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Proposed Extension of Information Collection Comment Request; Prohibited Transaction Class Exemption 2002-12, Cross-Trades of Securities by Index and Model-Driven Funds

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Employee Benefits Security Administration, Department of Labor.




The Department of Labor, as part of its continuing effort to reduce paperwork and respondent burden, conducts a preclearance consultation program to provide the general public and Federal agencies with an opportunity to comment on proposed and continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA 95). This program helps to ensure that respondents can provide the requested data in the desired format, that the reporting burden (time and financial resources) on the public is minimized, that the public can understand the Department's collection instruments, and that the Department can properly assess the impact of its information collection requirements on respondents. Currently, the Employee Benefits Security Administration (EBSA) is soliciting comments on a proposed extension of the information collection provisions of Prohibited Transaction Class Exemption 2002-12, Cross-Trades of Securities by Index and Model-Driven Funds. A copy of the information collection request (ICR) can be obtained by contacting the individual shown in the Addresses section of this notice.


Written comments must be submitted to the office shown in the Addresses section on or before June 19, 2009.


Direct all written comments to G. Christopher Cosby, Office of Policy and Research, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., Room N-5718, Washington, DC 20210, (202) 693-8410, FAX (202) 219-4745 (These are not toll-free numbers.). Comments may also be submitted electronically to the following Internet e-mail address:

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I. Background

PTE 2002-12 exempts certain transactions that would be prohibited under the Employee Retirement Income Security Act of 1974 (the Act or ERISA) and the Federal Employees' Retirement System Act (FERSA), and provides relief from certain sanctions of the Internal Revenue Code of 1986 (the Code). The exemption permits cross-trades of securities among Index and Model-Driven Funds (Funds) managed by managers (Managers), and among such Funds and certain large accounts (Large Accounts) that engage such Managers to carry out a specific portfolio restructuring program or to otherwise act as a “trading adviser” for such a program. By removing existing barriers to these types of transactions, the exemption increases the incidences of cross-trading, thereby lowering the transaction costs to plans in a number of ways from what they would be otherwise.

In order for the Department to grant an exemption for a transaction or class of transactions that would otherwise be prohibited under ERISA, the statute requires the Department to make a finding that the exemption is administratively feasible, in the interest of the plan and its participants and beneficiaries, and protective of the rights of the participants and beneficiaries. To ensure that Managers have complied with the requirements of the exemption, the Department has included in the exemption certain recordkeeping and disclosure obligations that are designed to safeguard plan assets by periodically providing information to plan fiduciaries, who generally must be independent, about the cross-trading program. Initially, where plans are not invested in Funds, Managers must furnish information to plan fiduciaries about the cross-trading program, provide a statement that the Manager will have a potentially conflicting division of loyalties, and obtain written authorization from a plan fiduciary for a plan to participate in a cross-trading program. For plans that are currently invested in Funds, the Manager must provide annual notices to update the Start Printed Page 17986plan fiduciary and provide the plan with an opportunity to withdraw from the program. For Large Accounts, prior to the cross-trade, the Manager must provide information about the cross-trading program and obtain written authorization from the fiduciary of a Large Account to engage in cross-trading in connection with a portfolio restructuring program. Following completion of the Large Account's restructuring, information must be provided by the Manager about all cross-trades executed in connection with a portfolio-restructuring program. Finally, the exemption requires that Managers maintain for a period of 6 years from the date of each cross-trade the records necessary to enable plan fiduciaries and certain other persons specified in the exemption (e.g., Department representatives or contributing employers), to determine whether the conditions of the exemption have been met.

EBSA previously submitted the information collection provisions of PTE 2002-12 to the Office of Management and Budget (OMB) for review in connection with promulgation of the prohibited transaction exemption. OMB approved the information collection request (ICR) under OMB Control No. 1210-0115. The ICR approval is currently scheduled to expire on August 31, 2009.

II. Desired Focus of Comments

The Department of Labor (Department) is particularly interested in comments that:

  • Provide information related to the number of entities offering Index and Model-Driven Funds and their client plans, and the number of Large Accounts that may make use of the exemption;
  • Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Department, including whether the information will have practical utility;
  • Evaluate the accuracy of the Department's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
  • Enhance the quality, utility, and clarity of the information to be collected; and
  • Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.

III. Current Actions

This notice requests comments on an extension of the information collections in PTE 2002-12. After considering comments received in response to this notice, the Department intends to submit the ICR to OMB for continuing approval. Extension of the information collection provision of the exemption is important because, without the disclosures and recordkeeping provided for in the exemption, participants' and beneficiaries' investments in a pension plan might not be adequately protected. In addition, Managers that cross trade securities among Funds or cross trade securities in connection with the restructuring of a portfolio of a Large Account would be subject to statutorily imposed sanctions under ERISA. Lastly, the exemption provides a benefit to plans and participants through savings that result from index/model cross-trading. No change to the existing ICR is being proposed or made at this time. A summary of the ICR and the current burden estimates follows:

Agency: Employee Benefits Security Administration, Department of Labor.

Title: Prohibited Transaction Class Exemption 2002-12, Cross-Trades of Securities by Index and Model-Driven Funds.

Type of Review: Extension of a currently approved collection of information.

OMB Number: 1210-0115.

Affected Public: Individuals or households; Business or other for-profit; Not-for-profit institutions.

Respondents: 60.

Responses: 960.

Estimated Total Burden Hours: 855.

Comments submitted in response to this notice will be summarized and/or included in the ICR submitted to OMB for approval; they will also become a matter of public record.

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Dated: April 13, 2009.

Joseph S. Piacentini,

Director, Office of Policy and Research, Employee Benefits Security Administration.

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[FR Doc. E9-8904 Filed 4-17-09; 8:45 am]