[Federal Register Volume 88, Number 6 (Tuesday, January 10, 2023)]
[Notices]
[Pages 1418-1431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-00282]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2023-01; Exemption Application No. D-
12064]
Exemption From Certain Prohibited Transaction Restrictions
Involving JPMorgan Chase Co.
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of exemption.
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SUMMARY: This document contains a notice of exemption issued by the
Department of Labor (the Department) from certain of the prohibited
transaction restrictions of the Employee Retirement Income Security Act
of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986
(the Code). This exemption allows entities with specified relationships
to JPMorgan Chase Co. (JPMC or the Applicant), located in New York,
N.Y., to continue to rely on the exemptive relief provided by
Prohibited Transaction Class Exemption 84-14 (PTE 84-14 or the QPAM
Exemption), notwithstanding the judgment of conviction against JPMC, as
described below.
DATES: The exemption is effective for a period of four years, beginning
on January 10, 2023, and ending on January 9, 2027.
FOR FURTHER INFORMATION CONTACT: Mr. Joseph Brennan of the Department
at (202) 693-8456. (This is not a toll-free number.)
SUPPLEMENTARY INFORMATION: On October 20, 2022, the Department
published a notice of proposed exemption in the Federal Register at 87
FR 63802 that would permit certain qualified professional asset
managers (QPAMs) within the corporate family of JPMC to continue
relying on the class exemptive relief provided under PTE 84-14 \1\ for
a period of four years notwithstanding the judgment of conviction
against JPMC, as described below. The Department is granting this
exemption to ensure that the
[[Page 1419]]
participants and beneficiaries of ERISA-covered Plans and IRAs managed
by JPMC affiliates (together, Covered Plans) are protected.
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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).
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This exemption provides only the relief specified in the text of
the exemption and does not provide relief from violations of any law
other than the prohibited transaction provisions of Title I of ERISA
and the Code expressly stated herein.
The Department intends for the terms of this exemption to promote
adherence by the JPMC QPAMs to basic fiduciary standards under Title I
of ERISA and the Code. An important objective in granting this
exemption is to ensure that Covered Plans can terminate their
relationships with a JPMC QPAM in an orderly and cost-effective fashion
in the event the fiduciary of a Covered Plan determines that it is
prudent to do so.
Based on the Applicant's adherence to all the conditions of the
exemption, the Department makes the requisite findings under ERISA
Section 408(a) that the exemption is: (1) administratively feasible,
(2) in the interest of Covered Plans and their participants and
beneficiaries, and (3) protective of the rights of the participants and
beneficiaries of Covered Plans. Accordingly, affected parties should be
aware that the conditions incorporated in this exemption are,
individually and 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 Applicant requested an individual exemption pursuant to ERISA
Section 408(a) in accordance with the procedures set forth in 29 CFR
part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).
Background
1. JPMC is the parent company of investment management affiliates
that rely upon the class exemptive relief provided under the QPAM
Exemption to manage the assets of Covered Plans (The JPMC Affiliated
QPAMs). In addition to the JPMC Affiliated QPAMs, JPMC currently owns a
5% or greater direct or indirect interest in certain investment
managers that also rely upon the QPAM Exemption but are not affiliated
with JPMC in the sense of having common control (the JPMC Related
QPAMs).\2\
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\2\ Since the Department granted PTE 2017-03, the following
seven JPMC QPAMs have exercised discretionary control over the
management and disposition of client assets held by ERISA-covered
Plans and IRAs (together, Covered Plans): JPMorgan Chase Bank, N.A.,
J.P. Morgan Alternative Asset Management, Inc., JPMorgan Asset
Management (Asia Pacific) Limited, J.P. Morgan Investment Management
Inc., J.P. Morgan Private Investments Inc., J.P. Morgan Securities
LLC., and Security Capital Research & Management Incorporated.
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2. The QPAM Exemption exempts certain prohibited transactions
between a party in interest and an ``investment fund'' (as defined in
Section VI(b) of the QPAM Exemption) in which a plan has an interest if
the investment manager with discretion over the investment of plan
assets satisfies the definition of ``qualified professional asset
manager'' and satisfies additional conditions of the exemption. The
QPAM Exemption was developed and granted based on the essential premise
that broad relief could be afforded for all types of transactions in
which a plan engages only if the commitments and the investments of
plan assets and the negotiations leading thereto are the sole
responsibility of an independent, discretionary manager.\3\
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\3\ See 75 FR 38837, 38839 (July 6, 2010).
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3. Section I(g) of the QPAM Exemption prevents an entity that may
otherwise meet the definition of QPAM from utilizing the exemptive
relief provided, for itself and its client plans, if that entity, an
``affiliate'' thereof,\4\ or any direct or indirect five percent or
more owner in the QPAM has been either convicted or released from
imprisonment, whichever is later, as a result of criminal activity
described in section I(g) within the 10 years immediately preceding the
transaction. Section I(g) was included in the QPAM Exemption, in part,
based on the Department's expectation that a QPAM, and those who may be
in a position to influence the QPAM's policies, must maintain a high
standard of integrity.
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\4\ Section VI(d) of PTE 84-14 defines the term ``affiliate''
for purposes of Section I(g) as ``(1) Any person directly or
indirectly through one or more intermediaries, controlling,
controlled by, or under common control with the person, (2) Any
director of, relative of, or partner in, any such person, (3) Any
corporation, partnership, trust or unincorporated enterprise of
which such person is an officer, director, or a 5 percent or more
partner or owner, and (4) Any employee or officer of the person
who--(A) Is a highly compensated employee (as defined in Section
4975(e)(2)(H) of the Code) or officer (earning 10 percent or more of
the yearly wages of such person), or (B) Has direct or indirect
authority, responsibility or control regarding the custody,
management or disposition of plan assets.''
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4. On May 20, 2015, the Department of Justice filed a Criminal
Information in the U.S. District Court for the District of Connecticut
(the District Court) \5\ charging JPMC with a one-count violation of
the Sherman Antitrust Act.\6\ The Information charged that as early as
July 2010 until at least January 2013, JPMC, through one of its euro/
U.S. dollar (EUR/USD) traders, entered into and engaged in a
combination and conspiracy to fix, stabilize, maintain, increase or
decrease the price of, and rig bids and offers for, the EUR/USD
currency pair exchanged in the foreign exchange spot market by agreeing
to eliminate competition in the purchase and sale of the EUR/USD
currency pair in the United States and elsewhere (the Criminal
Misconduct). The Criminal Misconduct involved near-daily conversations,
some of which were conducted in code, in an exclusive electronic chat
room. On May 20, 2015, JPMC agreed to enter a guilty plea to the charge
set out in the Information (the Plea Agreement). The District Court
subsequently entered a judgment of Conviction against JPMC on January
10, 2017.
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\5\ Case Number 3:15-CR-79-SRU.
\6\ 15 U.S.C. 1.
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5. Once the District Court entered the Conviction, the JPMC
Affiliated QPAMs and the JPMC Related QPAMs, as well as their Covered
Plan clients, became ineligible to rely on the QPAM Exemption (due to
the Section I(g) disqualification provision) without receiving an
individual prohibited transaction exemption from the Department.
6. On December 22, 2016, the Department granted PTE 2016-15 which
permitted the JPMC Affiliated QPAMs and the JPMC Related QPAMs to
continue to rely upon the relief provided in the QPAM exemption for a
period of one year, from January 10, 2017 through January 9, 2018.\7\
Subsequently, on December 29, 2017, the Department granted PTE 2017-03,
a second individual exemption that permitted the JPMC Affiliated QPAMs
and the JPMC Related QPAMs to continue to rely upon the relief provided
by the QPAM Exemption for a period of five years, from January 10, 2018
through January 9, 2023.\8\ PTEs 2016-15 and 2017-03 each contain a set
of conditions that are designed to protect those Covered Plans that
entrust their assets to a JPMC QPAM despite the serious nature of the
Criminal Misconduct underlying the Conviction.
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\7\ PTE 2016-15, 81 FR 94028 (December 22, 2016). PTE 2016-15
became effective on January 10, 2017 (the date on which the District
Court.
\8\ PTE 2017-03, 82 FR 61816 (December 29, 2017).
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7. With PTEs 2016-15 and 2017-03, the Department decided to grant
limited terms of relief despite the Applicant's request for an
exemption that would cover the entire 10-year ineligibility period
triggered by Section I(g). With the limited terms of relief, the
Department reserved the right to review the JPMC QPAMs' adherence to
the conditions set out in those exemptions.
8. On October 1, 2021, the Applicant filed an application for
exemptive relief
[[Page 1420]]
that would permit the JPMC QPAMs to continue to rely upon the QPAM
Exemption for a period of four years from January 10, 2023 (the
expiration of PTE 2017-03), through January 9, 2027 (the conclusion of
the Section I(g) 10-year ineligibility period). On February 7, 2022,
the Applicant supplemented its application with the most recent audit
report, as required under PTE 2017-03.
9. In support of its request to extend exemptive relief through the
end of the disqualification period, the Applicant submits that the JPMC
Affiliated QPAMs and the JPMC Related QPAMs have complied with all of
the conditions of PTE 2017-03 and, therefore, should be permitted to
continue to rely upon the QPAM Exemption in order to avoid substantial
costs and other disruptions to Covered Plans that would otherwise occur
in the absence of relief.
10. In the proposed exemption the Department discussed in greater
detail the suite of conditions imposed by PTE 2017-03 and the JPMC
QPAMs' compliance with each of those conditions. In the proposed
exemption the Department also discussed the Applicant's representations
regarding the potential for adverse consequences for Covered Plans if
this exemption is not granted.
11. The Department encourages anyone reading this grant notice to
consult the proposed exemption for a more complete discussion of all
material facts underlying the Applicant's exemption request and the
Department's decision to proceed with this grant notice.
Written Comments
In the proposed exemption, the Department invited all interested
persons to submit written comments and/or requests for a public hearing
with respect to the notice of proposed exemption. All comments and
requests for a hearing were due to the Department by December 19, 2022.
The Department received four written comments and no hearing requests.
Two written comments were received from the Applicant and two written
comments were received from other interested persons. The comments are
discussed in more detail below.
Comments From the Applicant
Comment 1: Certification of Audit Report
Section III(i)(7) of the proposed exemption requires a general
counsel or senior executive at the JPMC Affiliated QPAMs to make
certain certifications with respect to the audit report. Section
III(i)(7), in pertinent part, states: ``Notwithstanding the above, no
person, including any person referenced in the Statement of Facts that
gave rise to the Conviction, who knew of, or should have known of, or
participated in, any misconduct described in the Statement of Facts
underlying the Conviction, by any party, may provide the certification
required by this exemption, unless the person took active documented
steps to stop the misconduct.''
The Applicant requests the Department to modify the language of
Section III(i)(7) to make it consistent with PTE 2017-03 so that
participation and knowledge relate to the misconduct that was the
subject of the Conviction. The Applicant states that, while the plea
agreement was not limited to a description of criminal conduct, only
the foreign exchange antitrust violations were deemed criminal by the
Department of Justice (DOJ). The Applicant requests that the final
sentence of the condition be limited to ``conduct underlying the
Conviction.''
In addition, the Applicant notes that the reference to a Statement
of Facts in Section III(i)(7) is unclear and should be removed, because
there is no section entitled Statement of Facts in either the plea
agreement or the information. Accordingly, the Applicant requests that
Section III(i)(7), in pertinent part, be modified to read:
``. . . Notwithstanding the above, no person, including any person
referenced in the plea agreement that gave rise to the Conviction, who
knew of, or should have known of, or participated in, the misconduct
underlying the Conviction may provide the certification required by
this exemption, unless the person took active documented steps to stop
the misconduct.''
Department's Response: The Department agrees with the Applicant's
requests in part and disagrees in part. The Department declines to make
the Applicant's requested change to Section III(i)(7). The officer
tasked with reviewing the audit report and certifying that the JPMC
Affiliated QPAMs have remedied any instance of noncompliance with the
Policies and Training should not have knowingly participated in the
misconduct identified by the DOJ. This includes the misconduct directly
underlying the Conviction and also the tertiary misconduct cited by
DOJ. The Department agrees, however, with the Applicant's request to
strike the reference to ``Statement of Facts.''
Comment 2: Indemnification
Section III(j)(2) of the proposed exemption provides: Throughout
the Exemption Period, with respect to any arrangement, agreement, or
contract between a JPMC Affiliated QPAM and a Covered Plan, the JPMC
Affiliated QPAM agrees and warrants: (2) To indemnify and hold harmless
the Covered Plan for any actual losses resulting directly from a JPMC
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 the QPAM; or any claim arising out
of the failure of such JPMC Affiliated 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 Conviction. This condition
applies only to actual losses caused by the JPMC Affiliated QPAM's
violations. Actual losses include losses and related costs arising from
unwinding transactions with third parties and from transitioning Plan
assets to an alternative asset manager as well as costs associated with
any exposure to excise taxes under Code section 4975 as a result of a
QPAM's inability to rely upon the relief in the QPAM Exemption.
The Applicant requests the Department to delete the expanded
discussion of ``actual losses'' at the end of Section III(j)(2). The
Applicant states that, although the Department uses the same
definition, in different circumstances, in the recently published
Proposed Amendment to Prohibited Transaction Class Exemption 84-14,
several commenters asserted that this definition was too expansive,
goes far beyond any transaction reliant on the QPAM Exemption, appears
punitive with respect to the investment manager, and would represent a
windfall to plan clients. If the convicted entity is the asset manager
and it is no longer allowed to manage plan assets, the Applicant states
that plans may well believe that the criminal conduct of their manager
militates in favor of terminating the arrangement. The Applicant states
that where the asset manager is not only not the convicted entity, but
did not know of, have reason to know of, or participate in that
conduct, the exemption effectively forces plans to terminate their
arrangements, if only to have their market losses covered. According to
the Applicant, it seems patently unfair to apply this definition only
to the Applicant, in advance of a change in the rule applicable to all
managers.
The Applicant further submits that for many JPMC Affiliated QPAMs
who use the QPAM Exemption only occasionally or not at all for a
particular account or strategy, there is no reason for the JPMC
Affiliated QPAMs to be required to
[[Page 1421]]
indemnify a plan for losses with respect to transactions that never
relied on the QPAM Exemption. Nor should the JPMC Affiliated QPAMs be
required to indemnify for a new manager search when under the
provisions of ERISA, the plan is not required to terminate its
arrangement with the JPMC Affiliated QPAM.\9\
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\9\ The Department notes that under this exemption a JPMC
Affiliated QPAM may disclaim reliance on QPAM status in a written
modification of a contract, arrangement, or agreement with a Covered
Plan, where the modification is made in a bilateral document signed
by the client, the client's attention is specifically directed
toward the disclaimer, and the client is advised in writing that,
with respect to any transaction involving the client's assets, the
JPMC Affiliated QPAM will not represent that it is a QPAM, and will
not rely on the relief described in PTE 84-14.
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The Applicant states that the potential liability exposure
associated with the broad and vague indemnification requirements is
extensive and ambiguous and it is not commercially reasonable to
include indemnity provisions of this magnitude. According to the
Applicant, this new burden will likely impact the fees and expenses
managers charge plans for their services due to, among other things,
higher compliance and liability insurance costs. The Applicant states
that imposing new and distinct penalties for loss of eligibility for
one specific exemption when that exemption may not have been used at
all for the transaction at issue is arbitrary and unwarranted.
Department's Response: The Department declines to make the
requested change. The Department views the new language as a
clarification of the term ``actual losses'' as contemplated by Section
III(j)(2). In the event a JPMC Affiliated QPAM is no longer able to
rely on the QPAM Exemption, Section III(j)(2) allows Covered Plans to
prudently manage their plans without needing to consider the costs
caused by the QPAM's own violations, including costs resulting from
unwinding transactions and transitioning plan assets to a new manager
(as these costs will be borne by the QPAM and not the Covered Plan).
In the Department's view, it is important that plans have the
option to take their business elsewhere when parties fail to meet the
conditions of the exemption and should not be locked into
disadvantageous relationships based on the cost of unwinding
transactions--a cost that would not have been incurred if there had
been full compliance with the exemption. In addition, the Department
notes that nothing in this exemption prevents the JPMC Affiliated QPAMs
from entering into indemnification arrangements with affiliates to
manage circumstances where an affiliate causes the loss of another
affiliate's QPAM status.
Comment 3: Entities in Corporate Structure
Section III(l) of the proposed exemption states: The JPMC
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 JPMC corporate structure is
convicted of a crime described in Section I(g) of PTE 84-14 (other than
the Conviction), relief in this exemption would terminate immediately.
The Applicant submits that the language, ``an entity within the
JPMC corporate structure,'' was intended to mean an affiliate of the
JPMC Affiliated QPAMs within the meaning of Section VI(d) of the QPAM
Exemption, because this latter formulation is used throughout PTE 2017-
03. The Applicant states that the use of alternative language will be
confusing and ambiguous and urges the Department to use the language
used elsewhere in PTE 2017-03 instead. Accordingly, the Applicant
requests that Section III(l), in pertinent part, be modified to read:
. . . If, during the Exemption Period, an affiliate of the JPMC
Affiliated QPAMs (as defined in Section VI(d) of PTE 84-14) \10\ is
convicted of a crime described in Section I(g) of PTE 84-14 (other than
the Conviction), relief in this exemption would terminate immediately;
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\10\ For purposes of Section I(g) of the QPAM Exemption, an
``affiliate'' of a person means--(1) Any person directly or
indirectly through one or more intermediaries, controlling,
controlled by, or under common control with the person, (2) Any
director of, relative of, or partner in, any such person, (3) Any
corporation, partnership, trust or unincorporated enterprise of
which such person is an officer, director, or a 5 percent or more
partner or owner, and (4) Any employee or officer of the person
who--(A) Is a highly compensated employee (as defined in section
4975(e)(2)(H) of the Code) or officer (earning 10 percent or more of
the yearly wages of such person), or (B) Has direct or indirect
authority, responsibility or control regarding the custody,
management or disposition of plan assets.
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Department's Response: The Department agrees with the Applicant's
requested change and has amended Section III(l) accordingly.
Comment 4: Deferred Prosecution Agreement
Section III(u) of the proposed exemption provides: (u) Other than
former employees who worked on the Precious Metals Desk and U.S.
Treasuries Desk within the CIB in the Global Markets division, the JPMC
Affiliated QPAMs and the JPMC Related QPAMs (including their officers,
directors, agents and employees of such 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, and did not
participate in the conduct underlying the September 29, 2020, deferred
prosecution agreement entered into between the Department of Justice
and JPMC, JPMorgan Chase Bank, and JPMS (the DPA). Further, any other
party engaged on behalf of the JPMC Affiliated QPAMs and JPMC Related
QPAMs who had responsibility for or exercised authority in connection
with the management of plan assets did not know or have reason to know
of and did not participate in the criminal conduct that is the subject
of the DPA.
Section III(v) of the proposed exemption provides: (v) Apart from a
non-fiduciary line of business within JPMorgan Chase Bank, the JPMC
Affiliated QPAMs and the JPMC Related QPAMs (including their officers,
directors, and agents, and employees of such JPMC 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 conduct
underlying the DPA. Further, any other party engaged on behalf of the
JPMC Affiliated QPAMs and the JPMC Related 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 conduct underlying the
DPA.
The Applicant requests that these conditions be modified to carve
out a nonfiduciary line of business in JPMorgan Chase Bank and J.P.
Morgan Securities LLC (JPMS). In connection with PTE 2017-03, the
Department included an exception for an individual who worked for a
non-fiduciary line of business within JPMorgan Chase Bank in Sections
(a) and (b)--conditions that relate to the conduct underlying the
Conviction--to ensure that the conditions accurately reflected the plea
agreement could be met. The Applicant asserts that the new conditions
in this exemption relating to the DPA should use similar language
relating to a non-fiduciary line of business within JPMorgan Chase Bank
and JPMS.
Accordingly, the Applicant requests that Sections III(u) and (v),
in pertinent part, be modified to read:
(u) Apart from a non-fiduciary line of business within JPMorgan
Chase Bank
[[Page 1422]]
and JPMS, and except as set forth in the Resolution Documents . . .
`Resolution Documents' refers to settlements entered into with the CFTC
and SEC in connection with related, parallel proceedings on the same
date as the DPA.
(v) Apart from a non-fiduciary line of business within JPMorgan
Chase Bank and JPMS, . . .
Department's Response: The Department declines to make the
requested change to proposed condition (u). Proposed condition (u)
mirrors condition (a) in PTE 2017-03, because both conditions provide,
in general terms, that except for a limited number of former employees,
the JPMC Affiliated QPAMs and their employees did not know of nor have
reason to know of the criminal conduct that is the subject of the
relevant misconduct and did not participate in it. Further, the
Department is concerned that the Applicant's ``Resolution Documents''
exception may effectively allow individuals who had knowledge of the
misconduct that is the subject of the DPA to continue to work in the
asset management lines of businesses of JPMC Affiliated QPAMs.
The Department is revising condition (v) consistent with the
Applicant's request (i.e., by adding an exception to the non-fiduciary
business lines of business of JPMS), to more accurately reflect the
terms of and parties to the DPA.
Comment 5: Timing of Audit
Section III(i)(1) of the proposal states: Each JPMC Affiliated QPAM
must submit to an audit conducted every two years by an independent
auditor . . . Each audit must cover the preceding consecutive twelve
(12) month period. The first audit must cover the period from July 10,
2022, through July 9, 2023, and must be completed by December 31, 2023.
The second audit must cover the period from July 1, 2024, through June
30, 2025, and must be completed by December 31, 2025. The third audit
must cover the period from July 1, 2026, through January 9, 2027, and
must be completed by July 8, 2027.
The Applicant requests that the Department revert to the January 9
completion date for each audit that was specified in PTE 2017-03,
instead of December 31.
The Applicant submits that there is no material advantage to plans
in reducing the audit timeline and a December 31 deadline for the first
two audits under the proposed exemption would also pose logistical
challenges because of the holidays, both for the Auditor and the QPAMs.
Department's Response: The Department agrees with the Applicant's
requested change and has amended Section III(i)(1) accordingly.
Comment 6: Definition of JPMC
Section I(d) of the proposed exemption provides: The term ``JPMC''
means JPMorgan Chase and Co.
The Applicant states that PTE 2017-03 includes clarifying language
that the definition of ``JPMC'' refers to the parent entity but does
not include any subsidiaries or other affiliates. The Applicant states
that a change in the definition of ``JPMC'' will be confusing because
certain conditions apply specifically to the parent entity (JPMC),
rather than subsidiaries or other affiliates, and the deletion of the
clarifying language in the definition would inject ambiguity into such
conditions and, for certain conditions, render them incapable of
administration.
Accordingly, the Applicant requests that Section I(d) of the
proposal be modified to read: The term ``JPMC'' means JPMorgan Chase
and Co., the parent entity, but does not include any subsidiaries or
other affiliates.
Department's Response: The Department agrees with the Applicant's
requested change and has amended Section I(d) accordingly.
Comment 7: Timing of Policies and Training
Section III(h)(1) of the proposed exemption provides, in pertinent
part: Each JPMC Affiliated QPAM must maintain, adjust (to the extent
necessary), implement, and follow the written policies and procedures
(the Policies).
Section III(h)(2) of the proposed exemption provides, in pertinent
part: Each JPMC Affiliated QPAM must continue to implement a training
program (the Training) conducted at least annually for all relevant
JPMC Affiliated QPAM asset/portfolio management, trading, legal,
compliance, and internal audit personnel . . .
The Applicant notes that as written, there is no period provided
for modifications required by the proposal (or a final exemption),
which effectively requires any revisions to be completed and
implemented before the effective date of a final exemption. The
Applicant requests that Section III(h)(1) be amended to allow two
months for any required modifications to be made to the Policies to the
extent any modifications are required by this exemption.
With respect to the timing of the Training, the Applicant requests
that the final annual Training under PTE 2017-03 must be completed by
July 9, 2023, and the first annual Training under a final exemption
must be completed by July 9, 2024.
Accordingly, the Applicant requests that Sections III(h)(1) and
(2), in pertinent part, be modified to read:
(h)(1) By a date that is two (2) months after the effective date of
this exemption, each JPMC Affiliated QPAM must maintain, adjust (to the
extent necessary), implement, and follow the written policies and
procedures (the Policies) . . .
(h)(2) . . . The final annual training under PTE 2017-03 must be
completed by all relevant JPMC Affiliated QPAM personnel by July 9,
2023, and the first Training under this exemption must be completed by
all relevant JPMC Affiliated QPAM personnel by July 9, 2024.
Department's Response: The Department agrees with the Applicant's
requested change and has amended Section III(h)(1) and (2) accordingly.
Comment 8: Required Notices
Section III(j)(7) of the proposed exemption provides: Each JPMC
Affiliated QPAM must provide a notice of its obligations under this
Section I(j) to each Covered Plan. For all other prospective Covered
Plans, the JPMC Affiliated QPAM must agree to its obligations under
this Section I(j) in an updated investment management agreement between
the JPMC Affiliated 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 2016-15 or PTE 2017-03 that meets the
terms of this condition. This condition will also be met where the JPMC
Affiliated QPAM previously agreed to the same obligations required by
this Section I(j) in an updated investment management agreement between
the JPMC Affiliated QPAM and a Covered Plan. Notwithstanding the above,
a JPMC Affiliated QPAM will not violate this condition solely because a
Covered Plan refuses to sign an updated investment management
agreement.
Section III(k) of the proposed exemption provides: Within 60 days
after the effective date of this exemption, each JPMC Affiliated QPAM
provides notice of the exemption as published in the Federal Register,
along with a separate summary describing the facts that led to the
Conviction (the Summary), which has 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-
[[Page 1423]]
14 to each sponsor and beneficial owner of a Covered Plan that has
entered into a written asset or investment management agreement with a
JPMC Affiliated QPAM, or the sponsor of an investment fund in any case
where a JPMC Affiliated QPAM acts as a subadviser to the investment
fund in which such ERISA-covered plan and IRA invests. All prospective
Covered Plan clients that enter into a written asset or investment
management agreement with a JPMC Affiliated QPAM after a date that is
60 days after the effective date of this exemption must receive a copy
of the notice of the exemption, the Summary, and the Statement before,
or contemporaneously with, the Covered Plan's receipt of a written
asset or investment management agreement from the JPMC Affiliated QPAM.
The notices may be delivered electronically (including by an email that
has a link to the exemption). Notwithstanding the above, a JPMC
Affiliated QPAM will not violate the condition solely because a Covered
Plan refuses to sign an updated investment management agreement.
For Covered Plan clients that first become clients on or after
January 10, 2023, but before May 10, 2023, a JPMC Affiliated QPAM will
meet the requirements of this Section (k) to the extent the investment
management or comparable agreements with the JPMC Affiliated QPAM
includes notification language referencing PTE 2017-03 and a link to
the required materials, provided the website containing such materials
stipulated under the notification conditions in this proposed
exemption, if granted, is updated, as necessary, by May 10, 2023.
The Applicant requests clarification that to the extent a Covered
Plan client received notices as required pursuant to Sections I(j)(7)
and I(k) of PTE 2017-03, a new notice would not be required, provided
the website currently containing the materials stipulated under such
sections of PTE 2017-03 is updated, as necessary, to incorporate any
modifications to the comparable provisions in this exemption (e.g.,
Sections III(j)(7) and III(k)), by May 10, 2023 (four months following
the effective date of this exemption, if granted).
The Applicant states that if the expanded definition of ``actual
losses'' in Section III(j)(2) is the only substantive amendment to this
condition, as compared against PTE 2017-03, a repeat notice due solely
to this modification would be likely to confuse Covered Plans without a
material benefit.
The Applicant states that it is likely that many clients that
retain the JPMC Affiliated QPAMs shortly after the effective date of
the final exemption (January 10, 2023) will enter into investment
management or comparable agreements with the JPMC Affiliated QPAMs that
continue to include notification language referencing PTE 2017-03 and a
link to the required materials thereunder. As the Department did
through email clarification when PTE 2017-03 was published, the
Applicant requests that it should also be considered to have met the
notification requirements in the exemption for such clients that first
become Covered Plan clients on or after January 10, 2023, but before
May 10, 2023, to the extent the investment management or comparable
agreements with the JPMC Affiliated QPAMs include notification language
referencing PTE 2017-03 and a link to the required materials, provided
the website containing such materials stipulated under the notification
conditions in the exemption is updated, as necessary, by May 10, 2023.
The Applicant expects that clients that first become Covered Plan
clients on or after May 10, 2023 will enter into agreements with the
JPMC Affiliated QPAMs that include notification language specifically
referencing this exemption, including links to the updated website
containing the materials stipulated under the conditions of this
exemption.
Accordingly, the Applicant requests that Section III(j)(7) be
modified to read:
(7) Each JPMC Affiliated QPAM must provide a notice of its
obligations under this Section III(j) to each Covered Plan. This
condition will be deemed met for: (i) each Covered Plan that received a
notice pursuant to Section I(i) of PTE 2016-15 or Section I(j)(7) of
PTE 2017-03 prior to January 10, 2023 (the effective date of this
exemption), and (ii) each Covered Plan that receives a notice on or
after January 10, 2023, but before May 10, 2023, pursuant to an
investment management or comparable agreement with the JPMC Affiliated
QPAM that includes notification language referencing the obligations
set forth in Section I(j) of PTE 2017-03 and a link to the required
materials thereunder, provided that the website containing the
materials stipulated under such section of PTE 2017-03 is updated, as
necessary, to incorporate any modifications to the comparable
provisions within this Section III(j)(7) by May 10, 2023 (four months
following the effective date of this exemption). For Covered Plans that
enter into an investment management or comparable agreement with the
JPMC Affiliated QPAM on or after May 10, 2023, the JPMC Affiliated QPAM
must agree to its obligations under this Section III(j) within such
investment management agreement between the JPMC Affiliated QPAM and
such clients or other written contractual agreement (i.e., such
agreements will include notification language referencing the
obligations under this exemption--not PTE 2017-03--and a link to the
required materials hereunder). This condition will be deemed met for
each Covered Plan that received a notice pursuant to PTE 2016-15 or PTE
2017-03. This condition will also be met where the JPMC Affiliated QPAM
previously agreed to a substantially similar obligation required by
this Section III(j) in an updated investment management agreement
between the JPMC Affiliated QPAM and a Covered Plan. Notwithstanding
the above, a JPMC Affiliated QPAM will not violate this condition
solely because a Covered Plan refuses to sign an updated investment
management agreement;
The Applicant also requests that Section III(k) be modified to
read:
Each JPMC Affiliated QPAM must provide a copy of the exemption as
published in the Federal Register, along with a separate summary
describing the facts that led to the Conviction (the Summary), which
has 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 (collectively, the ``Exemption Notice
Materials''), to each Covered Plan that has entered into a written
asset or investment management agreement with a JPMC Affiliated QPAM,
or the sponsor of an investment fund in any case where a JPMC
Affiliated QPAM acts as a sub-adviser to the investment fund in which
such ERISA-covered plan and IRA invests. This condition will be deemed
met for: (i) each Covered Plan that received a notice pursuant to
Section I(k) of PTE 2017-03 prior to January 10, 2023 (the effective
date of this exemption), and (ii) each Covered Plan that receives a
notice on or after January 10, 2023, but before May 10, 2023, pursuant
to an investment management or comparable agreement with the JPMC
Affiliated QPAM that includes notification language referencing the
materials set forth in Section I(k) of PTE 2017-03 and a link to the
required materials thereunder, provided that the website containing the
materials stipulated under such section of PTE 2017-03 is updated, as
necessary, to incorporate the Exemption Notice Materials specified in
this Section III(k) by May 10, 2023 (four months following the
effective date of the exemption). For
[[Page 1424]]
Covered Plan clients that enter into a written investment management or
comparable agreement with a JPMC Affiliated QPAM on or after May 10,
2023, the JPMC Affiliated QPAM will provide the Exemption Notice
Materials described in this Section III(k) within such investment
management agreement between the JPMC Affiliated QPAM and such clients
or other written contractual agreement (i.e., such agreements will
include language referencing the Exemption Notice Materials under this
Section III(k) of exemption--not PTE 2017-03--and a link to the website
where such Exemption Notice Materials may be accessed). The notices may
be delivered electronically (including by a link to the exemption).
Notwithstanding the above, a JPMC Affiliated QPAM will not violate the
condition solely because a Covered Plan refuses to sign an updated
investment management agreement;
Department's Response: The Department declines to make the
requested changes with one exception. The Applicant has not
demonstrated that simply updating a website without sending a
corresponding notification of the update to Covered Plans would
represent adequate notice. Without a corresponding notice that directs
Covered Plans to access the updated website, Covered Plans may never
become aware that (a) a new exemption has been published; or (b) that
the obligations of the JPMC Affiliated under Section (III)(j) have been
modified.
The Department confirms that the Applicant will meet the
notification requirements in the exemption with respect to such clients
that first become Covered Plan clients on or after January 10, 2023,
but before May 10, 2023, to the extent the investment management or
comparable agreements with the JPMC Affiliated QPAMs include
notification language referencing PTE 2017-03 and a link to the
required materials, provided the website containing such materials
stipulated under the notification conditions in the exemption is
updated, as necessary, by May 10, 2023.
The Department notes that with respect to the notice of obligations
requirement in Section III(j)(7), all Covered Plans must receive a
notice that includes the clarified definition of actual losses as
stated in Section III(j)(2) of this exemption (PTE 2023-01). The
Department notes that with respect to the notice of obligations
requirement in Section III(j)(7), all Covered Plans must receive a
notice that includes the clarified definition of actual losses as
provided in Section III(j)(2) of this exemption (PTE 2023-01). Covered
Plans that previously received a notice in connection with PTEs 2016-15
or 2017-03 must receive a new notice if the notice they previously
received did not include the definition of actual losses provided in
this exemption.
Comment 9: Appointment of Compliance Officer
Section III(m) of the proposed exemption provides, in pertinent
part: Within 60 days after the effective date of this exemption, each
JPMC Affiliated QPAM must designate a senior compliance officer (the
Compliance Officer) who will be responsible for compliance with the
Policies and Training requirements described herein.
The Applicant requests confirmation that there is no need to
reappoint the Compliance Officer appointed pursuant to PTE 2017-03. In
addition, the Applicant notes that PTE 2017-03 required JPMC to
designate the Compliance Officer, rather than the Affiliated QPAMs or
relevant lines of business. The Applicant requests confirmation that
the JPMC Affiliated QPAMs or lines of business need not reappoint the
Compliance Officer appointed by JPMC pursuant to PTE 2017-03.
Department's Response: The Department confirms that there is no
need to reappoint the Compliance Officer appointed pursuant to PTE
2017-03.
Comment 10: Exemption Review
Section III(m)(2)(i) of the proposed exemption provides, in
pertinent part: The annual Exemption Review includes a review of the
JPMC Affiliated QPAM's compliance with and effectiveness of the
Policies and Training and of the following: . . . the most recent Audit
Report issued pursuant to this exemption or PTE 2017-03; . . .
The Applicant submits that the Department did not intend for this
condition to require the JPMC Affiliated QPAMs to comment on the audit
report. Instead, the Applicant believes that the Department intended to
require the Compliance Officer to comment on any violations raised by
the audit. Accordingly, the Applicant requests that Section
III(m)(2)(i), in pertinent part, be modified to read: The annual
Exemption Review includes a review of the JPMC Affiliated QPAM's
compliance with and effectiveness of the Policies and Training and of
the following: . . . any compliance failures referenced in the most
recent Audit Report issued pursuant to this exemption or PTE 2017-03;.
. .
Department's Response: The Department believes the Applicant's
requested change is too narrow. However, the Department sees merit in
focusing the JPMC Affiliated QPAM's review on each material error,
recommendation, and compliance failure identified in the Audit Report,
and has modified the exemption accordingly.
Comment 11: Direction of Investment Fund
Section III(d) of the proposed exemption provides, in pertinent
part: At all times during the Exemption Period, no JPMC Affiliated 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 JPMC Affiliated QPAM in reliance on PTE
84-14, or with respect to which a JPMC Affiliated QPAM has expressly
represented to a Covered Plan that it qualifies as a QPAM or relies on
the QPAM class exemption, to enter into any transaction with JPMC, or
to engage JPMC 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.
The Applicant suggests that this condition should be simplified by
referring to ``Covered Plan,'' as opposed to repeating in this
provision the definition of ``Covered Plan'' already set forth in
Section I(b).\11\ As the language used in Section III(d) is
substantively identical, using the term ``Covered Plan'' in this
condition would achieve the same result.
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\11\ Section I(b) defines a ``Covered Plan'' to mean ``a plan
subject to Part IV of Title I of ERISA (an `ERISA-covered plan') or
a plan subject to Code section 4975 (an `IRA'), in each case, with
respect to which a JPMC Affiliated QPAM relies on PTE 84-14, or with
respect to which a JPMC Affiliated QPAM (or any JPMC affiliate) has
expressly represented that the manager qualifies as a QPAM or relies
on the QPAM class exemption (PTE 84-14).''
---------------------------------------------------------------------------
Department's Response: The Department agrees with the Applicant's
requested change and has amended Section III(d) accordingly.
Comment 12: Transition for Newly Acquired Asset Managers
The Applicant states that from time to time, JPMC acquires asset
managers that rely, as of the effective date of the acquisition, on the
QPAM Exemption. According to the Applicant, when a manager is in the
process of being acquired, it is generally unwilling, or practically
unable, to communicate with its clients regarding all the terms of the
[[Page 1425]]
acquiror's individual QPAM exemption, e.g., in case the transaction
does not close. In addition, the associated information and
documentation may raise questions from plan clients that the manager
being acquired cannot answer, and it would be inappropriate to allow
the acquiror to talk directly to the manager's clients prior to close.
The Applicant states that, while the exemption has many
requirements, all of which must be contained in the policies and
procedures of the newly acquired manager, the acquired entity is
typically unable to change its policies and procedures until the
transaction has closed. Only at the acquisition's close does the
acquired manager try to meld new policies and procedures related to the
QPAM Exemption to its own policies.
The Applicant submits that the consequences for violating the
exemption are severe, and the acquired manager would be understandably
reluctant to accept these liabilities until it had trained its own
employees. Further, the Applicant expects that it would be quite
challenging for the independent auditor to insert an entirely new
entity, with which it has no familiarity, into its audit testing in
real-time (to the extent it even has the necessary resources to expand
its audit and can confirm it remains independent from the acquired
manager).
The Applicant states that in the prior and current exemptions (PTEs
2016-15 and 2017-03) the Department allowed for six months to comply
with all of the exemption conditions at the outset. However, for a
newly acquired manager, there is no time provided at all. The Applicant
asserts that it is nearly impossible to come into full compliance with
the exemption before any such acquisition closes, given all of the
conditions regarding notices, training, policies, compliance regimes,
etc.
As stated by the Applicant, if full compliance with the exemption
is not in place as of an acquisition's closing date, the acquired
manager may not be able to transact in reliance on PTE 84-14 on behalf
of its plan clients, even where it was doing so immediately prior to
the closing date. For plans managed by the acquired manager,
transactions may have to be terminated, strategies changed, and
guidelines amended, causing disruption to such plans through no fault
of their own.
The Applicant requests that with respect to any newly acquired
manager relying on PTE 84-14, the operative terms of the exemption
shall first apply after a date that is six months after the closing
date for the acquisition. In addition, the acquired manager could
continue to rely on PTE 84-14 without conditions during that six-month
period, which can be used to provide the necessary notices to the new
affiliate's clients, provide training to the new affiliate's employees,
draft policies and procedures, accommodate the audit schedule, and make
sure that systems are in place to implement the ERISA policies, etc.
The Applicant requests the addition of the following language to
the operative language of the exemption:
With respect to an asset manager that becomes a JPMC Affiliated
QPAM after the effective date of this exemption by virtue of being
acquired (in whole or in part) by JPMC or a subsidiary or affiliate of
JPMC, the newly-acquired JPMC Affiliated QPAM would not be precluded
from relying on the exemptive relief provided by PTE 84-14
notwithstanding the Conviction as of the closing date for the
acquisition; however, the operative terms of the exemption shall not
apply to the newly-acquired JPMC Affiliated QPAM until a date that is
six (6) months after the closing date for the acquisition. To that end,
the newly-acquired JPMC Affiliated QPAM will initially submit to an
audit pursuant to Section III(i) of this exemption as of the first
audit period that begins on a date following the date that is six (6)
months after the closing date for the acquisition.
Department's Response: The Department agrees, in part, with the
Applicant's requested change. However, the Department believes any new
JPMC Affiliated QPAM must be subject to an audit covering the entirety
of the JPMC QPAM's reliance on this exemption. Also, the newly-acquired
JPMC Affiliated QPAM must be included in the first audit that occurs
following the QPAM's acquisition. The Department is adding a new
condition (w) in accordance with the Applicant's request, with an
amended final sentence that reads:
. . . To that end, the newly-acquired JPMC Affiliated QPAM will
initially submit to an audit pursuant to Section III(i) of this
exemption as of the first audit period that begins following the
closing date for the acquisition. The period covered by the audit must
begin on the date on which the JPMC Affiliated QPAM was acquired.
Number of Convictions
The Proposal references ``Convictions'' in Section III(n). Because
a single conviction necessitated the need for exemptive relief, the
Applicant requests that this reference to ``Convictions'' be replaced
by ``the Conviction.''
Department's Response: The Department agrees with the Applicant's
requested change and has amended Section III(n) accordingly.
Comments From the Public
The Department received one written comment in support of the
exemption and another written comment requesting that the exemption be
denied. The comment requesting a denial however did not raise any
substantive issues. The Department also received multiple phone calls
from interested persons requesting an explanation of the exemption.
Comment From the Department
In Section III(j) of this grant notice, the Department changed
several references from ``Section I'' to Section ``III.''
The Department also notes that the application file number was
misstated in the proposed exemption as D-12035. The correct application
file for this exemption is D-12064.
The complete application file (D-12064) 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, please refer to the notice of
proposed exemption published on October 20, 2022, at 87 FR 63802.
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under ERISA Section 408(a) does not relieve a fiduciary or other party
in interest from certain requirements of other ERISA provisions,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
ERISA Section 404, which, among other things, require a fiduciary to
discharge their duties respecting the plan solely in the interest of
the plan's participants and beneficiaries and in a prudent fashion in
accordance with ERISA Section 404(a)(1)(B).
(2) As required by ERISA Section 408(a), the Department hereby
finds that the exemption is: (a) administratively feasible; (b) in the
interests of the affected plans and their participants and
beneficiaries; and (c) protective of the rights of the participants and
beneficiaries of the affected plans.
[[Page 1426]]
(3) This exemption is supplemental to, and not in derogation of,
any other ERISA provisions, including statutory or administrative
exemptions and transitional rules. Furthermore, the fact that a
transaction is subject to an administrative or statutory exemption is
not dispositive of determining whether the transaction is in fact a
prohibited transaction.
(4) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describe all material terms of the transactions
that are the subject of the exemption.
Accordingly, the following exemption is granted under the authority
of ERISA Section 408(a), and in accordance with the procedures set
forth in 29 CFR part 2570, subpart B: \12\
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\12\ 76 FR 66637, 66644 (October 27, 2011).
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Exemption
Section I. Definitions
(a) The term ``Conviction'' means the judgment of conviction
against JPMC for violation of the Sherman Antitrust Act, 15 U.S.C. 1,
entered in the District Court for the District of Connecticut (the
District Court) (case number 3:15-cr-79-SRU). For all purposes under
this exemption, ``conduct'' of any person or entity that is the
``subject of [a] Conviction'' encompasses the conduct described in
Paragraph 4(g)-(i) of the Plea Agreement filed in the District Court in
case number 3:15-cr-79-SRU (the Plea Agreement).
(b) The term ``Covered Plan'' means a plan subject to Part IV of
Title I of ERISA (an ``ERISA-covered plan'') or a plan subject to Code
section 4975 (an ``IRA''), in each case, with respect to which a JPMC
Affiliated QPAM relies on PTE 84-14, or with respect to which a JPMC
Affiliated QPAM (or any JPMC 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 JPMC 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. Further,
a JPMC Affiliated QPAM may disclaim reliance on QPAM status or PTE 84-
14 in a written modification of a contract, arrangement, or agreement
with an ERISA-covered plan or IRA, where the modification is made in a
bilateral document signed by the client, the client's attention is
specifically directed toward the disclaimer, and the client is advised
in writing that, with respect to any transaction involving the client's
assets, the JPMC Affiliated QPAM will not represent that it is a QPAM,
and will not rely on the relief described in PTE 84-14.
(c) The term ``Exemption Period'' means January 10, 2023, through
January 9, 2027.
(d) The term ``JPMC'' means JPMorgan Chase and Co., the parent
entity, but does not include any subsidiaries or other affiliates.
(e) The term ``JPMC 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 or represents to
Covered Plans that it qualifies as a QPAM, and with respect to which
JPMC is a current or future ``affiliate'' (as defined in Section
VI(d)(1) of PTE 84-14). The term ``JPMC Affiliated QPAM'' excludes the
parent entity, JPMC, the entity implicated in the criminal conduct that
is the subject of the Conviction.
(f) The term ``JPMC 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 whom JPMC owns a direct or indirect five percent or more
interest but is not an ``affiliate'' (as defined in Section VI(d)(1) of
PTE 84-14).
(g) The term ``Newly Acquired JPMC Affiliated QPAM'' means an asset
manager that becomes a JPMC Affiliated QPAM after the effective date of
this exemption by virtue of being acquired (in whole or in part) by
JPMC or a subsidiary or affiliate of JPMC.
Section II. Covered Transactions
Under this exemption, the JPMC Affiliated QPAMs and the JPMC
Related QPAMs, as defined in Sections I(e) and I(f), respectively,
would not be precluded from relying on the exemptive relief provided by
Prohibited Transaction Class Exemption 84-14 (PTE 84-14 or the QPAM
Exemption) notwithstanding the Conviction, as defined in Section I(a),
during the Exemption Period,\13\ provided that the conditions set forth
in in Section III below are satisfied.
---------------------------------------------------------------------------
\13\ Section I(g) of PTE 84-14 generally provides relief only if
``[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 felonies including violation of the Sherman
Antitrust Act, Title 15 United States Code, Section 1.
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Section III. Conditions
(a) Other than a single individual who worked for a non-fiduciary
business within JPMorgan Chase Bank and who had no responsibility for,
nor exercised any authority in connection with, the management of plan
assets, the JPMC Affiliated QPAMs and the JPMC Related QPAMs (including
their officers, directors, agents other than JPMC, and employees of
such 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, and did not participate in the criminal conduct
that is the subject of the Conviction. Further, any other party engaged
on behalf of the JPMC Affiliated QPAMs and JPMC Related QPAMs who had
responsibility for or exercised authority in connection with the
management of plan assets did not know or have reason to know of and
did not participate in the criminal conduct that is the subject of the
Conviction. For purposes of this exemption, ``participate in'' refers
not only to active participation n the criminal conduct of JPMC that is
the subject of the Conviction, but also to knowing approval of the
criminal conduct or knowledge of such conduct without taking active
steps to prohibit it, including reporting the conduct to such
individual's supervisors, and to the Board of Directors;
(b) Apart from a non-fiduciary line of business within JPMorgan
Chase Bank, the JPMC Affiliated QPAMs and the JPMC Related QPAMs
(including their officers, directors, and agents other than JPMC, and
employees of such JPMC 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 that is the
subject of the Conviction. Further, any other party engaged on behalf
of the JPMC Affiliated QPAMs and the JPMC Related 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 that is the subject of the Conviction;
(c) The JPMC Affiliated QPAMs do not currently and will not in the
future employ or knowingly engage any of the individuals that
participated in the criminal conduct that is the subject of the
Conviction.
[[Page 1427]]
(d) At all times during the Exemption Period, no JPMC Affiliated
QPAM will use its authority or influence to direct a Covered Plan to
enter into any transaction with JPMC, or to engage JPMC to provide any
service to such Covered Plan, for a direct or indirect fee borne by
such Covered Plan, 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 a JPMC Affiliated QPAM or a JPMC Related QPAM to
satisfy Section I(g) of PTE 84-14 arose solely from the Conviction;
(f) A JPMC Affiliated QPAM or a JPMC 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 Code Section 4975 (an IRA) in a manner
that it knew or should have known would: further the criminal conduct
that is the subject of the Conviction; or cause the JPMC Affiliated
QPAM, the JPMC Related QPAM, or their affiliates to directly or
indirectly profit from the criminal conduct that is the subject of the
Conviction;
(g) Other than with respect to employee benefit plans maintained or
sponsored for its own employees or the employees of an affiliate, JPMC
will not act as a fiduciary within the meaning of ERISA Section
3(21)(A)(i) or (iii), or Code Section 4975(e)(3)(A) and (C), with
respect to Covered Plan assets; provided, however, that JPMC will not
be treated as violating the conditions of this exemption solely because
it acted as an investment advice fiduciary within the meaning of ERISA
Section 3(21)(A)(ii) or Code Section 4975(e)(3)(B);
(h)(1) By a date that is two (2) months after the effective date of
this exemption, each JPMC Affiliated QPAM must maintain, adjust (to the
extent necessary), implement, and follow the written policies and
procedures (the Policies). The Policies must require and be reasonably
designed to ensure that:
(i) The asset management decisions of the JPMC Affiliated QPAM are
conducted independently of the corporate management and business
activities of JPMC;
(ii) The JPMC Affiliated QPAM fully complies with ERISA's fiduciary
duties and with ERISA and the Code's prohibited transaction provisions,
as applicable with respect to each Covered Plan, and does not knowingly
participate in any violation of these duties and provisions with
respect to Covered Plans;
(iii) The JPMC 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 JPMC Affiliated 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 JPMC Affiliated QPAM's knowledge at the
time, the JPMC 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;
(vi) The JPMC Affiliated QPAM complies with the terms of this
exemption; and
(vii) Any violation of or failure to comply with an item in
subparagraphs (ii) through (vi) is corrected as soon as reasonably
possible upon discovery or as soon after 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, to the head of
compliance and the general counsel (or their functional equivalent) of
the relevant line of business that engaged in the violation or failure,
and the independent auditor responsible for reviewing compliance with
the Policies. A JPMC Affiliated QPAM will not be treated as having
failed to develop, implement, maintain, or follow the Policies,
provided it corrects any instance of noncompliance as soon as
reasonably possible upon discovery, or as soon as reasonably possible
after the QPAM reasonably should have known of the noncompliance
(whichever is earlier), and provided it adheres to the reporting
requirements set forth in this subparagraph (vii);
(2) Each JPMC Affiliated QPAM must continue to implement a training
program (the Training) conducted at least annually for all relevant
JPMC Affiliated QPAM asset/portfolio management, trading, legal,
compliance, and internal audit personnel. The final annual training
under PTE 2017-03 must be completed by all relevant JPMC Affiliated
QPAM personnel by July 9, 2023, and the first Training under this
exemption must be completed by all relevant JPMC Affiliated QPAM
personnel by July 9, 2024. The Training required under this exemption
may be conducted electronically and 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 to perform the tasks required
by this exemption;
(i)(1) Each JPMC Affiliated QPAM must submit to an audit conducted
every two years 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 JPMC
Affiliated QPAM's compliance with the Policies and Training conditions
described herein. The audit requirement must be incorporated in the
Policies. Each audit must cover the preceding consecutive twelve (12)
month period. The first audit must cover the period from July 10, 2022,
through July 9, 2023, and must be completed by January 9, 2024. The
second audit must cover the period from July 1, 2024, through June 30,
2025, and must be completed by January 9, 2026. The third audit must
cover the period from July 1, 2026, through January 9, 2027, and must
be completed by July 8, 2027;
(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, each JPMC Affiliated QPAM
and, if applicable, JPMC, will grant the auditor unconditional access
to its businesses, including, but not limited to: its computer systems;
business records; transactional data; workplace locations; training
materials; and personnel. Such access will be provided only to the
extent that it is not prevented by state or federal statute, or
involves communications subject to attorney client privilege and may be
limited to information relevant to the auditor's objectives as
specified by the terms of this exemption;
(3) The auditor's engagement must specifically require the auditor
to determine whether each JPMC Affiliated QPAM has developed,
implemented, maintained, and followed the Policies in accordance with
the conditions of this exemption, and has developed and implemented the
Training, as required herein;
[[Page 1428]]
(4) The auditor's engagement must specifically require the auditor
to test each JPMC Affiliated QPAM's operational compliance with the
Policies and Training conditions. In this regard, the auditor must
test, for each QPAM, a sample of the QPAM's transactions involving
Covered Plans 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 for
completing the audit described in Section III(i)(1), the auditor must
issue a written report (the Audit Report) to JPMC and the JPMC
Affiliated QPAM to which the audit applies that describes the
procedures performed by the auditor during the course of its
examination. At its discretion, the auditor may issue a single
consolidated Audit Report that covers all the JPMC Affiliated QPAMs.
The Audit Report must include the auditor's specific determinations
regarding:
(i) the adequacy of each JPMC Affiliated QPAM's Policies and
Training; each JPMC Affiliated QPAM's compliance with the Policies and
Training conditions; the need, if any, to strengthen such Policies and
Training; and any instance of the respective JPMC Affiliated QPAM's
noncompliance with the written Policies and Training described in
Section III(h) above. The JPMC Affiliated QPAM must promptly address
any noncompliance and promptly address or prepare a written plan of
action to address any determination by the auditor regarding the
adequacy of the Policies and Training and the auditor's recommendations
(if any) with respect to strengthening the Policies and Training of the
respective JPMC Affiliated QPAM. Any action taken, or the plan of
action to be taken, by the respective JPMC Affiliated QPAM must be
included in an addendum to the Audit Report (and such addendum must be
completed before the certification described in Section III(i)(7)
below). In the event such a plan of action to address the auditor's
recommendation regarding the adequacy of the Policies and Training is
not completed by the time the Audit Report is submitted, the following
period's Audit Report must state whether the plan was satisfactorily
completed. Any determination by the auditor that the respective JPMC
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 JPMC Affiliated QPAM has complied with the
requirements under this subparagraph must be based on evidence that the
particular JPMC 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 Report
created by the compliance officer (the Compliance Officer), as
described in Section III(m) below, as the basis for the auditor's
conclusions in lieu of independent determinations and testing performed
by the auditor, as required by Section III(i)(3) and (4) above; and
(ii) The adequacy of the most recent Annual Review described in
Section III(m);
(6) The auditor must notify the respective JPMC Affiliated 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 each Audit Report, the general counsel, or one
of the three most senior executive officers of the line of business
engaged in discretionary asset management services through the JPMC
Affiliated QPAM with respect 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 and that to the best of
such officer's knowledge at the time, the JPMC Affiliated QPAM has
addressed, corrected or remedied any noncompliance and inadequacy, or
has an appropriate written plan to address any inadequacy regarding the
Policies and Training identified in the Audit Report. The certification
must also include the signatory's determination that the Policies and
Training in effect at the time of signing are adequate to ensure
compliance with the conditions of this exemption and with the
applicable provisions of ERISA and the Code. Notwithstanding the above,
no person, including any person referenced in the Plea Agreement that
gave rise to the Conviction, who knew of, or should have known of, or
participated in, any misconduct described in the Plea Agreement
underlying the Conviction, by any party, may provide the certification
required by this exemption, unless the person took active documented
steps to stop the misconduct;
(8) The Risk Committee of JPMC's Board of Directors is provided a
copy of each Audit Report, and a senior executive officer with a direct
reporting line to the highest-ranking legal compliance officer of JPMC
must review the Audit Report for each JPMC Affiliated QPAM and certify
in writing, under penalty of perjury, that such officer has reviewed
each Audit Report;
(9) Each JPMC Affiliated QPAM provides its certified Audit Report,
by electronic mail to [email protected]. This delivery must take place no
later than thirty (30) days following completion of the Audit Report.
The Audit Report will be made part of the public record regarding this
exemption. Furthermore, each JPMC 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) Each JPMC Affiliated QPAM and the auditor must submit, to e-
[email protected], any engagement agreement(s) entered into pursuant to the
engagement of the auditor under this exemption no later than two (2)
months after the execution of any such engagement agreement;
(11) The auditor must provide the Department, upon request access
to all the workpapers created and utilized in the course of the audit,
for inspection and review, provided such access and inspection is
otherwise permitted by law; and
(12) JPMC 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 JPMC;
(j) Throughout the Exemption Period, with respect to any
arrangement, agreement, or contract between a JPMC Affiliated QPAM and
a Covered Plan, the JPMC Affiliated QPAM agrees and warrants:
(1) To comply with ERISA and the Code, as applicable with respect
to such Covered Plan; refrain from engaging in prohibited transactions
that are not otherwise exempt (and to promptly correct any prohibited
transactions); and comply with the standards of prudence and loyalty
set forth in ERISA Section 404 with respect to each such Covered Plan,
to the extent that section is applicable;
(2) To indemnify and hold harmless the Covered Plan for any actual
losses resulting directly from a JPMC Affiliated QPAM's violation of
ERISA's fiduciary duties, as applicable, and of the
[[Page 1429]]
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 JPMC Affiliated 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 Conviction. This condition applies only to
actual losses caused by the JPMC Affiliated QPAM's violations. The term
Actual Losses includes, but is not limited to, losses and related costs
arising from unwinding transactions with third parties and from
transitioning Plan assets to an alternative asset manager as well as
costs associated with any exposure to excise taxes under Code section
4975 as a result of a QPAM's inability to rely upon the relief in the
QPAM Exemption.
(3) Not to require (or otherwise cause) the Covered Plan to waive,
limit, or qualify the liability of the JPMC 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 JPMC Affiliated QPAM with
respect to any investment in a separately managed account or pooled
fund subject to ERISA and managed by the 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 of
these arrangements involving investments in pooled funds subject to
ERISA entered into after the effective date of this exemption, the
adverse consequences must relate to a lack of liquidity of the
underlying assets, valuation issues, or regulatory reasons that prevent
the fund from promptly redeeming a Covered Plan's investment, and the
restrictions must be applicable to all such investors and effective no
longer than reasonably necessary to avoid the adverse consequences;
(5) Not to impose any fees, penalties, or charges for such
termination or withdrawal with the exception of reasonable fees,
appropriately disclosed in advance, that are specifically designed to
prevent generally recognized abusive investment practices or
specifically designed to ensure equitable treatment of all investors in
a pooled fund in the event the withdrawal or termination may have
adverse consequences for all other investors, provided that such fees
are applied consistently and in like manner to all such investors;
(6) Not to include exculpatory provisions disclaiming or otherwise
limiting liability of the JPMC Affiliated QPAM for a violation of such
agreement's terms. To the extent consistent with ERISA Section 410,
however, this provision does not prohibit disclaimers for liability
caused by an error, misrepresentation, or misconduct of a plan
fiduciary or other party hired by the plan fiduciary who is independent
of JPMC and its affiliates, or damages arising from acts outside the
control of the JPMC Affiliated QPAM; and
(7) Each JPMC Affiliated QPAM must provide a notice of its
obligations under this Section III(j) to each Covered Plan. For all
other prospective Covered Plans, the JPMC Affiliated QPAM must agree to
its obligations under this Section III(j) in an updated investment
management agreement between the JPMC Affiliated 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-
15 or PTE 2017-03 that meets the terms of this condition. This
condition will also be met where the JPMC Affiliated QPAM previously
agreed to the same obligations required by this Section III(j) in an
updated investment management agreement between the JPMC Affiliated
QPAM and a Covered Plan. Notwithstanding the above, a JPMC Affiliated
QPAM will not violate this condition solely because a Covered Plan
refuses to sign an updated investment management agreement;
(k) Within 60 days after the effective date of this exemption, each
JPMC Affiliated QPAM provides notice of the exemption as published in
the Federal Register, along with a separate summary describing the
facts that led to the Conviction (the Summary), which has 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 has entered into a written asset or investment management
agreement with a JPMC Affiliated QPAM, or the sponsor of an investment
fund in any case where a JPMC Affiliated QPAM acts as a sub-adviser to
the investment fund in which such ERISA-covered plan and IRA invests.
All prospective Covered Plan clients that enter into a written asset or
investment management agreement with a JPMC Affiliated QPAM after a
date that is 60 days after the effective date of this exemption must
receive a copy of the notice of the exemption, the Summary, and the
Statement before, or contemporaneously with, the Covered Plan's receipt
of a written asset or investment management agreement from the JPMC
Affiliated QPAM. The notices may be delivered electronically (including
by an email that has a link to the exemption). Notwithstanding the
above, a JPMC Affiliated QPAM will not violate the condition solely
because a Covered Plan refuses to sign an updated investment management
agreement.
For Covered Plan clients that first become clients on or after
January 10, 2023, but before May 10, 2023, a JPMC Affiliated QPAM will
meet the requirements of this Section (k) to the extent the investment
management or comparable agreements with the JPMC Affiliated QPAM
includes notification language referencing PTE 2017-03 and a link to
the required materials, provided the website containing such materials
stipulated under the notification conditions in this exemption, if
granted, is updated, as necessary, by May 10, 2023;
(l) The JPMC 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 affiliate of the JPMC Affiliated QPAMs (as
defined in Section VI(d) of PTE 84-14) is convicted of a crime
described in Section I(g) of PTE 84-14 (other than the Conviction),
relief in this exemption would terminate immediately;
(m)(1) Within 60 days after the effective date of this exemption,
each JPMC Affiliated QPAM must designate 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 JPMC
Affiliated QPAM may designate its own Compliance Officer(s).
Notwithstanding the above, no person, including any person referenced
in the Statement of Facts that gave rise to the Plea Agreement, who
knew of, or should have known of, or participated in, any misconduct
described in the Statement of Facts, by any party, may be involved with
the designation or responsibilities required by this condition, unless
the person took active documented steps to stop the misconduct. The
Compliance Officer must conduct a review of each twelve-month period of
the Exemption Period (the Exemption Review), to determine the adequacy
and effectiveness of the implementation of the Policies and Training.
With respect
[[Page 1430]]
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 legal compliance for
asset management.
(2) With respect to the Exemption Review, the following conditions
must be met:
(i) The annual Exemption Review includes a review of the JPMC
Affiliated QPAM's compliance with and effectiveness of the Policies and
Training and of the following: any compliance matter related to the
Policies or Training that was identified by, or reported to, the
Compliance Officer or others within the compliance and risk control
function (or its equivalent) during the previous year; any material
error, recommendation, and compliance failure identified in the most
recent Audit Report; any material change in the relevant business
activities of the JPMC 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
JPMC Affiliated QPAMs;
(ii) The Compliance Officer prepares a written report for the
Exemption Review (an Exemption Report) that (A) summarizes their
material activities during the prior year; (B) sets forth any instance
of noncompliance discovered during the prior 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 the Exemption Report, the Compliance Officer must certify
in writing that to the best of their knowledge at the time: (A) the
report is accurate; (B) the Policies and Training are working in a
manner which is reasonably designed to ensure that the Policies and
Training requirements described herein are met; (C) any known instance
of noncompliance during the prior year and any related correction taken
to date have been identified in the Exemption Report; and (D) the JPMC
Affiliated QPAMs have complied with the Policies and Training, and/or
corrected (or are correcting) any known instances of noncompliance in
accordance with Section III(h) above;
(iv) The Exemption Report must be provided to appropriate corporate
officers of JPMC and each JPMC Affiliated QPAM to which such report
relates; the head of compliance and the general counsel (or their
functional equivalent) of JPMC and the relevant JPMC Affiliated QPAM;
and must be made unconditionally available to the independent auditor
described in Section III(i) above;
(v) The annual Exemption Review, including the Compliance Officer's
written Report, must be completed within three (3) months following the
end of the period to which it relates. The annual Exemption Reviews
under this exemption must cover the following periods: January 10, 2023
through December 31, 2023; January 1, 2024 through December 31, 2024;
January 1, 2025 through December 31, 2025; and January 1, 2026 through
January 9, 2027.
(n) JPMC imposes internal procedures, controls, and protocols to
reduce the likelihood of any recurrence of conduct that is the subject
of the Conviction;
(o) JPMC complies in all material respects with the requirements
imposed by a U.S. regulatory authority in connection with the
Conviction;
(p) Each JPMC Affiliated QPAM maintains records necessary to
demonstrate that the conditions of this exemption have been met for six
(6) years following the date of any transaction for which the JPMC
Affiliated QPAM relies upon the relief in this exemption;
(q) During the Exemption Period, JPMC 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 JPMC 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 ERISA Section 411; and (2) immediately
provide the Department with any information requested by the
Department, as permitted by law, regarding the agreement and/or conduct
and allegations that led to the agreement;
(r) Within 60 days after the effective date of this exemption, each
JPMC 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 JPMC 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. If 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. 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;
(s) A JPMC Affiliated QPAM will not fail to meet the terms of this
exemption solely because a different JPMC Affiliated QPAM fails to
satisfy a condition for relief described in Sections III(c), (d), (h),
(i), (j), (k), (l), (p) or (r); or if the independent auditor described
in Section III(i) fails to comply with a provision of the exemption,
other than the requirement described in Section III(i)(11), provided
that such failure did not result from any actions or inactions of JPMC
or its affiliates; and
(t) All the material facts and representations set forth in the
Summary of Facts and Representations are true and accurate.
(u) Other than former employees who worked on the Precious Metals
Desk and U.S. Treasuries Desk within the CIB in the Global Markets
division, the JPMC Affiliated QPAMs and the JPMC Related QPAMs
(including their officers, directors, agents and employees of such
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, and did not participate in the conduct underlying
the September 29, 2020, deferred prosecution agreement entered into
between the Department of Justice and JPMC, JPMorgan Chase Bank, and
JPMS (the DPA). Further, any other party engaged on behalf of the JPMC
Affiliated QPAMs and JPMC Related QPAMs who had responsibility for or
exercised authority in connection with the management of plan assets
did not know or have reason to know of and did not participate in the
criminal conduct that is the subject of the DPA.
(v) Apart from a non-fiduciary line of business within JPMorgan
Chase Bank and JPMS, the JPMC Affiliated QPAMs and the JPMC Related
QPAMs (including their officers, directors, and
[[Page 1431]]
agents, and employees of such JPMC 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 conduct underlying the DPA.
Further, any other party engaged on behalf of the JPMC Affiliated QPAMs
and the JPMC Related 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 conduct underlying the DPA.
(w) With respect to an asset manager that becomes a JPMC Affiliated
QPAM after the effective date of this exemption by virtue of being
acquired (in whole or in part) by JPMC or a subsidiary or affiliate of
JPMC (a ``newly-acquired JPMC Affiliated QPAM''), the newly-acquired
JPMC Affiliated QPAM would not be precluded from relying on the
exemptive relief provided by PTE 84-14 notwithstanding the Conviction
as of the closing date for the acquisition; however, the operative
terms of the exemption shall not apply to the newly-acquired JPMC
Affiliated QPAM until a date that is six (6) months after the closing
date for the acquisition. To that end, the newly-acquired JPMC
Affiliated QPAM will initially submit to an audit pursuant to Section
III(i) of this exemption as of the first audit period that begins
following the closing date for the acquisition. The period covered by
the audit must begin on the date on which the JPMC Affiliated QPAM was
acquired.
Effective Date: This exemption is effective for a period of four
years, beginning on January 10, 2023, and ending on January 9, 2027.
Accordingly, after considering the entire record developed in
connection with the Applicant's exemption application, the Department
has determined to grant the exemption described above.
Signed at Washington, DC.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2023-00282 Filed 1-6-23; 4:15 pm]
BILLING CODE 4510-29-P