by Bob Valer

Posted: 1/09/2007

The Department of Labor recently finalized Prohibited Transaction Class Exemption ("PTE") 2006-16, which consolidates and restates PTEs 81-6 and 82-63, and applies to securities lending transactions entered into on or after January 2, 2007.  71 Fed. Reg. 63786 (Oct. 31, 2006).  The restated exemption does not change the conditions of PTE 82-63, which provides relief from ERISA self-dealing (sec. 406(b)(1)) for the lending agent's compensation arrangement.  However, the final exemption provides relief from the party-in-interest and other section 406(a) prohibitions by expanding the types of collateral that a plan may accept, and enabling plans to loan securities to certain foreign banks and foreign broker-dealers.  In the latter respect, it goes well beyond the proposed exemption and PTE 81-6.  The consolidated exemption also clarifies that "fee-for-hold" arrangements, as well as loans structured as repurchase agreements, can qualify for the relief.

For more information please contact Bob Valer.