliance or inadequacy. The Department is not persuaded that
certification of actions, or plans of action, that are not finalized
provides meaningful protection to Covered Plans. Further, nothing in
the exemption precludes a certifying officer from providing meaningful,
comprehensive input prior to the finalization of the addendum.
Credit Suisse Comment 3. Section I(i)(8) provides, in part: ``The
Risk Committee, the Audit Committee, and CSAG's Board of Directors are
provided a copy of each Audit Report. . . and the head of Compliance
and the General Counsel must review the Audit Report for each CS
Affiliated QPAM and must certify in writing, under penalty of perjury,
that such officer has reviewed each Audit Report . . . .''
First, Credit Suisse states that the requirement that the Audit
Report be provided to the Risk Committee, Audit Committee, and Board of
Directors is an escalation compared to not only the
[[Page 61930]]
existing exemption but to prior exemptions for similarly situated
applicants. PTE 2015-14 contains no requirement to provide the audit
report to a committee of the Board of Directors. Credit Suisse notes
that the Department granted exemptions arising from criminal
convictions of entities that conspired to manipulate the price of U.S.
dollars and euros exchanged in the foreign currency exchange (FX) spot
market (the FX exemptions),\6\ and the Audit Reports in those
exemptions were required to be provided to either the Risk Committee or
the Audit Committee of the entity's Board of Directors (depending on
their structure), not both, and not to the full Board.
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\6\ Citicorp, JPMorgan Chase & Co. and Barclays PLC were
criminally convicted for conspiring to manipulate the price of U.S.
dollars and euros exchanged in the foreign currency exchange (FX)
spot market (the FX convictions). QPAMs related to those entities
received five year exemptions (the FX exemptions) allowing them to
continue to rely on the relief provided by PTE 84-14,
notwithstanding the FX convictions. See PTE 2017-05 (Citicorp), PTE
2017-03 (JPMorgan Chase & Co.) and PTE 2017-06 (Barclays).
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Second, Credit Suisse requests that the condition be revised to
require that an executive officer of Credit Suisse AG must review the
Audit Report for each CS Affiliated QPAM and must certify in writing,
under penalty of perjury, that such officer has reviewed each Audit
Report.
Department's Response: The Department is not persuaded that the
conditions in this exemption must mirror the conditions in the FX
exemptions. First, the Department's individual exemptions and the
conditions therein are not precedential. Further, the Department does
not view all criminal convictions as analogous when determining whether
to grant an individual exemption and how best to protect affected plans
and IRAs. Each applicant for an exemption must demonstrate, and the
Department must affirmatively find, on the record, that the requested
relief is in the interest of, and protective of, affected plans and
IRAs, and administratively feasible. Finally, the Department will not
fail to impose a condition it believes will enhance the protection of
affected plans and IRAs, merely because an earlier exemption does not
contain that condition.
It is the Department's understanding that the primary function of
Credit Suisse's Risk Committee is to assist the Credit Suisse Group AG
Board of Directors in fulfilling its risk management responsibilities
as defined by applicable law and regulations as well as Credit Suisse
Group AG's articles of association and internal regulations.
Additionally, it is the Department's understanding that the primary
function of Credit Suisse's Audit Committee is to assist the Board of
Directors in its oversight role by monitoring and assessing the
financial statements of Credit Suisse. Given those roles, the
Department believes that receipt of the Audit Report by either the Risk
Committee or the Audit Committee will provide a meaningful protection
to Covered Plans. Consistent with this requirement, the exemption
mandates that a senior executive officer of the Risk or Audit Committee
that received the Audit Report must review the Audit Report, and must
certify in writing, under penalty of perjury, that the officer has
reviewed the Audit Report.
Credit Suisse Comment 4. Section I(i)(9) requires, in part, that
each CS Affiliated QPAM must provide its certified Audit Report to the
Department no more than 30 days following the completion of the Audit
Report. Credit Suisse requests that the time for delivering the audit
report to the Department be extended from 30 days to 45 days.
Department's Response: The Department has revised Section I(i)(9)
as requested.
Credit Suisse Comment 5. Credit Suisse requests that relief to the
CS Affiliated QPAMs and to Covered Plans not be conditioned upon the
independent auditor's cooperation with the Department or disclosure of
work papers. In this regard, Section I(i)(11) provides, in part: ``The
auditor must provide the Department, upon request, for inspection and
review, access to all of the work papers created and used in connection
with the audit, provided the access and inspection are otherwise
permitted by law. . . .'' And Section I(q) provides, in part: ``A CS
Affiliated QPAM will not fail to meet the terms of this five-year
exemption solely because a different CS Affiliated QPAM fails to
satisfy a condition for relief described in Sections I(c), (d), (h),
(i), (j), (k), (l), (n), and (p); 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 CSAG or its
affiliates.''
Department's Response: The Department is not making the requested
revision. The Department expects the CS Affiliated QPAMs and the
Independent Auditor will make every effort to ensure that their
respective responsibilities under the exemption are fulfilled, and to
contact the Office of Exemption Determinations in a timely manner any
time guidance is needed. The Department is not aware of any instance
where an independent auditor has failed to meet its responsibilities
under a QPAM Section I(g) individual exemption.
Credit Suisse Comment 6. Section I(a) of the proposed exemption
provides, in part: ``For purposes of this exemption, including
paragraph (c) below, ``participate in'' refers not only to active
participation in the criminal conduct of CSAG that is the subject of
the Conviction, but also to knowing approval of the criminal conduct,
or knowledge of such conduct without taking active steps to prohibit
such conduct, including reporting the conduct to such individual's
supervisors, and to the Board of Directors. In this regard, unless the
individual reasonably believed that his or her initial report was given
an appropriate response within a reasonable time, the individual must
further report the criminal conduct to the person or persons the
individual reasonably expected would carry out the appropriate
response.''
Credit Suisse requests that this condition be replaced with the
language in the FX exemptions. No prior exemption has contained a
requirement that an individual determine whether his or her initial
report of criminal conduct was appropriately addressed, and Credit
Suisse submits that this requirement is not necessary to protect
Covered Plans, and the requirement is inherently problematic. According
to Credit Suisse, instead of reflecting a state of affairs that existed
at the time of the criminal conduct, the condition appears to be
prospective in that it requires further action by any individual with
knowledge of the criminal conduct. Credit Suisse states that even the
parallel conditions in the exemptions granted to BNP Paribas in May
2018 and to UBS in February 2019, both for third convictions, applied
only to the criminal conduct at issue and did not contain a prospective
component. Credit Suisse performed the diligence required by the
Department under the existing exemption. Credit Suisse states that the
requirement is unjust and, with the significant passage of time,
potentially impossible, to now require the investigation and diligence
required by this provision.
Credit Suisse additionally argues that the condition as written
involves a subjective assessment of the state of mind of the reporting
individual at the time of the criminal conduct. According to Credit
Suisse, this analysis requires the Applicant to speculate about what an
individual may have been thinking, which is nearly impossible to comply
[[Page 61931]]
with or confirm, especially five years removed from the criminal
conduct.
The applicant also complains that the term ``reasonably'' is used
three times and is not defined, resulting in a further lack of clarity
as to whether and how this condition could be satisfied. Credit Suisse
submits that this condition is not practically enforceable and that
there is no need to deviate from the objective conditions used in the
FX exemptions.
Department's Response: The Department is revising the exemption in
part in response to the Credit Suisse request. The condition, as
written, is consistent with an essential premise of the QPAM class
exemption: That the QPAM, and those persons and entities that control
the QPAM, act with integrity. The condition, as written, is also
consistent with representations by Credit Suisse: That the criminal
misconduct did not occur within any CS Affiliated QPAM. The Department
carefully considered those representations when structuring the
protective conditions of PTE 2015-14 and this exemption. The Department
expects that each CS Affiliated QPAM will use every effort to ensure
that this condition is met throughout the duration of the exemption.
The Department is revising the condition by removing the last sentence
of Section I(a) beginning with ``In this regard . . .'' as requested by
Credit Suisse.
Credit Suisse Comment 7. Section I(d) of the proposed exemption
provides, in part: At all times during the Exemption Period, a CS
Affiliated QPAM will not use its authority or influence to direct an
``investment fund'' (as defined in Section VI(b) of PTE 84-14) that is
subject to ERISA or the Code and managed by such CS Affiliated QPAM
with respect to one or more Covered Plans, to enter into any
transaction with CSAG or to engage CSAG 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. A Credit Suisse Affiliated QPAM will not fail this
condition solely because:
(1) A CSAG affiliate serves as a local sub-custodian that is
selected by an unaffiliated global custodian that, in turn, is selected
by someone other than a CS Affiliated QPAM or CS Related QPAM;
(2) CSAG provides only necessary, non-investment, nonfiduciary
services that support the operations of CS Affiliated QPAMs, at the CS
Affiliated QPAM's own expense, and the Covered Plan is not required to
pay any additional fee beyond its agreed-to asset management fee. This
exception does not permit CSAG or its branches to provide any service
to an investment fund managed by a CS Affiliated QPAM or CS Related
QPAM; or
(3) CSAG employees are double-hatted, seconded, supervised, or
subject to the control of a CS Affiliated QPAM.
First, regarding Section I(d)(1), Credit Suisse states: ``the
formulation here is not practically workable and must be revised.
Although Section I(d)(1) allows a CSAG affiliate to serve as a local
sub-custodian, this condition does not benefit the Covered Plan clients
of Credit Suisse because only the Bank and its branches--not an
affiliate--currently serve as local sub-custodians for the four largest
plan global custodians. While in some markets, it might be possible for
a global custodian to select an affiliate or subsidiary of a bank, that
situation is very rare.''
Department's Response: The Department is not revising Section
I(d)(1). The criminal wrong-doing that is the subject of the Conviction
was committed by CSAG, and the charging documents cite participation by
CSAG subsidiaries. In this regard, as noted in the proposed exemption,
on May 19, 2014, in the U.S. District Court for the Eastern District of
Virginia (the District Court),\7\ the U.S. Department of Justice
charged CSAG with, and CSAG pled guilty to, one criminal count of
conspiracy to violate Code section 7206(2).\8\ The charging documents
cited Credit Suisse and its subsidiaries, Credit Suisse Fides and
Clariden Leu Ltd., for willfully aiding, assisting in, procuring,
counseling, and advising the preparation and presentation of false
income tax returns and other documents to the Internal Revenue Service
of the Treasury Department (IRS), for decades, prior to and through
approximately 2009. On May 19, 2014, pursuant to a plea agreement, CSAG
entered a guilty plea for assisting U.S. citizens in federal income tax
evasion. On November 21, 2014, the District Court entered a judgment of
conviction against CSAG.
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\7\ United States of America v. Credit Suisse AG, Case Number
1:14-cr-188-RBS.
\8\ Section 7206(2) of the Code prohibits willfully aiding,
assisting, procuring, counseling, or advising the preparation or
presentation of false income tax returns. Section 371 of Title 18 of
the United States Code generally prohibits two or more persons from
conspiring either to commit any offense against the United States or
to defraud the United States.
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Credit Suisse has not adequately demonstrated that permitting CSAG
and its subsidiaries and branches to participate in the sub-custody
transactions described in Section I(d)(1) of the exemption would be in
the interest of, and protective of, affected Covered Plans.
Second, regarding Section I(d)(2), Credit Suisse states: The
condition should be clarified to permit CSAG to provide support
services to the CS Affiliated QPAMs regardless of whether such support
also benefits an investment fund managed by a QPAM, as long as the
Covered Plan pays no additional fee. According to Credit Suisse, the
condition, as written, creates confusion in any situation where CSAG
may provide services to the CS Affiliated QPAMs because of the
prohibition on services to investment funds managed by the QPAMs.
Department's Response: The Department is not revising the
condition. Credit Suisse has not demonstrated that the condition
creates confusion. In the Department's view, the condition is clear and
unambiguous: CSAG may only provide necessary, non-investment, non-
fiduciary services that support the operations of CS Affiliated QPAMs,
at the CS Affiliated QPAM's own expense. Further, the Department notes
that if it is unclear whether a particular arrangement or situation
satisfies a term in the exemption, the CS Affiliated QPAM should
resolve the ambiguity in light of the exemption's protective purposes.
To the extent additional clarification is necessary, persons or
entities should contact EBSA's Office of Exemption Determinations, at
202-693-8540.
Credit Suisse Comment 8. Section I(l) of the proposed exemption
provides, in part: ``The CS Affiliated QPAM must comply with each
condition of PTE 84-14, as amended, with the sole exception of the
violation of Section I(g) of PTE 84-14 that is attributable to the
Conviction. If, during the Exemption Period, an entity within the
Credit Suisse corporate structure is convicted of a crime described in
Section I(g) of PTE 84-14, (other than the Conviction), including a
conviction in a foreign jurisdiction for a crime described in Section
I(g) of PTE 84-14, relief in this exemption would terminate
immediately.''
Credit Suisse requests that the Department ``reconsider its
additional condition that a conviction in a foreign jurisdiction
automatically would disqualify Credit Suisse from relief under Section
I(g) of PTE 84-14 and under this individual exemption, as stated in
Section I(l).'' Credit Suisse submits that, should the Department
include the condition in Section I(l) for Credit Suisse and later
reconsider its view, the CS Affiliated QPAMs would be treated
differently from similarly
[[Page 61932]]
situated applicants and the regulated community as a whole.
Department's Response: The Department has removed the condition's
reference to foreign convictions. This revision should not be
interpreted, however, as the Department's affirmation that a violation
of Section I(g) of PTE 84-14 does not occur when a person or entity is
convicted in a foreign jurisdiction for a crime described in Section
I(g) of PTE 84-14.
Credit Suisse Comment 9. Credit Suisse requests three revisions to
Sections I(a) and I(b) of the proposed exemption. Section I(a)
provides, in relevant part: ``The CS Affiliated QPAMs (including their
officers, directors, agents other than CSAG, employees of such QPAMs,
and CSAG employees described in subparagraph (d) above) did not know
of, have reason to know of, or participate in the criminal conduct of
CSAG that is the subject of the Conviction . . ''
Section I(b) of the proposed exemption provides: ``The CS
Affiliated QPAMs and the CS Related QPAMs (including their officers,
directors, agents other than CSAG, employees of such QPAMs, and CSAG
employees described in subparagraph (d) above) did not receive direct
compensation, or knowingly receive indirect compensation, in connection
with the criminal conduct of CSAG that is the subject of the
Conviction.''
First, Credit Suisse requests that the Department qualify that the
conditions apply only to employees of the CS Affiliated and Related
QPAMs who had responsibility for or exercised authority in connection
with the management of plan assets. Credit Suisse states that
comparable sections in the FX exemptions covered only QPAM employees
``who had responsibility for, or exercised authority in connection with
the management of plan assets.''
Second, Credit Suisse states that the phrase ``or knowingly receive
indirect compensation'' implicates the same problems as the definition
of ``participated in,'' described above. Credit Suisse states that it
performed the diligence required by the Department under the existing
exemption, and it is potentially impossible, given the passage of time,
to perform the investigation and diligence required by this provision.
Third, Credit Suisse requests that the Department clarify that
references to CSAG employees described in subparagraph (d) of the
proposed exemption, is intended to refer only to subparagraph (d)(3).
Department's Response: The Department is not making the first two
requested revisions. The FX convictions involve criminal misconduct
that occurred within non-asset management divisions of certain entities
that acted as QPAMs. Consistent with those facts, Section I(a) of each
FX exemption precludes relief if a QPAM's asset management division
employs an individual who knew of the misconduct, had reason to know of
the misconduct, or who participated in the relevant FX criminal
misconduct. Also consistent with those facts, Section I(b) of each FX
exemption precludes relief if an employee in a QPAM's asset management
division received direct compensation or knowingly received indirect
compensation from participating in the criminal conduct that gave rise
to the relevant FX conviction.
It is the Department's understanding, consistent with Credit
Suisse's representations, that the CSAG Conviction arose from criminal
misconduct that occurred outside any CS Affiliated QPAM. No CS
Affiliated QPAM employee (asset management or otherwise) knew of, had
reason to know of, or participated in, the criminal misconduct that
gave rise to the CSAG Conviction. Section I(a) and Section I(b) of the
exemption are structured consistent with both the record and with
Credit Suisse's representations. Credit Suisse has not demonstrated
that it would be in the interest of Covered Plans if individuals who
participated in, or were compensated from, the CSAG criminal misconduct
were permitted to work in a non-asset management division of a CS
Affiliated QPAM.
Regarding Credit Suisse's comment regarding the difficulty a CS
Affiliated QPAM may have in complying with these conditions, the
Department expects that each CS Affiliated QPAM will use every effort
to ensure that the conditions are complied with throughout the duration
of the exemption.
Credit Suisse's third requested revision is consistent with the
Department's intent, and the Department has made the requested
revision.
Credit Suisse Comment 10. Section I(f) provides: ``A CS Affiliated
QPAM or a CS Related QPAM did not exercise authority over the assets of
any plan subject to Part 4 of Title I of ERISA (an ERISA-covered plan)
or section 4975 of the Code (an IRA) in a manner that it knew or should
have known would: further criminal conduct that is the subject of the
Conviction; or cause the CS Affiliated QPAM or CS Related QPAM, its
affiliates, or related parties to directly or indirectly profit from
the criminal conduct that is the subject of the Conviction.''
Credit Suisse requests that the term ``related parties'' be removed
from this condition. Credit Suisse states that the term is undefined
and should be removed.
For clarity, the Department is removing the term ``related
parties.''
Credit Suisse Comment 11. Section I(h)(1) provides, in pertinent
part: ``Each CS Affiliated QPAM must continue to maintain, adjust (to
the extent necessary) or immediately implement and follow written
policies and procedures (the Policies). The Policies must require and
be reasonably designed to ensure that:
(i) The asset management decisions of the CS Affiliated QPAMs are
conducted independently of CSAG's corporate management and business
activities, and without considering any fee a CS-related local sub-
custodian may receive from those decisions. This condition does not
preclude a CS Affiliated QPAM from receiving publicly available
research and other widely available information from a CSAG affiliate;
* * * * *
(vi) The CS Affiliated QPAM complies with the terms of this five-
year exemption, and CSAG complies with the terms of Section I(d)(2).''
First, Credit Suisse states that the phrase ``or immediately
implement'' should be deleted. ``Immediately'' is not defined, and in
Credit Suisse's view, it is unrealistic for the CS Affiliated QPAMs to
``immediately implement'' the policies required under the exemption.
Credit Suisse requests that the Department revise the condition, such
that each CS Affiliated QPAM must continue to maintain and follow or,
within six (6) months of the effective date of this exemption, adjust
(to the extent necessary) and implement written policies.
Department's Response: Credit Suisse has not demonstrated or
supported its contention that it would be ``unrealistic'' for the CS
Affiliated QPAMs to ``immediately implement'' the policies required by
the exemption. However, the Department believes that Covered Plans
would be adequately protected if the CS Affiliated QPAMs continue to
follow and maintain policies the Policies required by PTE 2015-14 for
six months following the effective date of this exemption (i.e., until
May 20, 2020). Notwithstanding this, the Department notes that the
policies required by PTE 2015-14 do not cover transactions or
arrangements described in Section I(d) of this exemption. Therefore,
the Department is
[[Page 61933]]
revising Section I(h)(1), which now begins as follows: Prior to May 21,
2020, a CS Affiliated QPAM may continue to maintain, follow and
implement the policies described in Section I(h)(1) of PTE 2015-14.
Otherwise, each CS Affiliated QPAM must maintain, adjust (to the extent
necessary), implement, and follow the written policies and procedures
described below (the Policies). Notwithstanding the preceding sentence,
a CS Affiliated QPAM may not engage in any transaction or arrangement
described in Section I(d)(1) through (3) of this exemption prior to the
date the Policies have been developed, implemented and followed.
Second, Credit Suisse notes that Section I(h)(1)(i) includes the
additional prohibition that asset management decisions are made
``without considering any fee a CS-related local sub-custodian may
receive from those decisions.'' Credit Suisse states that the scope of
this condition is unclear by virtue of the ambiguous word
``considering. . .'' Credit Suisse requests that the Department
substitute the following language: ``without putting the fact of any
fee a CS-related local sub-custodian may receive before the interest of
the plan client.''
Department's Response: The Department is not revising the
condition. Credit Suisse has not demonstrated why the term
``considering'' is ambiguous. As written, the condition makes it clear
that the Policies must require and be reasonably designed to ensure
that the CS Affiliated QPAM's asset management decisions do not take
into account the fee a CS-related local sub-custodian may receive from
those decisions.
Third, Credit Suisse states that the second clause of Section
I(h)(1)(vi) ``is impracticable for the reasons [Credit Suisse raised]
in connection with Section I(d)(2).''
Department's Response: The Department is not revising the second
clause of Section I(h)(1)(vi) for the same reasons the Department
expressed in response to Credit Suisse's request to revise Section
I(d)(2).
Credit Suisse Comment 12. Section I(h)(2) provides: ``Any violation
of, or failure to comply with, an item in subparagraphs (h)(1)(ii)
through (vi) of this section, 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
discovery of such failure to so correct, in writing, to appropriate
corporate officers, the head of Compliance and the General Counsel (or
their functional equivalent) of the relevant CS Affiliated QPAM, and
the independent auditor responsible for reviewing compliance with the
Policies. A CS Affiliated 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 QPAM
reasonably should have known of the noncompliance (whichever is
earlier), and provided that it adheres to the reporting requirements
set forth in this paragraph (2).''
Credit Suisse states that the notification requirements of this
condition are unclear by virtue of the phrase ``appropriate corporate
officers.'' Credit Suisse suggests instead that subsection (h)(2) read
as follows: ``Any violation of, or failure to comply with, an item in
subparagraphs (h)(1)(ii) through (vi) of this section, 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 discovery of such failure to so correct, in writing,
to the head of Compliance and the General Counsel (or their functional
equivalent) of the relevant CS Affiliated QPAM, and the independent
auditor responsible for reviewing compliance with the Policies. A CS
Affiliated 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 QPAM reasonably
should have known of the noncompliance (whichever is earlier), or
provided that it adheres to the reporting requirements set forth in
this paragraph (2), if applicable.''
Department's Response: The Department is removing the condition's
reference to ``appropriate corporate officers.'' However, the
Department is not making Credit Suisse's remaining requested revisions.
Credit Suisse has not demonstrated why a CS Affiliated QPAM should not
be treated as having failed to develop, implement, maintain or follow
the Policies merely because it adheres to the condition's reporting
requirements.
Credit Suisse Comment 13. Section I(h)(3) provides, in part: ``Each
CS Affiliated QPAM must maintain, adjust (to the extent necessary), and
implement a program of training (the Training), conducted at least
annually, for all relevant CS Affiliated QPAM asset/portfolio
management, trading, legal, compliance, and internal audit personnel.
The Training must:
* * * * *
(ii) Be conducted by a professional who has been prudently selected
and who has appropriate technical training and proficiency with ERISA
and the Code.''
Credit Suisse requests confirmation that the training may be
conducted electronically or via a website. In addition, Credit Suisse
requests a period of six (6) months from the effective date of the
exemption to adjust and implement training as necessary.
Department's Response: The Department declines to incorporate the
Applicant's requested language regarding the use of electronic or web-
based methods in conducting the Training. Further, the training
required by this exemption is substantially similar to the training
required by PTE 2015-14, and Credit Suisse has not demonstrated the
need to delay the training required by this exemption for six months.
Given the importance of this condition, the Department is not revising
the condition to allow the six month adjustment/implementation period
sought by Credit Suisse.
Credit Suisse Comment 14. Section I(k)(1) provides: ``Each CS
Affiliated QPAM provides a notice of the five-year exemption, along
with a separate summary describing the facts that led to the Conviction
(the Summary), which have been submitted to the Department, and a
prominently displayed statement (the Statement) that the Conviction
results in a failure to meet a condition in PTE 84-14, to each sponsor
and beneficial owner of a Covered Plan that entered into a written
asset or investment management agreement with a CS Affiliated QPAM, or
the sponsor of an investment fund in any case where a CS Affiliated
QPAM acts as a sub-adviser to the investment fund in which such ERISA-
covered plan and IRA invests. The notice, Summary and Statement must be
provided prior to, or contemporaneously with, the client's receipt of a
written asset management agreement from the CS Affiliated QPAM. If this
five-year exemption is granted, the clients must receive a Federal
Register copy of the notice of final five-year exemption within sixty
(60) days of its publication in the Federal Register. The notice may be
delivered electronically (including by an email that has a link to the
five-year exemption).''
Credit Suisse requests that the sixty-day period to provide notice
of the final
[[Page 61934]]
exemption run from the effective date, rather than the date of
publication in the Federal Register.
Department's Response. The Department has revised the condition as
requested.
Credit Suisse Comment 15. Section I(m)(1) provides:
``By May 20, 2020, CSAG designates 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 for each twelve month period,
beginning on November 21, 2019, (the Annual 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:
* * * * *
(ii) The Compliance Officer must have a direct reporting line to
the highest ranking corporate officer in charge of compliance for asset
management.''
Credit Suisse requests that the condition be changed to require a
CS Affiliated QPAM, rather than the parent company, to designate the
senior compliance officer. In addition, Credit Suisse requests that the
Department clarify that each relevant line of business may designate
its own compliance officer. Finally, Credit Suisse requests
clarification that the designated compliance officer report to (or be)
the highest ranking corporate officer in charge of compliance for the
CS Affiliated QPAM.
Department's Response: The Department is making the requested
revisions.
Credit Suisse Technical Corrections Request
In addition to the substantive comments above, Credit Suisse
requested that certain technical clarifications be made to the proposed
exemption. The Department's responses are described below.
Technical Correction Request 1. Section I(h)(1)(iv) provides: ``Any
filings or statements made by the CS Affiliated QPAM to regulators,
including but not limited to, the Department of Labor, 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 . . . .''
Credit Suisse requests that the Department strike the phrase ``in
relation to Covered Plans'' in Section (I)(h)(1)(iv). Section
(I)(h)(1)(v) includes ``communications with such regulators with
respect to Covered Plans,'' which encompasses all communications that
would potentially be covered by Section I(h)(1)(iv). Because a similar
requirement is included in both subsections, the assumption is that a
different meaning is intended.
Department's Response: The Department is not making the requested
revision. The phrase ``in relation to Covered Plans'' is sufficiently
clear such that the requested revision is not warranted.
Technical Correction Request 2. Section I(i)(5)(i) provides, in
part, that ``the Audit Report must include the auditor's specific
determinations regarding the adequacy of the CS Affiliated QPAM's
Policies and Training; the CS Affiliated QPAM's compliance with the
Policies and Training; the need, if any, to strengthen such Policies
and Training; and any instance of the respective CS Affiliated QPAM's
noncompliance with the written Policies and Training described in
Section I(h) above. The CS Affiliated QPAMs must promptly address any
noncompliance. The CS Affiliated 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 CS Affiliated QPAM.''
Credit Suisse requests that the requirement in Section I(i)(5)(i)
to ``promptly'' address any noncompliance be revised to be ``as soon as
reasonably possible.'' This would align the procedure with the
provisions for addressing noncompliance relating to the policies, set
forth in Section I(h)(2), which require action ``as soon as reasonably
possible.''
Department's Response: The Department is not making the requested
revision. The term ``promptly'' is consistent with the Department's
view that addressing any noncompliance must be an important and high
priority for a CS Affiliated QPAM.
Technical Correction Request 3. Section I(i)(7) provides, in part:
``With respect to each Audit Report, the General Counsel, or one of the
three most senior executive officers of the CS Affiliated QPAMs to
which the Audit Report applies, must certify in writing, under penalty
of perjury, that the officer has reviewed the Audit Report and this
five-year exemption; and that to the best of such officer's knowledge
at the time the CS Affiliated QPAM addressed, corrected, or remedied
any noncompliance and inadequacy or has an appropriate written plan to
address any inadequacy regarding the Policies and Training identified
in the Audit Report.''
Credit Suisse requests that the Department replace ``General
Counsel'' in Section I(i)(7) with ``general counsel,'' and clarify that
the certification of the Audit Report may come from the respective CS
Affiliated QPAM's general counsel or one of its three most senior
officers.
Department's Response: Given that the criminal misconduct that gave
rise to the CSAG Conviction did not occur at any CS Affiliated QPAM,
the Department has replaced ``General Counsel'' with ``general
counsel.'' The condition is otherwise clear and reflects the
Department's intent as to who must certify the Audit Report.
Technical Correction Request 4. Section I(i)(12) provides: ``CSG
must notify the Department of a change in the independent auditor no
later than two (2) months after the engagement of a substitute or
subsequent auditor and must provide an explanation for the substitution
or change including a description of any material disputes between the
terminated auditor and CSAG.''
Credit Suisse requests that the reference to ``CSG'' in Section
I(i)(12) be revised to read, ``CSAG and/or the CS Affiliated QPAMs.''
Department's Response: The Department has revised the exemption
consistent with this request.
II. The Morjanoff Letter
a. The Individuals' Hearing Request: The three individuals that
submitted the Morjanoff Letter stated that ``it is impractical to
present all the necessary evidence as comments, but it can be presented
at a hearing. Briefly, the reasons are:
1. Recent investigations and court decisions show that CS provided
false information for the first exemption.
2. It has declined to correct this false information since then.
3. CS lodged their comment on the last day and was not publicly
visible until after public comments had closed.
4. That CS comment requested a relaxation of waiver conditions
based on highly dubious assumptions.
5. In essence, this would tend to recreate conditions which could
facilitate illegal activity based on the same general scheme as
facilitated the criminal activity for which it was convicted.
6. That scheme was based on having a set of `ineffective rules &
policies' for appearances while `inciting' staff to
[[Page 61935]]
break those `rules & policies' for the bank's illegal profit.
7. Quasi `third parties' were created which pretended to be
`external' to the bank, but in fact operated as if they were a part of
the bank.
8. Because thousands of bank employees became accustomed to such
extreme double standards, special remediation is required.
9. The public have a right and an urgent need to respond to CS's
proposals.
10. Since comments have closed, that would have to be at a public
hearing.
11. The sophistication of the bank's deceptions go beyond what can
be reasonably expected of the DOL or pension funds to adequately
discern.
12. As further proof of the bank's absence of seriousness in
correcting its illegal activities, we note that it continues to refuse
to respond to formal notifications of crime in the bank sent to top
management.
13. A complete analysis of the flaws in CS's submissions is beyond
the scope of a comment.''
The individuals stated further, ``A public hearing is essential:
CS's submission contains false statements, omissions & half-truths
while the DOL can't be expected to have the expertise to see through
CS's schemes.''
The individuals attached numerous links to recent court cases and
other sources. The individuals added, ``The matters raised are not
merely matters of law and the factual issues identified are too complex
to be adequately explored through the submission of evidence in written
(including electronic) form.'' The individuals concluded, ``[s]ince the
`CS Public Hearing' was held on January 15, 2015, a mass of new
evidence has become publicly available which dramatically changes the
context of the application. Had this knowledge been available
previously, it is likely that the previous application would have
either been rejected or the waiver substantially modified. Broadly
speaking, CS would have known these facts and their non-disclosure
represents a serious lack of candour and likely a sufficient breach of
requirements to summarily reject the current application.''
Department's Response to the Individuals' Hearing Request: The
Department declines to hold a hearing. The individuals articulated and
supported their views in a twelve page comment letter. The individuals
had adequate time (a 45 day comment period, plus one additional week)
to supplement their letter with all relevant information that was
available to them. The individuals did not demonstrate that the issues
they raised in the Morjanoff Letter would be more fully or
expeditiously explored at a hearing.
Regarding the three individuals' contention that, ``[s]ince the `CS
Public Hearing' was held on January 15, 2015, a mass of new evidence
has become publicly available which dramatically changes the context of
the application[,]'' the Department believes the Independent Auditor is
best suited to determine whether any newly uncovered evidence affects
Credit Suisse's compliance with requirements of the exemption. An
essential premise in the Department's determination to grant PTE 2015-
14 (and this exemption) is that a qualified independent auditor will
annually determine whether each condition of the exemption had been met
over the prior year. This includes an in-depth analysis of a wide range
of transactions, arrangements, policies, agreements, and procedures
relating to the operation of, and services provided by, the Credit
Suisse QPAMs. Further, in the Department's view, the factual issues
described by the individuals in the Morjanoff Letter could be fully
explored through the submission of evidence in written (including
electronic) form, which the individuals failed to submit.
b. The Individuals' Response to the Credit Suisse Comment Letter:
In the Morjanoff Letter, the three individuals took issue with many of
the revisions that Credit Suisse requested in their response letter.
With respect to the Credit Suisse-requested revisions which the
Department accepted, the three individuals stated the following:
(a) Regarding Credit Suisse's request to remove the term ``related
parties'' from Section I(f), the three individuals state that Credit
Suisse structured their crime so that undefined ``quasi-third parties''
benefited from and concealed criminal activity. ``It is futile to
attempt to define related parties while CS uses its creativity in
manufacturing them. Details can be provided at a public hearing.''
(b) The three individuals state that the exemption should specify
the actual affiliates who will receive relief under the exemption. The
individuals recommend that relief should be limited to CSAM LLC and
CSAM Ltd, ``who are the only affiliates that currently manage the
assets of ERISA-covered plans on a discretionary basis.'' The
individuals state that Credit Suisse Securities (USA) LLC ``has
participated in all manner of illegal, criminal and disreputable
activities (as described in previous submissions and subsequently)''
and should not be permitted to be QPAM. The individuals state that if
relief is available to potentially other affiliates, ``they should be
named now, and their suitability examined at a public hearing.''
Department's Response: The Department does not agree the
suitability of future CS Affiliated QPAMs must be examined at a public
hearing. This exemption contains a suite of protective conditions,
including an in-depth annual audit of, among other things, each CS
Affiliated QPAM's transactions, training and policies, as well as each
QPAM's compliance with the terms of this exemption. The Department has
reviewed prior audits of CS Affiliated QPAMs under PTE 2015-14, and the
Department believes the conditions of this exemption are sufficiently
protective of Covered Plans with assets managed by current and future
QPAMs.
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 ERISA 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 Code, including any
prohibited transaction provisions to which the exemption does not apply
and the general fiduciary responsibility provisions of section 404 of
ERISA, which, among other things, require a fiduciary to discharge its
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 ERISA; 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 and the Code, including statutory or
administrative exemptions and transitional rules. Furthermore, the fact
that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
[[Page 61936]]
(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.
Five-Year Exemption
The Department is granting a five-year exemption under the
authority of section 408(a) of the Employee Retirement Income Security
Act of 1974, as amended (ERISA), and section 4975(c)(2) of the Internal
Revenue Code of 1986, as amended (the Code), and in accordance with the
procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637,
66644, October 27, 2011).\9\
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\9\ For purposes of this five-year exemption, references to
section 406 of Title I of ERISA, unless otherwise specified, should
be read to refer as well to the corresponding provisions of section
4975 of the Code.
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Section I. Covered Transactions
The CS Affiliated QPAMs, as further defined in Section II(d), will
not be precluded from relying on the exemptive relief provided by
Prohibited Transaction Exemption 84-14 (PTE 84-14),\10\ notwithstanding
the ``Conviction'' against CSAG (as further defined in Section
II(a)),\11\ during the Exemption Period, provided that the following
conditions are satisfied:
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\10\ 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).
\11\ Section I(g) of PTE 84-14 generally provides that
``[n]either the QPAM nor any affiliate thereof . . . nor any owner .
. . of a 5 percent or more interest in the QPAM is a person who
within the 10 years immediately preceding the transaction has been
either convicted or released from imprisonment, whichever is later,
as a result of'' certain criminal activity therein described.
---------------------------------------------------------------------------
(a) The CS Affiliated QPAMs and the CS Related QPAMs (including
their officers, directors, agents other than CSAG, employees of such
QPAMs, and CSAG employees described in subparagraph (d) below) did not
know of, have reason to know of, or participate in the criminal conduct
of CSAG that is the subject of the Conviction. For purposes of this
exemption, including paragraph (c) below, ``participate in'' refers not
only to active participation in the criminal conduct of CSAG that is
the subject of the Conviction, but also to knowing approval of the
criminal conduct, or knowledge of such conduct without taking active
steps to prohibit such conduct, including reporting the conduct to such
individual's supervisors, and to the Board of Directors.
(b) The CS Affiliated QPAMs and the CS Related QPAMs (including
their officers, directors, agents other than CSAG, employees of such
QPAMs, and CSAG employees described in subparagraph (d)(3) below) did
not receive direct compensation, or knowingly receive indirect
compensation, in connection with the criminal conduct of CSAG that is
the subject of the Conviction;
(c) The CS Affiliated QPAMs will not employ or knowingly engage any
of the individuals that ``participated in'' the criminal conduct of
CSAG that is the subject of the Conviction;
(d) At all times during the Exemption Period, a CS Affiliated QPAM
will not use its authority or influence to direct an ``investment
fund'' (as defined in Section VI(b) of PTE 84-14) that is subject to
ERISA or the Code and managed by such CS Affiliated QPAM with respect
to one or more Covered Plans, to enter into any transaction with CSAG
or to engage CSAG 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. A CS
Affiliated QPAM will not fail this condition solely because:
(1) A CSAG affiliate serves as a local sub-custodian that is
selected by an unaffiliated global custodian that, in turn, is selected
by someone other than a CS Affiliated QPAM or CS Related QPAM;
(2) CSAG provides only necessary, non-investment, non-fiduciary
services that support the operations of CS Affiliated QPAMs, at the CS
Affiliated QPAM's own expense, and the Covered Plan is not required to
pay any additional fee beyond its agreed-to asset management fee. This
exception does not permit CSAG or its branches to provide any service
to an investment fund managed by a CS Affiliated QPAM or CS Related
QPAM; or
(3) CSAG employees are double-hatted, seconded, supervised, or
subject to the control of a CS Affiliated QPAM;
(e) Any failure of a CS Affiliated QPAM to satisfy Section I(g) of
PTE 84-14 arose solely from the Conviction;
(f) A CS Affiliated QPAM or a CS Related QPAM did not exercise
authority over the assets of any plan subject to Part 4 of Title I of
ERISA (an ERISA-covered plan) or section 4975 of the Code (an IRA) in a
manner that it knew or should have known would: Further criminal
conduct that is the subject of the Conviction; or cause the CS
Affiliated QPAM or CS Related QPAM or its affiliates to directly or
indirectly profit from the criminal conduct that is the subject of the
Conviction;
(g) CSAG will not act as a fiduciary 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, except it may
act as such a fiduciary (1) with respect to employee benefit plans
sponsored for its own employees or employees of an affiliate; or (2) in
connection with securities lending services of the New York Branch of
CSAG. CSAG will not be treated as violating the conditions of the
exemption solely because it 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) Prior to May 21, 2020, a CS Affiliated QPAM may continue to
maintain, follow and implement the policies described in Section
I(h)(1) of PTE 2015-14. Otherwise, each CS Affiliated QPAM must
maintain, adjust (to the extent necessary), implement, and follow the
written policies and procedures described below (the Policies).
Notwithstanding the preceding sentence, a CS Affiliated QPAM may not
engage in any transaction or arrangement described in Section I(d)(1)
through (3) of this exemption prior to the date the Policies below have
been developed, implemented and followed.
The Policies must require and be reasonably designed to ensure
that:
(i) The asset management decisions of the CS Affiliated QPAMs are
conducted independently of CSAG's corporate management and business
activities, and without considering any fee a CS-related local sub-
custodian may receive from those decisions. This condition does not
preclude a CS Affiliated QPAM from receiving publicly available
research and other widely available information from a CSAG affiliate;
(ii) The CS Affiliated 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 CS Affiliated QPAM does not knowingly participate in any
other person's violation of ERISA or the Code with respect to Covered
Plans;
(iv) Any filings or statements made by the CS Affiliated QPAM to
regulators, including but not limited to, the Department of Labor, the
Department of the Treasury, the Department of Justice,
[[Page 61937]]
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 its knowledge at the time, the CS Affiliated
QPAM does not make material misrepresentations or omit material
information in its communications with such regulators with respect to
Covered Plans, or make material misrepresentations or omit material
information in its communications with Covered Plans; and
(vi) The CS Affiliated QPAM complies with the terms of this five-
year exemption, and CSAG complies with the terms of Section I(d)(2);
(2) Any violation of, or failure to comply with, an item in
subparagraphs (h)(1)(ii) through (vi) of this section, 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 discovery of such failure to so correct, in writing,
to the head of Compliance and the general counsel (or their functional
equivalent) of the relevant CS Affiliated QPAM, and the independent
auditor responsible for reviewing compliance with the Policies. A CS
Affiliated 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 QPAM reasonably
should have known of the noncompliance (whichever is earlier), and
provided that it adheres to the reporting requirements set forth in
this paragraph (2);
(3) Each CS Affiliated QPAM must maintain, adjust (to the extent
necessary), and implement a program of training (the Training),
conducted at least annually, for all relevant CS Affiliated 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 five-year 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 CS Affiliated QPAM submits to three audits, conducted
by an independent auditor, who has been prudently selected and who has
appropriate technical training and proficiency with ERISA and the Code,
to evaluate the adequacy of, and each CS Affiliated QPAM's compliance
with, the Policies and Training described herein. The audit requirement
must be incorporated in the Policies. The first audit must cover the 24
month period that begins on November 21, 2019. The second audit must
cover the 24 month period that begins on November 21, 2021, and the
third audit must cover the 12 month period that begins on November 21,
2023. Each audit must be completed no later than six (6) months after
the period to which the audit applies; \12\
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\12\ Periods prior to November 21, 2019 must be audited
consistent with PTE 2015-14.
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(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 CS Affiliated
QPAM and, if applicable, CSAG, 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 CS Affiliated 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 each CS Affiliated QPAM's operational compliance with the
Policies and Training. In this regard, the auditor must test a sample
of: (1) Each CS Affiliated QPAM's transactions involving Covered Plans;
(2) each CS Affiliated QPAM's transactions involving CSAG affiliates
that serve as a local sub-custodian. The samples must be sufficient in
size and nature to afford the auditor a reasonable basis to determine
the QPAM's operational compliance with the Policies and Training;
(5) For each audit, on or before the end of the relevant period
described in Section I(i)(1) for completing the audit, the auditor must
issue a written report (the Audit Report) to CSAG and the CS Affiliated
QPAMs to which the audit applies that describes the procedures
performed by the auditor during the course of its examination. The
auditor, at its discretion, may issue a single consolidated Audit
Report that covers all the CS Affiliated QPAMs. The Audit Report must
include the auditor's specific determinations regarding:
(i) The adequacy of the CS Affiliated QPAM's Policies and Training;
the CS Affiliated QPAM's compliance with the Policies and Training; the
need, if any, to strengthen such Policies and Training; and any
instance of the respective CS Affiliated QPAM's noncompliance with the
written Policies and Training described in Section I(h) above. The CS
Affiliated QPAMs must promptly address any noncompliance. The CS
Affiliated 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 CS Affiliated
QPAM. Any action taken or the plan of action to be taken by the
respective CS Affiliated 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 the respective CS Affiliated QPAM has
implemented, maintained, and followed sufficient Policies and Training
must not be based solely or in substantial part on an absence of
evidence indicating noncompliance. In this last regard, any finding
that a CS Affiliated QPAM has complied with the requirements under this
subparagraph must be based on evidence that the particular CS
Affiliated QPAM has actually implemented, maintained, and followed the
Policies and Training required by this exemption. Furthermore, the
auditor must not solely rely on the Annual Exemption Report created by
the compliance officer (the Compliance Officer), as described in
Section I(m)
[[Page 61938]]
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 Annual Exemption Review described in
Section I(m);
(6) The auditor must notify the respective CS Affiliated QPAMs of
any instance of noncompliance identified by the auditor within five (5)
business days after such noncompliance is identified by the auditor,
regardless of whether the audit has been completed as of that date;
(7) With respect to each Audit Report, the general counsel, or one
of the three most senior executive officers of the CS Affiliated QPAMs
to which the Audit Report applies, must certify in writing, under
penalty of perjury, that the officer has reviewed the Audit Report and
this five-year exemption; that, to the best of such officer's knowledge
at the time, the CS Affiliated QPAM addressed, corrected, or remedied
any noncompliance and inadequacy or has an appropriate written plan to
address any inadequacy regarding the Policies and Training identified
in the Audit Report. Such certification must also include the
signatory's determination that, to the best of the 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 the applicable provisions of ERISA and the Code;
(8) A copy of the Audit Report must be provided to CSAG's Board of
Directors and to either the Risk Committee or the Audit Committee; and
a senior executive officer at either the Risk Committee or the Conduct
and Financial Crime Control Committee must review the Audit Report for
each CS Affiliated QPAM and must certify in writing, under penalty of
perjury, that such officer has reviewed each Audit Report;
(9) Each CS Affiliated QPAM must provide its certified Audit
Report, by regular mail to: The Department's 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. The delivery must take place no more
than 45 days following the completion of the Audit Report. The Audit
Report will be part of the public record regarding this five-year
exemption. Furthermore, each CS Affiliated QPAM must make its Audit
Report unconditionally available, electronically or otherwise, for
examination upon request by any duly authorized employee or
representative of the Department, other relevant regulators, and any
fiduciary of a Covered Plan;
(10) Any engagement agreement with an auditor to perform the audit
required by this exemption must be submitted to OED no later than two
(2) months after the execution of the engagement agreement;
(11) The auditor must provide the Department, upon request, for
inspection and review, access to all of the workpapers created and used
in connection with the audit, provided the access and inspection are
otherwise permitted by law; and
(12) CSAG and/or the CS Affiliated QPAMs must notify the Department
of a change in the independent auditor no later than two (2) months
after the engagement of a substitute or subsequent auditor and must
provide an explanation for the substitution or change including a
description of any material disputes between the terminated auditor and
CSAG and/or the CS Affiliated QPAMs;
(j) As of the effective date of this five-year exemption, with
respect to any arrangement, agreement, or contract between a CS
Affiliated QPAM and a Covered Plan, each CS Affiliated QPAM agrees and
warrants to Covered Plans:
(1) To comply with ERISA and the Code, as applicable with respect
to the 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 CS Affiliated QPAM's violation of
ERISA's fiduciary duties, as applicable, and of the prohibited
transaction provisions of ERISA and the Code, as applicable; a breach
of contract by a CS Affiliated QPAM; or any claim arising out of the
failure of such CS Affiliated QPAMs to qualify for the exemptive relief
provided by PTE 84-14 as a result of a violation of Section I(g) of PTE
84-14 other than the Conviction. This condition only applies to actual
losses caused by the CS Affiliated QPAM's violations;
(3) Not to require (or otherwise cause) the Covered Plan to waive,
limit, or qualify the liability of the CS Affiliated QPAM for violating
ERISA or the Code or engaging in prohibited transactions;
(4) Not to restrict the ability of the Covered Plan to terminate or
withdraw from its arrangement with the CS Affiliated 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 arrangement involving investments in pooled funds subject to ERISA
entered into after the effective date of this exemption, the adverse
consequences must relate to a lack of liquidity of the underlying
assets, valuation issues, or regulatory reasons that prevent the fund
from promptly redeeming an ERISA-covered plan's or IRA's investment,
and such restrictions must be applicable to all such investors and
effective no longer than reasonably necessary to avoid the adverse
consequences;
(5) Not to impose any fees, penalties, or charges for such
termination or withdrawal with the exception of reasonable fees,
appropriately disclosed in advance, that are specifically designed to
prevent generally-recognized abusive investment practices or
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event such withdrawal or termination may have
adverse consequences for all other investors, provided that such fees
are applied consistently and in like manner to all such investors;
(6) Not to include exculpatory provisions disclaiming or otherwise
limiting liability of the CS Affiliated QPAMs for a violation of the
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 CSAG and its affiliates, or damages arising outside the control of
the CS Affiliated QPAM; and
(7) Within four (4) months of the effective date of this five-year
exemption, each CS Affiliated QPAM must provide a notice of its
obligations under this Section I(j) to each Covered Plan. For Covered
Plans that enter into a written asset or investment management
agreement with a CS Affiliated QPAM on or after November 21, 2019, the
CS Affiliated QPAM must agree to its obligations under this Section
I(j) in an updated investment management agreement between the CS
Affiliated QPAM and such clients or
[[Page 61939]]
other written contractual agreement. Notwithstanding the above, a CS
Affiliated QPAM will not violate the condition solely because a Covered
Plan refuses to sign an updated investment management agreement. This
condition will be deemed met for each Covered Plan that received a
notice pursuant to PTE 2015-14 that meets the terms of this condition.
(k) Notice to Covered Plan Clients. Each CS Affiliated QPAM
provides a notice of the five-year exemption, along with a separate
summary describing the facts that led to the Conviction (the Summary),
which have been submitted to the Department, and a prominently
displayed statement (the Statement) that the Conviction results in a
failure to meet a condition in PTE 84-14, to each sponsor and
beneficial owner of a Covered Plan that entered into a written asset or
investment management agreement with a CS Affiliated QPAM, or the
sponsor of an investment fund in any case where a CS Affiliated QPAM
acts as a sub-adviser to the investment fund in which such ERISA-
covered plan and IRA invests. The notice, Summary and Statement must be
provided prior to, or contemporaneously with, the client's receipt of a
written asset management agreement from the CS Affiliated QPAM. The
clients must receive a Federal Register copy of the notice of final
five-year exemption within sixty (60) days of the effective date of
this exemption. The notice may be delivered electronically (including
by an email that has a link to the five-year exemption).
(l) The CS Affiliated QPAM must comply with each condition of PTE
84-14, as amended, with the sole exception of the violation of Section
I(g) of PTE 84-14 that is attributable to the Conviction. If, during
the Exemption Period, an entity within the Credit Suisse corporate
structure is convicted of a crime described in Section I(g) of PTE 84-
14, relief in this exemption would terminate immediately;
(m)(1) By May 20, 2020, each CS Affiliated QPAM designates a senior
compliance officer (the Compliance Officer) who will be responsible for
compliance with the Policies and Training requirements described
herein. For purposes of this condition (m), each relevant line of
business within a CS Affiliated QPAM may designate its own compliance
officer. The Compliance Officer must conduct an annual review for each
twelve month period, beginning on November 21, 2019, (the Annual
Exemption Review) to determine the adequacy and effectiveness of the
implementation of the Policies and Training. With respect to the
Compliance Officer, the following conditions must be met:
(i) The Compliance Officer must be a professional who has extensive
experience with, and knowledge of, the regulation of financial services
and products, including under ERISA and the Code; and
(ii) The Compliance Officer must have a direct reporting line to
the highest ranking corporate officer in charge of compliance for the
applicable CS Affiliated QPAM.
(2) With respect to each Annual Exemption Review, the following
conditions must be met:
(i) The Annual Exemption Review includes a review of the CS
Affiliated 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 compliance and risk control
function (or its equivalent) during the previous year; the most recent
audit report issued pursuant to this exemption or PTE 2015-14; any
material change in the relevant business activities of the CS
Affiliated QPAMs; and any change to ERISA, the Code, or regulations
related to fiduciary duties and the prohibited transaction provisions
that may be applicable to the activities of the CS Affiliated QPAMs;
(ii) The Compliance Officer prepares a written report for each
Annual Exemption Review (each, an Annual Exemption Report) that (A)
summarizes his or her material activities during the preceding year;
(B) sets forth any instance of noncompliance discovered during the
preceding year, and any related corrective action; (C) details any
change to the Policies or Training to guard against any similar
instance of noncompliance occurring again; and (D) makes
recommendations, as necessary, for additional training, procedures,
monitoring, or additional and/or changed processes or systems, and
management's actions on such recommendations;
(iii) In each Annual Exemption Report, the Compliance Officer must
certify in writing that to the best of his or her 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 preceding year and any
related correction taken to date have been identified in the Annual
Exemption Report; and (D) the CS Affiliated 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) Each Annual Exemption Report must be provided to appropriate
corporate officers of CSAG and each CS Affiliated QPAM to which such
report relates; the head of Compliance and the general counsel (or
their functional equivalent) of the relevant CS Affiliated QPAM; and
must be made unconditionally available to the independent auditor
described in Section I(i) above;
(v) Each Annual Exemption Review, including the Compliance
Officer's written Annual Exemption Report, must be completed within
three (3) months following the end of the period to which it relates;
(n) Each CS Affiliated QPAM will maintain records necessary to
demonstrate that the conditions of this five-year exemption have been
met, for six (6) years following the date of any transaction for which
the CS Affiliated QPAM relies upon the relief in the five-year
exemption;
(o) During the Exemption Period, CSAG: (1) Immediately discloses to
the Department any Deferred Prosecution Agreement (a DPA) or Non-
Prosecution Agreement (an NPA) that Credit Suisse Group AG or CSAG or
any affiliate (as defined in Section VI(d) of PTE 84-14) enters into
with the U.S Department of Justice, to the extent such DPA or NPA
relates to the conduct described in Section I(g) of PTE 84-14 or
section 411 of ERISA; and (2) immediately provides the Department any
information requested by the Department, as permitted by law, regarding
the agreement and/or the conduct and allegations that led to the
agreement;
(p) Within 60 days of the effective date of the five-year
exemption, each CS Affiliated QPAM, in its agreements with, or in other
written disclosures provided to Covered Plans, will clearly and
prominently inform Covered Plan clients of their right to obtain a copy
of the Policies or a description (Summary Policies) which accurately
summarizes key components of the CS Affiliated QPAM's written Policies
developed in connection with this exemption. If the Policies are
thereafter changed, each Covered Plan client must receive a new
disclosure within six (6) months following the end of the calendar year
during which the Policies were changed.\13\ With respect to this
[[Page 61940]]
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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\13\ 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.
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(q) A CS Affiliated QPAM will not fail to meet the terms of this
five-year exemption, solely because a different CS Affiliated QPAM
fails to satisfy a condition for relief under this five-year exemption
described in Sections I(c), (d), (h), (i), (j), (k), (l), (n), and (p);
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 CSAG or its affiliates.
Section II. Definitions
(a) The term ``Conviction'' means the judgment of conviction
against CSAG for one count of conspiracy to violate section 7206(2) of
the Internal Revenue Code in violation of Title 18, United States Code,
Section 371, that was entered in the District Court for the Eastern
District of Virginia in Case Number 1:14-cr-188-RBS, on November 21,
2014.
(b) The term ``Covered Plan'' means a plan subject to Part 4 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 CS Affiliated QPAM relies on PTE 84-14, or with respect to
which a CS Affiliated QPAM (or any CSAG 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 CS Affiliated QPAM has expressly
disclaimed reliance on QPAM status or PTE 84-14 in entering into a
contract, arrangement, or agreement with the ERISA-covered plan or IRA.
(c) The term ``CSAG'' means Credit Suisse AG.
(d) The term ``CS Affiliated QPAM'' means a ``qualified
professional asset manager'' (as defined in Section VI(a) of PTE 84-14)
that relies on the relief provided by PTE 84-14 and with respect to
which CSAG is a current or future ``affiliate'' (as defined in Section
VI(d) of PTE 84-14), but is not a CS Related QPAM. The term ``CS
Affiliated QPAM'' excludes the parent entity, CSAG.
(e) The term ``CS Related QPAM'' means any current or future
``qualified professional asset manager'' (as defined in Section VI(a)
of PTE 84-14) that relies on the relief provided by PTE 84-14, and with
respect to which CSAG owns a direct or indirect five (5) percent or
more interest, but with respect to which CSAG is not an ``affiliate''
(as defined in section VI(d)(1) of PTE 84-14).
(f) The term ``Exemption Period'' means the period from November
21, 2019 through November 20, 2024.
Effective Date: This five-year exemption will be in effect for five
years beginning on the expiration of PTE 2015-14.
FOR FURTHER INFORMATION CONTACT: Mrs. Blessed Chuksorji-Keefe of the
Department, telephone (202) 693-8567. (This is not a toll-free number.)
Signed at Washington, DC, this 8th day of November, 2019.
Lyssa Hall,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2019-24750 Filed 11-13-19; 8:45 am]
BILLING CODE 4510-29-P
