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DEPARTMENT OF LABOR

Employee Benefits Security Administration

Proposed Exemptions From Certain Prohibited Transaction Restrictions

AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemptions.
SUMMARY: This document contains notices of pendency before the Department of Labor (the Department) of proposed exemptions from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). This notice includes the following proposed exemptions: D-11637 HSBC-North America (U.S.) Tax Reduction Investment Plan; D-11679 Sammons Enterprises, Inc. Employee Stock Ownership ESOP; and D-11683 First Federal Bancshares of Arkansas, Inc. Employees' Savings and Profit Sharing Plan.
DATES: All interested persons are invited to submit written comments or requests for a hearing on the pending exemptions, unless otherwise stated in the Notice of Proposed Exemption, within 45 days from the date ofpublication of thisFederal RegisterNotice.
ADDRESSES: Comments and requests for a hearing should state: (1) The name, address, and telephone number of the person making the comment or request, and (2) the nature of the person's interest in the exemption and the manner in which the person would be adversely affected by the exemption. A request for a hearing must also state the issues to be addressed and include a general description of the evidence to be presented at the hearing. All written comments and requests for a hearing (at least three copies) should be sent to the Employee Benefits Security Administration (EBSA), Office of Exemption Determinations, Room N-5700, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210. Attention: Application No.___, stated in each Notice of Proposed Exemption. Interested persons are also invited to submit comments and/or hearing requests to EBSA via email or FAX. Any such comments or requests should be sent either by email to:moffitt.betty@dol.gov,or by FAX to (202) 219-0204 by the end of the scheduled comment period. The applications for exemption and the comments received will be available for public inspection in the Public Documents Room of the Employee Benefits Security Administration, U.S. Department of Labor, Room N-1513, 200 Constitution Avenue NW., Washington, DC 20210.

Warning:If you submit written comments or hearing requests, do not include any personally-identifiable or confidential business information that you do not want to be publicly-disclosed. All comments and hearing requests are posted on the Internet exactly as they are received, and they can be retrieved by most Internet search engines. The Department will make no deletions, modifications or redactions to the comments or hearing requests received, as they are public records.

SUPPLEMENTARY INFORMATION:

Notice to Interested Persons

Notice of the proposed exemptions will be provided to all interested persons in the manner agreed upon by the applicant and the Department within 15 days of the date of publication in theFederal Register. Such notice shall include a copy of the notice of proposed exemption as published in theFederal Registerand shall inform interested persons of their right to comment and to request a hearing (where appropriate).

The proposed exemptions were requested in applications filed pursuant to section 408(a) of the Act and/or section 4975(c)(2) of the Code, and in accordance with procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. Therefore, these notices of proposed exemption are issued solely by the Department.

The applications contain representations with regard to the proposed exemptions which are summarized below. Interested persons are referred to the applications on file with the Department for a complete statement of the facts and representations.

HSBC-North America (U.S.) Tax Reduction Investment Plan (the Plan), Located in Mettawa, Illinois, [Application No. D-11637]. Proposed Exemption

The Department is considering granting an exemption under the authority of section 408(a) of the Act and section 4975(c)(2) of the Code and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).

Section I: Transactions

If the proposed exemption is granted, effective March 2, 2009, the restrictions of sections 406(a)(1)(A) and 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407(a)(1)(A) of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A) and 4975(c)(1)(E) of the Code,1 shall not apply:

1For purposes of this proposed exemption, references to specific provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code.

(1) To the acquisition of certain rights (the ADS Rights) by the Plan in connection with an offering (the Offering) of shares of stock (the Stock) in HSBC Holding, plc (Holdings) by Holdings, a party in interest with respect to the Plan,

(2) To the holding of the ADS Rights received by the Plan during the subscription period of the Offering; provided that the conditions as set forth in section II of this proposed exemption were satisfied;

Section II: Conditions

The relief provided in this exemption is conditioned upon adherence to the material facts and representations described, herein, and as set forth in the application file and upon compliance with the conditions, as set forth in this proposed exemption.

(1) The receipt by the Plan of the ADS Rights occurred in connection with the Offering made available by Holdings on the same terms to all shareholders, such as the Plan, of American Depository Shares2 (the HSBC ADS) which represent the Stock of Holdings;

2American Depository Shares permit investment in foreign securities to trade on markets in the United States without many of the complications that would otherwise arise from such cross-border and cross-currency transactions.

(2) The acquisition of the ADS Rights by the Plan resulted from an independent act of Holdings, as a corporate entity, and all holders of the ADS Rights, including the Plan, were treated in the same manner with respect to the acquisition of such rights;

(3) All holders of the ADS Rights, such as the Plan, received the same proportionate number of such rights based on the number of HSBC ADS held; and

(4) All decisions regarding the ADS Rights made by the Plan were made by an independent, qualified fiduciary (the I/F) which:

(a) Conducted a due diligence review of the Offering;

(b) Determined whether or not to direct the Plan to vote in favor of the Offering; and

(c) Evaluated a prudent strategy for disposition of the ADS Rights under the Offering that were allocated to the Plan.

Effective Date:This proposed exemption, if granted, will be effective, on March 2, 2009, the date of the announcement of the Offering.

Summary of Facts and Representations

1. The Plan is a defined contribution profit sharing plan, for eligible employees of HSBC North America Holdings, Inc. (the Employer) and its subsidiaries.

The Plan is qualified under section 401(a) of the Code. In addition, the Plan contains a cash or deferred arrangement intended to qualify under section 401(k) of the Code.

The Plan received a favorable determination letter, dated November 14, 2008, from the Internal Revenue Service. Although the Plan has been amended since applying for the determination letter, the Plan administrator and counsel for the Plan believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code.

As of September 30, 2009, the Plan had approximately 44,000 participants. The fair market value of the total assets of the Plan, as of September 30, 2009, was $2.4 billion.

2. The Plan provides for participant directed investment of contributions made to the Plan. Participants in the Plan may choose among investment options, including mutual funds managed by subsidiaries of the Employer and managed by Vanguard Fiduciary Trust Co. (Vanguard). Vanguard is the trustee of HSBC-North American (U.S.) Tax Reduction Investment Trust (the Trust) which holds the assets of the Plan. In addition, the Vanguard Group of Investment Companies is the record-keeper of the Plan.

3. The application was filed on behalf of the Employer, a financial services company, which sponsors the Plan. The Employer, as an employer any of whose employees are covered by the Plan, is a party in interest with respect to the Plan, pursuant to section 3(14)(C) of the Act.

It is represented that the Employer neither had nor exercised discretionary authority with respect to the ADS Rights acquired by the Plan pursuant to the Offering, and therefore, was not acting as fiduciary, as defined in section 3(21) of the Act. An administrative committee (the Committee) is the named fiduciary of the Plan with respect to daily administration of the Plan. The Committee, as a fiduciary of the Plan, is a party in interest with respect to the Plan, pursuant to section (3)(14)(A) of the Act.

4. The Employer is a subsidiary of Holdings, a public limited liability company incorporated in England and Wales with operations worldwide. The Employer comprises all of the business interests of Holdings in the United States. As the parent of the Employer which sponsors the Plan, Holdings is a party in interest with respect to the Plan, pursuant to section 3(14)(E)of the Act.

5. Holdings is the ultimate parent of the HSBC Group. The HSBC Group is not a separate legal entity, but rather the term, HSBC Group, is an informal collective reference to the legal entities wholly or partially owned by Holdings in Europe, Hong Kong, Asia Pacific, the Middle East, North America, and Latin America. The HSBC Group is not publicly traded on the London Stock Exchange (LSE) or any other stock exchange.

6. The Stock of Holdings is traded on the LSE under the symbol HSBA. The Stock of Holdings is also traded on stock exchanges in Hong Kong, Paris, and Bermuda.

In the United States, shares of HSBC ADS (each representing five (5) shares of the Stock of Holdings) are traded on the New York Stock Exchange (NYSE) under the symbol HBS. BNY Mellon, Inc. (BNY Mellon) is the depository bank that holds the Stock of Holdings in a custodial account and issues shares of HSBC ADS to investors in the United States.

7. The shares of HSBC ADS are a permitted investment option under the terms of the Plan. In this regard, although employee contributions, as of March 28, 2003, may no longer be directed into the acquisition of shares of HSBC ADS, any shares of HSBC ADS acquired prior to March 28, 2003, may continue to be held in participant accounts in the Plan.

The aggregate fair market value of the assets of the Plan invested in shares of HSBC ADS, as reflected in the Plan's most recent annual report dated, December 31, 2008, is $98,679,000. The approximate percentage of the fair market value of the Plan's total assets, as of December 31, 2008, that is represented by investments in shares of HSBC ADS is 4.9 percent (4.9%).

8. On March 2, 2009, Holdings announced its decision, as a corporate entity and issuer of securities, to issue, in connection with the Offering, up to 5,060,239,065 shares of Stock in the form of new ordinary shares, representing approximately 41.7 percent (41.7%) of the existing issued ordinary shares of Stock of Holdings, as of February 27, 2009, the last business day prior to the announcement of the Offering. It is represented that Holdings made this decision for the sole purpose of raising additional capital. An aggregate of 4,887,538,091 new ordinary shares of the Stock of Holdings were subscribed for in connection with the Offering. The gross proceeds from such subscriptions in connection with the Offering totaled £12,072,952,215.50.

Completion of the Offering was conditional upon approval from the shareholders of the Stock of Holdings and upon approval from the shareholders of the HSBC ADS, such as the Plan. The Offering was approved in a meeting (the General Meeting) held in London on March 19, 2009.

9. Under the terms of the Offering, all shareholders of the Stock of Holdings received certain rights (the Share Rights) to purchase, through the exercise of such Share Rights, the new ordinary shares of the Stock of Holdings being issued by Holdings in connection with the Offering. With respect to the Share Rights, under the terms of the Offering, five (5) Share Rights were issued for every twelve (12) shares of the Stock of Holdings, rounded down to the nearest whole number, held by each shareholder on March 13, 2009, (the Record Date). Each of the Share Rights permitted a shareholder of the Stock of Holdings to purchase one (1) additional share of such stock at 254 pence per share.

In addition, under the terms of the Offering, all shareholders of the HSBC ADS, such as the Plan, received ADS Rights to purchase HSBC ADS. With respect to the ADS Rights, under the terms of the Offering, five (5) ADS Rights were issued for every twelve (12) shares of the HSBC ADS, rounded down to nearest whole number, held by each holder of such shares, including the Plan, on the Record Date. Each of the ADS Rights permitted a holder, such as the Plan, to purchase one (1) additional share of the HSBC ADS for an estimated price of $17.75 per each share.

As of March 13, 2009, the Record Date, the Plan held 2,067,667 shares of the HSBC ADS3 on behalf of 10,562 participants and beneficiaries. Accordingly, based on a ratio of five (5) ADS Rights issued for every twelve (12) shares of the HSBC ADS held, rounded down to nearest whole number, on March 20, 2009, the Plan acquired 861,527 ADS Rights.

3Based on the conversion of one HSBC ADS to five (5) shares of Stock of Holdings, the Plan held the equivalent of 10.3 million shares of the Stock of Holdings or less than 0.1% of the outstanding shares of Stock of Holdings.

10. It is represented that there was no market for the ADS Rights acquired by the Plan, because the terms of the Offering stipulated that the ADS Rights were not transferrable and would not be admitted to trading on the NYSE or any other stock exchange. In order to sell the ADS Rights, holders of the ADS Rights, such as the Plan, had to convert their ADS Rights into Share Rights. The conversion ratio between the ADS Rights and the Share Rights was one to five (1:5). Therefore, it is represented that underlying the 861,527 ADS Rights acquired by the Plan in the Offering that there were 4,307,639 Share Rights.

11. A market for the Share Rights did develop, and the Share Rights were listed on the LSE. In this regard, the Shares Rights began trading on the LSE on March 20, 2009, at 8 a.m. GMT.

12. The Offering closed on March 31, 2009, at 5 p.m. EST with respect to the ADS Rights. The Offering closed on April 3, 2009, at 11 a.m. BST with respect to the Share Rights. Pursuant to the terms of the Offering all unexercised rights expired and became worthless after the closing of the Offering.

13. To avoid engaging in a prohibited transaction, it is represented that the Plan considered whether or not to accept the ADS Rights. In this regard, the ADS Rights were accepted, because refusing to accept such rights might constitute a breach of the Employer's fiduciary duties to the Plan and to its participants and beneficiaries.

14. Although the Plan provides for participant directed investment, the applicant represents that it was not practicable to initiate and implement a participant level “pass through” voting during the proxy vote for the General Meeting, relating to the approval of the Offering, nor was it practicable to initiate and implement a participant level “pass through” of the exercise or sale of the ADS Rights, due to the short duration of time between when such rights were acquired by the Plan and when such rights expired under the terms of the Offering.

On March 12, 2009, the Employer first contacted U.S. Trust, Bank of America Private Wealth Management, acting on behalf of Bank of America, National Association (BANA),4 to discuss BANA serving as the I/F for the Plan with respect to the Offering. On March 13, 2009, BANA issued an engagement agreement to the Employer to be retained as the I/F for the Plan with respect to the Offering. The Employer, as sponsor of the Plan and settlor of the Trust, amended section 6.5(i) of the Trust agreement, effective March 16, 2009, to retain BANA, to act as investment manager and I/F on behalf of the Plan.

4It is represented that Evercore Trust subsequently acquired the business within BANA that performed the services as I/F with respect to the subject transactions. Norman Goldberg, the individual who supervised BANA's work in connection with this matter and who signed the April 9, 2009, letter from BANA, is currently employed with Evercore Trust, as Managing Director.

15. BANA had sole authority to vote the shares of the HSBC ADS held under the Plan and to direct Vanguard to exercise or otherwise dispose of the ADS Rights acquired and held by the Trust, pursuant to the Offering. Specifically, BANA was responsible for: (i) Conducting a due diligence review of the Offering; (ii) determining whether or not to direct the Committee to vote in favor of the Offering at the General Meeting; and (iii) if the Offering were approved at the General Meeting to prudently evaluate a disposition strategy under the Offering for the ADS Rights that were allocated to the Plan.

With regard to the responsibility of BANA to instruct Vanguard, the Trustee of the Trust, on how to vote at the General Meeting held on March 19, 2009, it is represented that BANA performed an independent financial analysis of Holdings to determine the need for additional capital and the potential benefits of additional capital. BANA determined that Holdings appeared to be adequately capitalized, and that Holdings had taken steps to restructure its operations to better position itself for the future, in light of recent turmoil across a wide range of markets and industries, and in particular the financial services industry. Accordingly, it is represented that on March 16, 2009, BANA instructed Vanguard to vote the Plan's shares of the HSBC ADS in favor of the Offering at the General Meeting.

It is represented that on March 20, 2009, the participants and beneficiaries in the Plan whose accounts held shares of the HSBC ADS received theirpro ratashare of the ADS Rights. In this regard, BANA was responsible for analyzing and recommending a course of action for such rights received by such accounts.

As stated in the HSBC Rights Issue Prospectus (the Prospectus), issued by Holdings on March 17, 2009, shareholders of the HSBC ADS, including the Plan, were permitted to elect among the following three (3) options: (a) Exercise all or part of the ADS Rights for the purchase of shares of the HSBC ADS; (b) direct BNY Mellon to sell the Share Rights underlying the ADS Rights; (c) surrender the ADS Rights and receive Share Rights.

Option (A) Exercise All or Part of the ADS Rights

Under this option, a holder of the ADS Rights, including the Plan, could exercise all or only a part of the ADS Rights acquired in conjunction with the Offering and could purchase shares of HSBC ADS. In order to exercise the ADS Rights, a holder, such as the Plan, would have to deposit 110% of the subscription price for the HSBC ADS upon the exercise of each of the ADS Rights. The additional amount over and above the subscription price for the HSBC ADS was to increase the likelihood that the agent would have sufficient funds to pay the final subscription price for the HSBC ADS in light of a possible appreciation of Pounds Sterling against the U.S. dollar between the instruction date and the end of the subscription period, and to pay applicable United Kingdom stamp duty reserve taxes, and to pay any currency conversion expenses. It is represented that BANA understood that the Plan lacked available unallocated funds needed to exercise all of the ADS Rights.

The Plan could surrender a portion of the ADS Rights to BNY Mellon and direct BNY Mellon to sell the Share Rights underlying such ADS Rights, in order for the Plan to raise sufficient funds to exercise its remaining ADS Rights. According to BANA, this transaction would have resulted in the Plan receiving Pounds Sterling from the sale of the Share Rights, which would then have had to be converted back into U.S. dollars in order for the Plan to purchase shares of the HSBC ADS through the exercise of the remaining ADS Rights. The conversion from Pounds Sterling to U.S. dollars would have had to have been executed at the then-prevailing exchange rate. In the opinion of BANA, given the volatility in the foreign exchange markets and the uncertainty in future exchange rates, there was no guarantee that the Plan would have been able to convert the proceeds from the sale of the Share Rights into sufficient funds to exercise the remaining ADS Rights. If the Plan had received insufficient funds to exercise the remaining ADS Rights, such rights would have been deemed to have been declined and would have lapsed. Accordingly, for the reasons summarized above, BANA determined that the Plan would not select Option (A).

Option (B) Direct BNY Mellon To Sell the Share Rights Underlying the ADS Rights

Under this option, HSBC established a process by which a holder of ADS Rights, including the Plan, could elect to liquidate such ADS Rights by directing BNY Mellon to attempt to sell the underlying Share Rights on the LSE. Unlike Option (A) above, under Option (B), the Plan was not required to deposit any funds in order for BNY Mellon to liquidate the Plan's ADS Rights. Further, it is represented that BNY Mellon, as depository and as a premier trading firm that was familiar with the transaction, had appropriate trading accounts already in place to facilitate the trading, had the expertise and the processes in place to sell the Share Rights underlying the ADS Rights within the permitted time period. Notwithstanding the fact that there was some currency risk from the conversion of Pounds Sterling into U.S. dollars, according to the I/F, Option (B), offered the Plan an expedited, low cost, frictionless way to liquidate the Plan's interests in the ADS Rights. In this regard, it is represented that under Option (B), the Plan did not have to pay any brokerage commissions inconnection with the liquidation of its holding in ADS Rights.

Option (C) Surrender ADS Rights and Receive Share Rights

Under this option, a holder of ADS Rights, including the Plan, could elect to exchange such rights for the underlying Share Rights and to sell such Share Rights or exercise such Share Rights to purchase the Stock of Holdings on the LSE. To do so, the Plan would have had to direct BNY Mellon to cancel the ADS Rights and to deliver the underlying Share Rights to a brokerage account set up by the Plan at a firm in the United Kingdom that trades on the LSE. To surrender the ADS Rights and receive the underlying Share Rights, the Plan would have had to pay a 1.5% stamp tax. Finally, the Plan would have had to direct the broker to sell all of the Share Rights, or to exercise all of the Share Rights, or to sell sufficient Share Rights to generate the funds needed to exercise the Plan's remaining Share Rights. To sell and/or exercise the Share Rights through a broker selected by BANA on behalf of the Plan, BANA would have had to negotiate the brokerage fees and other expenses that the Plan would have had to pay such broker for the sale and/or exercise of the Share Rights. Additionally, the Plan would have had to assume the risks and responsibilities attendant to the Share Rights, including effecting the exercise or sale of such rights.

According to BANA, Option (C) presented a number of issues to the Plan that could have resulted in higher trading costs. As there was no market for the ADS Rights, the sale of such rights required conversion into the underlying Share Rights. The conversion of the ADS Rights and receipt of Share Rights would have required the Plan, rather than BNY Mellon, to sell the Share Rights and to receive the proceeds denominated in Pounds Sterling. In addition, the Plan would have had to effect a foreign exchange conversion at the then-prevailing exchange rate, repatriate the funds back into the U.S. (possibly paying any applicable taxes), and then either deposit the proceeds in participant accounts or use the proceeds to purchase shares of HSBC ADS on the NYSE. Furthermore, the Plan would have had to pay wire fees to move the proceeds back to the U.S. BANA points out that during this process, the share price of both the Stock of Holdings on the LSE and the share price of the HSBC ADS on the NYSE would be fluctuating and could possibly have moved against the Plan. Accordingly, BANA determined that the uncertainty of the stock markets and the foreign exchange markets, along with the costs associated with executing the different trades and repatriating the funds back to the U.S. and the uncertainty related to trade settlement and execution, might have resulted in higher trading costs to the Plan, and therefore, lower proceeds to Plan participants. For the foregoing reasons, BANA determined that Option (C) was not in the interest of the Plan.

The applicant provided the following chart which compares the three (3) options, discussed above, and assesses the risks associated with each of the three (3) options:

Risks Option (A)
  • Exercise All or Part of the ADS Rights
  • Option (B)
  • Direct BNY Mellon to Sell the Share Rights Underlying the ADS Rights
  • Option (C)
  • Surrender ADS Rights and Receive Share Rights
  • Plan Funding Risk: High Risk: Low Risk: High In order to exercise the ADS Rights, the Plan needed to deposit 110% of the 254 pence per share subscription price with BNY Mellon. The Plan lacked available unallocated funds needed to exercise the ADS Rights. To generate the necessary funds, the Plan would have had to direct BNY Mellon to sell a portion of the Plan's ADS Rights (technically to sell the Share Rights underlying the ADS Rights) to raise sufficient cash to exercise its remaining ADS Rights. No funds were required for BNY Mellon to sell the ADS Rights (technically to sell the Share Rights underlying the ADS Rights) on the public market. The Plan lacked available unallocated funds needed to exercise the Share Rights it would receive after surrendering the ADS Rights, meaning the Plan's most viable alternative would have been to sell the Share Rights it received. In order to exercise the Share Rights, the Plan would have had to first sell a portion of the Share Rights to raise sufficient cash to exercise the remaining rights. This would raise other risks as outlined herein. Operational Risks Risk: High Risk: Low Risk: High In order to exercise the ADS Rights, the Plan would have had to first sell a portion of the ADS Rights (technically to sell the Share Rights underlying the ADS Rights) to raise sufficient funds to exercise its remaining ADS Rights. The uncertainty of the proceeds from this sale (due to constantly changing foreign exchange rates, a fluctuating price for the Share Rights, and uncertainty as to the timing of any such sale) made it impossible to accurately calculate the number of Share Rights to sell in order to raise sufficient proceeds to exercise the remaining ADS Rights. The Plan could have either raised insufficient funds, leaving it holding unexercised (and possibly unsellable) ADS Rights which would have lapsed; or would have ended up with excess cash. HSBC had established a process to liquidate ADS Rights through BNY Mellon. BNY Mellon is a premier trading firm that was familiar with the transaction, was well-suited to execute all options available to shareholders, and offered competitive fees. BNY Mellon also had appropriate trading accounts already in place to facilitate the trading. The Plan would have been responsible for selecting a broker to sell the Share Rights on the open market. To do so, the Plan would have had to set up a brokerage account at a firm in London that trades on the LSE. This would have entailed a number of risks, including the time to set up and verify an account and the lesser familiarity by the broker (compared with BNY Mellon) with the transaction. In addition, no other broker selected on behalf of the Plan was likely to have had the market access and the trading volume enjoyed by BNY Mellon. Timing Risks Risk: Moderate-High Risk: Low Risk: High The Plan received the ADS Rights on March 20, 2009. Under the terms of the Offering, the ADS Rights expired on March 31, 2009 and the Share Rights expired on April 3, 2009. BANA had only 10 business days from the date on which the Prospectus describing the terms of the Offering was issued to evaluate the options available to the Plan, decide which of the options was in the best interest of the Plan's participant and beneficiaries, and carry out its decision. It was understood that the Plan did not have cash available to exercise the ADS Rights and the Plan was not intending to sell other investments to raise sufficient cash. Because of the timing of the Offering, the Plan would have had to instruct BNY Mellon at the same time with respect to both the sale and the exercise of the ADS Rights; cash also had to be deposited at this time for the exercise of the ADS Rights. Even assuming the Plan could have immediately monetized (for deposit with BNY Mellon) its expected proceeds from the sale of the ADS Rights, Option (A) nonetheless presented moderate timing risk, because if insufficient funds were generated from the sale, there was not enough time to supplement the cash to ensure the remaining ADS Rights could be exercised. If the necessary funds were not generated in time the ADS Rights would have expired and likely become worthless. The Plan needed to direct BNY Mellon to sell the ADS Rights (technically, the Share Rights underlying the ADS Rights) before such rights expired. As the depository and a premier trading firm, BNY Mellon already had the expertise and processes in place to sell the ADS Rights within the permitted period. The Plan needed to convert the ADS Rights into Share Rights, set up brokerage accounts at a firm in London that trades on the LSE, and either sell all of the Share Rights or sell sufficient Share Rights to generate the funds needed to exercise the remaining rights. This option presented the greatest timing risks because any delay in setting up the brokerage accounts or executing the sales could have resulted in the ADS Rights expiring and becoming worthless. Trading Costs Risk: Low Risk: Low Risk: High
    This option presented low risk since the Plan would have incurred the same costs described in Option (B) in order to sell a portion of the ADS Rights (technically, the Share Rights underlying the ADS Rights) through BNY Mellon to raise sufficient cash to exercise its remaining ADS Rights.
  • In order to exercise the remaining ADS Rights, the Plan needed to deposit 110% of the 254 pence per share subscription price with BNY Mellon. 110% of the subscription price needed to be deposited in order to cover possible exchange rate fluctuations, applicable United Kingdom stamp duty reserve taxes, and any currency conversion expenses.
  • This option presented low risk since the Plan would not have had to pay brokerage commissions for the sale of the ADS Rights (technically, the Share Rights underlying the ADS Rights) through BNY Mellon. The Plan would have had to have paid an ADS depository fee of $0.02 per ADS Right, any applicable taxes, and any other applicable fees and expenses of BNY Mellon, as provided under the deposit agreement,pro ratato the holders of the ADS Rights who directed BNY Mellon to sell the ADS Rights. The Plan would have incurred an estimated 1.5% stamp tax to surrender the ADS Rights and receive the underlying Share Rights. In addition, BANA would have had to negotiate and the Plan would have had to pay brokerage fees for the sale or exercise of the Share Rights. Furthermore, the Plan would have had to pay wire fees to move the proceeds back to the U.S. This option presented the highest risk since it could have resulted in higher trading costs to the Plan with uncertainty related to trade settlement and execution, as well as requiring additional trades to convert any shares of Stock of Holdings acquired into HSBC ADS. Foreign Exchange Rates Risk: High Risk: Low Risk: Moderate Although certain foreign exchange rate risks were involved in all three options, this option presented the highest risk to the Plan since foreign exchange rate fluctuations could have prevented the Plan's ability to exercise all of the ADS Rights. The Plan would have needed to sell a portion of the ADS Rights (technically, the Shares Rights underlying the ADS Rights) in order to generate the funds needed to exercise the remaining ADS Rights. If the funds generated were insufficient due to a change in foreign exchange rates, the Plan likely would not have had time to sell additional ADS Rights in order to generate the additional funds needed to exercise the remaining ADS Rights. BNY Mellon would need to convert the proceeds from the sale of the ADS Rights (technically, the Shares Rights underlying the ADS Rights) into U.S. dollars at the prevailing rate. The risk is low since the same conversion is needed to convert the proceeds under any of the three options into U.S. dollars. The extent of this risk varied depending on whether BANA decided to sell all of the Share Rights or sell a portion of the Share Rights to raise sufficient proceeds to execute the remaining Share Rights. The risk would have been similar to Option (A) had BANA decided to sell some of the Share Rights to exercise the remaining Share Rights. The risk would have been similar too or less than that in Option (B) had BANA decided to sell all of the Share Rights, as BANA would have controlled the timing of the sale.

    Accordingly, it is represented that for the reasons cited above, on March 23, 2009, BANA chose Option (B), above, and instructed Vanguard, as Trustee, in turn to instruct BNY Mellon, as depository agent, to liquidate the entire position of ADS Rights5 from the Plan and to convert the proceeds6 received from such sale in Pounds Sterling into U.S. dollars.7 It is represented that the Share Rights underlying the Plan's ADS Rights that BNY Mellon was directed to sell were aggregated by BNY Mellon with the Share Rights underlying other ADS Rights that BNY Mellon was directed to sell by other holders of ADS Rights. Based on information provided by BNY Mellon, the aggregated Share Rights underlying the ADS Rights were sold throughout the period beginning on March 27, 2009 and ending on April 3, 2009, at an average price of 147 pence, after expenses.8 Accordingly, it is represented that the Plan received total net proceeds of $7,291,066.81, on April 7, 2009, from the liquidation of the Plan's ADS Rights. It is represented that the proceeds represented less than .5% of the fair market value of the total assets of the Plan determined, as of September 30, 2009.

    5The applicant has not requested, nor is the Department, herein, providing any relief from section 406 of the Act with respect to decision to liquidate the Plan's entire position of ADS Rights.

    6The applicant has not requested, nor is the Department, herein, providing any relief from section 406 of the Act with respect to the foreign exchange transaction in connection with the conversion from Pounds Sterling into U.S. dollars.

    7The responsible plan fiduciary must determine, consistent with its responsibilities under section 404 of the Act, whether the Plan suffered any losses with respect to the liquidation of the ADS Rights and the conversion of the proceeds into US Dollars by BNY Mellon and takes appropriate action in light of the potential magnitude of the recovery and the risks and costs of pursuing legal action on behalf of the Plan.

    8It is represented that on March 27, 2009, the Share Rights traded in a range of 132 pence to 162 pence. On the same date, the HSBC ADS traded in a range of $28.26 to $29.02. At the close of trading on March 27, 2009, the Share Rights closed on the LSE at 147 pence, and the HSBC ADS closed on the NYSE at $28.47.

    It is represented that the proceeds from the transactions were distributed, after accounting for the ADS depository's fees paid to BNY Mellon ofup to $0.02 per each share of HSBC ADS and expenses,pro ratato the shareholders of the ADS Rights, including the Plan.9

    9The applicant has not requested, nor is the Department, herein, providing any relief from section 406 of the Act for the receipt of depository's fees by BNY Mellon in connection with the sale of the Share Rights underlying the ADS Rights.

    With regard to expenses, in addition to the ADS depository fees, the Plan paid foreign exchange charges incurred by BNY Mellon with respect to the conversion of Pounds Sterling to U.S. dollars. It is represented that on March 27, 2009, 1.4554 was the foreign exchange rate for converting Pounds Sterling to U. S. dollars. It is represented that this rate was obtained from OANDA10 Corporation and reflects the average rate for converting Pounds Sterling into U.S. dollars on March 27, 2009. The foreign exchange charges were allocatedpro ratato all holders of ADS Rights who directed BNY Mellon to sell the Share Rights underlying the ADS Rights, and the Plan'spro ratashare of such foreign exchange charges were deducted from the final amount that the Plan received from the sale of such rights. It is represented that BANA does not have information as to the amount of such charges.11 Further, the Prospectus also indicated that holders of ADS Rights who directed BNY Mellon to sell the Share Rights underlying their ADS Rights would have to pay any applicable taxes, and any other applicable fees and expenses of BNY Mellon, as provided under the deposit agreement,12 with such fees and expenses allocatedpro ratato all holders of ADS Rights who directed BNY Mellon to sell the Share Rights underlying their ADS Rights. It is represented that BANA does not have information on whether any such fees or expenses were applicable to the Share Rights underlying the ADS Rights sold by BNY Mellon on behalf of the Plan.

    10OANDA uses innovative computer and financial technology to provide Internet-based forex trading and currency information services to everyone, from individuals to large corporations, from portfolio managers to financial institutions. OANDA is a market maker and a source for currency data. It has access to one of the world's largest historical, high frequency, filtered currency databases.

    11The applicant has not requested, nor is the Department providing any relief for the receipt of fees by BNY Mellon with respect to the foreign exchange transaction in connection with the conversion from Pounds Sterling into U.S. dollars.

    12The applicant has not requested, nor is the Department, herein, providing any relief from section 406 of the Act with respect to receipt of any other applicable fees and expenses by BNY Mellon, as provided under the deposit agreement.

    16. The Employer has requested an exemption with respect to the transactions which are the subject of this proposed exemption. In this regard, relief has been requested: (a) for the acquisition of the ADS Rights by the Plan in connection with the Offering by Holdings, and (b) for the holding of the ADS Rights by the Plan during the subscription period of the Offering. It is represented that the ADS Rights acquired by the Plan satisfy the definition of “employer securities,” pursuant to section 407(d)(1) of the Act, but do not meet the definition of “qualifying employer securities,” as set forth in section 407(d)(5) of the Act. Accordingly, the subject transactions constitute an acquisition and holding on behalf of a plan, of an employer security in violation of section 407(a) of the Act, for which the applicant has requested relief from sections 406(a)(1)(A) and 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A). The subject transactions also raise conflict of interest issues by fiduciaries of the Plan for which relief from the prohibitions of 406(b)(1) and 406(b)(2) of the Act is needed.

    17. It is represented that the subject transactions have already been consummated. In this regard, the Plan acquired the ADS Rights pursuant to the Offering on March 20, 2009, and held such rights pending the liquidation of such rights. It is represented that there was insufficient time between the date the Plan acquired the ADS Rights and the date such rights expired, to apply for and be granted an exemption. Accordingly, the Employer is seeking a retroactive exemption to be granted, effective as of March 2, 2009, the date that Holdings announced the Offering.

    18. The applicant represents that the proposed exemption is feasible. In this regard, it is represented that the subject transactions are customary for the industry involved, as evidenced by the fact that the Department has granted individual administrative exemptions under similar circumstances. Further, the Employer bore the costs of the application for exemption, and the cost of the fee payable to BANA, and will bear the cost of notifying interested persons of the publication of the proposed exemption.

    19. The applicant represents that the transactions which are the subject of this proposed exemption are in the interest of the Plan, because if the Plan had not participated in the Offering, those participants and beneficiaries whose accounts were invested in shares of HSBC ADS on the Record Date would not have received the benefit received by all other shareholders of the Stock of Holdings and shareholders of HSBC ADS.

    20. The applicant represents that the proposed exemption provides sufficient safeguards for the protection of the Plan and its participants and beneficiaries. In this regard, the interests of the participants and beneficiaries of the Plan were independently represented at all times during the subject transactions by BANA. Further, BANA concluded that the most prudent course of action that the Plan could take with respect to the disposition of the ADS Rights and the course of action that was in the best interest of the affected participants and beneficiaries was to liquidate the ADS Rights under Option (B). Further, it is represented that the report prepared by BANA confirms that the subject transactions were administrative feasible, in the interest of, and protective of the rights of the Plan and its participants and beneficiaries.

    21. In summary, the applicant represents that the subject transactions satisfy the statutory criteria of section 408(a) of the Act and section 4975(c)(2) of the Code because:

    (a) The receipt by the Plan of the ADS Rights occurred in connection with the Offering made available by Holdings on the same terms to all shareholders of the HSBC ADS, including the Plan;

    (b) The acquisition of the ADS Rights by the Plan resulted from an independent act of Holdings as a corporate entity, and all holders of the ADS Rights, including the Plan, were treated in the same manner with respect to the acquisition of such rights;

    (c) All shareholders of HSBC ADS, such as the Plan, received the same proportionate number of ADS Rights based on the number of shares of HSBC ADS held; and

    (d) All decisions regarding the disposition of the ADS Rights made on behalf of the Plan were made by BANA, acting as the I/F.

    Notice to Interested Persons

    The persons who may be interested in the publication in theFederal Registerof the Notice of Proposed Exemption (the Notice) include participants and beneficiaries of the Plan whose accounts in the Plan held Stock.

    It is represented that each of these classes of interested persons will be notified of the publication of the Notice by first class mail, within fifteen (15) days of publication of the Notice in theFederal Register. Such mailing will contain a copy of the Notice, as it appears in theFederal Registeron the date of publication, plus a copy of the Supplemental Statement, as required, pursuant to 29 CFR 2570.43(b)(2), which will advise all interested persons of their right to comment and to request a hearing.

    All written comments and/or requests for a hearing must be received by the Department from interested persons within 45 days of the publication of this proposed exemption in theFederal Register.

    FOR FURTHER INFORMATION CONTACT:

    Ms. Angelena C. Le Blanc of the Department, telephone (202) 693-8540. (This is not a toll-free number.)

    Sammons Enterprises, Inc. Employee Stock Ownership ESOP, (the ESOP), Located in Dallas, Texas, Application No. D-11679].

    Proposed Exemption

    The Department of Labor (the Department) is considering granting an exemption under the authority of section 408(a) of the Act in accordance with procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the proposed exemption is granted, the restrictions of sections 406(a)(1)(A) and (D), 406(b)(1), and 406(b)(2) of the Act, and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A), (D) and (E) of the Code, shall not apply to the personal holding company consent dividend election (the Consent) with respect to Sammons Enterprises, Inc. (Sammons), by the trustee of the ESOP, provided that the following conditions are satisfied:

    (a) The trustee of the ESOP is an independent, qualified fiduciary (the I/F), acting on behalf of the ESOP, which determines prior to entering into the transaction that the transaction is feasible, in the interest of, and protective of the ESOP and the participants and beneficiaries of the ESOP;

    (b) Before the ESOP enters into the proposed transaction, the I/F reviews the transaction, and determines whether or not to approve the transaction, in accordance with the fiduciary provisions of the Act;

    (c) The I/F monitors compliance with the terms and conditions of this proposed exemption, as described herein, and ensures that such terms and conditions are at all times satisfied;

    (d) Sammons provides to the I/F, in a timely fashion, all information reasonably requested by the I/F to assist it in making its decision whether or not to approve the transaction;

    (e) The consent dividend will represent no more than two percent (2%) of the ESOP's assets in any taxable year within the timeframe of the exemption proposed herein;

    (f) Shares of Sammons stock are held in an ESOP suspense account, and are allocated each year to each eligible ESOP participant at the maximum level permitted under the Code;

    (g) All of the requirements of section 565 of the Code are met with respect to the Consent; and

    (h) All shareholders of Sammons are requested to consent to the dividend in the manner prescribed under section 565 of the Code.

    Temporary Nature of Exemption:This exemption, if granted, will expire at the earlier of (i) the first day of the first fiscal year of Sammons next following the fiscal year in which falls the fifth anniversary of the date of grant of the exemption; and (ii) the first day upon which the ESOP fails to own at least 99% of the issued and outstanding shares of Sammons.

    Summary of Facts and Representations

    1. Sammons Enterprises, Inc. (Sammons) is a multi-faceted, global holding corporation headquartered in Dallas, Texas that owns and operates businesses and manages an investment portfolio across a diverse range of industries. Sammons was founded by Charles A. Sammons in 1962. Its roots originate in Dallas, Texas, where Mr. Sammons began Reserve Life Insurance Company in 1938, providing the foundation for what has grown into Sammons. Beginning in the early 1950's, Mr. Sammons began to diversify Sammons' operations, purchasing interests in the communications, industrial products distribution, insurance, travel and hospitality industries. Sammons has now concentrated its investments into three sectors—life insurance/annuities, equipment distribution, and hospitality and real estate.

    2. The Sammons Enterprises, Inc. Employee Stock Ownership ESOP (the ESOP) was originally established in 1978 and, prior to 2010, had acquired approximately 4% of Sammons' outstanding shares. Prior to his death in 1988, almost all of Sammons' outstanding shares, other than those owned by the ESOP, were owned by Charles A. Sammons. At the time of his death, Mr. Sammons' shares passed to a charitable remainder trust with his widow Elaine D. Simmons as lifetime beneficiary. In 1997, Congress amended the Internal Revenue Code of 1986, as amended (the Code) to permit an ESOP and its related trust to be a beneficiary of a charitable remainder trust. This change in law allowed the ESOP to be named remainder beneficiary of the charitable trust established by Mr. Sammons. In January 2010, following the death of Mrs. Sammons, all of the Sammons shares held in the charitable remainder trust were transferred to the ESOP. The ESOP made no payment for the shares received from the charitable remainder trust.

    3. As a result of the transfer to the ESOP, it presently owns 99.997% of Sammons' outstanding shares. The remaining 258 shares (representing .003% of Sammons' outstanding shares) are owned by 12 individuals who are former Sammons employees and ESOP participants who received their shares as part of their ESOP distributions.

    4. As of December 31, 2010, the Sammons stock was valued by the ESOP's independent appraiser at $512 per share. The aggregate fair market value of the ESOP's Sammons share holdings is $4,099,394,048.13 The ESOP had approximately 1,064 participants as of the end of the 2010 plan year.

    13The applicant represents that, consistent with the requirements of the Act, including definitions of “adequate consideration” and “current value” found in Act sections 3(18) and 3(26), the value of the Sammons stock held by the ESOP is determined in good faith by the Plan's trustee, GreatBanc Trust Company, based upon valuations by the Plan's independent appraiser as required under Code section 401(a)(28)(C), and taking into account those factors determined to be relevant under Revenue Procedure 59-60 and the Department's Proposed Regulation section 2510.3-18. The applicant represents that, consistent with its fiduciary responsibilities under ERISA, it will, as the ESOP's independent trustee, continue to value the Sammons stock held by the ESOP in good faith based upon valuations performed by a qualified independent appraiser engaged by the Plan to ensure that all transactions are conducted at fair market value. The applicant further represents that Sammons regularly evaluates the performance of the qualified independent fiduciary under the terms of the ESOP Trust, and, as part of that evaluation, Sammons also regularly evaluates the performance of the ESOP's independent appraiser which is engaged on behalf of the ESOP by the qualified independent fiduciary.

    5. Although the ESOP is not leveraged, under a special structure established pursuant to section 664(g) of the Code, the shares acquired from the charitable remainder trust are held in an ESOP suspense account, and are currently allocated each year to each eligible ESOP participant at the maximum level permitted under Code section 664(g)(7),i.e.,25% of compensation (up to a maximum allocation of $45,000).14

    14The Code provides for a maximum allocation of $30,000, adjusted annually for cost-of-living. For 2011, the maximum allocation is $45,000.

    6. The trustee of the ESOP trust is the applicant, GreatBanc Trust Company (GreatBanc). GreatBanc is nationally recognized as a highly skilled independent ERISA trustee specializing in ESOPs and ESOP transactions. GreatBanc's management team and staff have an average of over 20 years' experience in the financial services industry, and include legal andregulatory experts and investment management professionals who hold the Chartered Financial Analyst designation. GreatBanc serves as trustee or independent fiduciary for over 200 ESOPs and other qualified plans sponsored by both public and private companies, and has fiduciary responsibility for over $18 billion in plan assets. Fees received by GreatBanc for fiduciary services to the Sammons ESOP currently represent approximately 3% of GreatBanc's annual revenue.

    7. As a result of its closely held nature and the types of revenue generated by certain of its lines of business, Sammons is potentially subject each year to a set of federal tax rules referred to as “personal holding company taxes” (PHCT). Although Sammons is a subchapter “C” corporation and pays its full share of corporate income taxes, the applicant represents that these PHCT rules can subject Sammons to a significant federal tax burden over and above that applied to most other companies. Given the ESOP's almost complete ownership of Sammons, these additional taxes would operate to the direct detriment of the ESOP and its participants.

    8. The applicant represents that the pertinent sections of the Code were first adopted in 1934 at a time when federal corporate tax rules were substantially lower than individual tax rates. This rate differential prompted wealthy individuals to place their passive investments in controlled corporations, with the idea that ongoing investment earnings could grow and be reinvested in substantially greater amounts than if held directly by the individual investor. The PHCT rules seek to thwart this strategy by imposing an additional tax, at the highest individual tax rate, on the corporation's “undistributed personal holding company income.” By thus equalizing corporate and individual tax rates, the incentive to place the individual's investment portfolio in a corporate structure is removed. Currently, the PHCT rate is 15%, which equates to the top individual rate on capital gains and qualifying dividends.15 Because this special tax regime is designed to preclude tax arbitrage by the controlled corporations of individual investors, it only applies if 50% or more of a company's stock is owned by five or fewer individuals. For this purpose, the ESOP is considered to be a single individual, notwithstanding its 1,604 participants, and thus the 50% ownership threshold is exceeded.

    15Over the years since its enactment, the PHCT rate has ranged as high as 85%.

    9. According to the applicant, the PHCT only applies if the corporation earns over 60% of what is referred to as its “adjusted ordinary gross income” from sources such as interest, dividends, rents and royalties. Although these particular forms of income may be suggestive of purely passive investments, they are defined under the Code in such a way that income from actively conducted trades or businesses can fall within their purview. For example, one Sammons subsidiary actively rents and sells industrial equipment to businesses in various states. The subsidiary employs approximately 450 workers who service and maintain this equipment. Although this business is an active, operating venture, it generates rental income which is subject to being characterized as personal holding company income. According to the applicant, these tax rules not only potentially subject Sammons, and, indirectly, the ESOP, to a tax burden which has nothing to do with the original purpose for which the tax rules were enacted, they also distort the ways in which Sammons must operate its businesses, to the detriment of the ESOP and its participants.

    10. Sammons' business planning is thus significantly influenced by the potential application of the PHCT, and otherwise desirable business activities are avoided or structured in a less efficient manner so that Sammons may maintain its tax obligations at the same level as that applicable to its competitors.

    11. Because the PHCT is applied to the company's undistributed personal holding company income, it is possible to avoid the tax by paying to the company's shareholders dividends equivalent to the amount of the company's personal holding company taxable income. The applicant represents that while the payment of such a dividend would resolve the PHCT problem, it is not an attractive alternative for (a) investors who would prefer to have the dividend amount remain invested in the company in order to fund future growth, or (b) companies that lack the liquidity to pay the required dividend.

    12. In response to these concerns, section 565 of the Code allows companies to pay what is called a “consent dividend.” In the case of a consent dividend, the shareholder agrees to recognize current income on a “deemed dividend” that is not actually distributed to the shareholder in cash. Rather, the shareholder is treated, for tax purposes, as if it had received the dividend (on which it will be taxed), and then made a capital contribution to the company in equivalent amount. The amount of the consent dividend remains within the company to be utilized in furtherance of the company's objectives and shareholders' interests.

    13. The applicant has requested an exemption to permit the Plan, based upon the discretionary determination of GreatBanc as trustee and independent fiduciary, to utilize the consent dividend process available to shareholders under Code section 565. If, in a year in which Sammons would otherwise be subject to the PHCT, the ESOP were able to elect to “receive” a consent dividend in an amount sufficient to represent a complete distribution of Sammons' personal holding company income, Sammons would be able to achieve significant tax savings at virtually no cost to the ESOP. This is because the ESOP, being a tax-exempt entity, would have no tax liability as a result of “receiving” the consent dividend. The applicant states that this represents a legitimate and appropriate use of the consent dividend process under Code section 565, and is entirely consistent with the language and purpose of that Code section, as well as the provisions of sections 401(a) and 501(a) of the Code.

    14. For example, if a $5 million distribution were required in order to avoid imposition of the PHCT upon Sammons, a $5 million consent dividend would save Sammons, at the current surtax rates, $750,000. Virtually16 the entire amount of this savings would inure to the benefit of the ESOP and its participants (because the ESOP presently owns 99.997% of the outstanding shares of Sammons). Importantly, this approach would also allow the consent dividend amount (and not just the tax savings) to continue to build share values within a successful and growing business.

    16The use of the term “virtually” both here and in representation 13, above, acknowledges the fact that the non-ESOP shareholders of Sammons might elect not to participate in the consent dividend process. These individuals currently hold .003% of Sammons' outstanding shares, and would receive a de minimis dividend payment if they elect not to participate in the consent dividend process.

    15. The applicant represents that the ESOP's participation in the consent dividend process will permit Sammons to manage its businesses and conduct long-range business planning without the need to structure its operations, or to forego potentially profitable opportunities and initiatives, so as to avoid the generation of personal holding company income. This will create greater opportunities for corporate growth and the enhancement of shareholder value, which will inuredirectly to the benefit of the ESOP and its participants and beneficiaries. The ESOP will incur no economic detriment by participating in the consent dividend process, because Sammons does not otherwise pay dividends.17 Thus, the ESOP would not be foregoing the option of receiving current cash dividends by consenting to receive the undistributed personal holding company income as a deemed dividend. Rather, the proposed transaction would permit Sammons to deploy its capital on a tax efficient basis in accordance with the provisions of the Code. Nevertheless, if GreatBanc determines in any year that it is not prudent and in the best interests of the ESOP and its participants and beneficiaries to participate in the consent dividend process, the Plan will be under no obligation to provide its consent. In such case, it will be up to Sammons' board and management to determine how best to address Sammons' tax position and obligations.

    17Sammons paid a relatively small dividend while Mrs. Sammons was alive. No dividends have been paid since her death, and Sammons does not anticipate paying dividends in the future.

    16. In summary, the applicant represents that the subject transaction satisfies the criteria contained in section 408(a) of the Act because: (a) The trustee of the ESOP, GreatBanc, is an independent, qualified fiduciary, acting on behalf of the ESOP, which determines prior to entering into the transaction that the transaction is feasible, in the interest of, and protective of the ESOP and the participants and ben