This pricing supplement, which is not complete and may be changed,
relates to an effective Registration Statement under the Securities Act of 1933. This pricing supplement and the accompanying prospectus
supplement and prospectus are not an offer to sell these notes in any country or jurisdiction where such an offer would not be
permitted.
* We or one of our affiliates may pay varying selling concessions
of up to 2.50% in connection with the distribution of the notes to other registered broker dealers.
We will deliver the notes in book-entry
form only through The Depository Trust Company on or about August [25], 2017 against payment in immediately available funds.
RISK FACTORS
Your investment in the notes entails
significant risks, many of which differ from those of a conventional security. Your decision to purchase the notes should be made
only after carefully considering the risks of an investment in the notes, including those discussed below, with your advisors in
light of your particular circumstances. The notes are not an appropriate investment for you if you are not knowledgeable about
significant elements of the notes or financial matters in general.
After the first two years, the notes
will pay interest at a floating rate that may be as low as 0% on one or more interest payment dates.
The rate at which the
notes will bear interest during each quarterly interest period after the first two years will depend on CMS10 on the applicable
interest determination date. As a result, the interest payable on the notes will vary with fluctuations in CMS10, subject to the
minimum interest rate of 0.00% per annum. It is impossible to predict whether CMS10 will rise or fall, or the amount of interest
payable on the notes. After the first two years, you may receive minimal interest, or possibly even no interest, for extended periods
of time or even throughout the remaining term of the notes. The interest rate that will apply at any time on the notes after the
first two years of their term may be more or less than other prevailing market interest rates at such time. As a result, the amount
of interest you receive on the notes may be less than the return you could earn on other investments.
An investment in the notes may be
more risky than an investment in notes with a shorter term.
The notes have a term of 12 years. By purchasing notes with a relatively
longer term, you are more exposed to fluctuations in interest rates than if you purchased a note with a shorter term. In particular,
you may be negatively affected if interest rates begin to rise, because the interest rate on the notes may be less than the amount
of interest you could earn on other investments with a similar level of risk available at that time. In addition, if you tried
to sell your notes at such time, their value in any secondary market transaction would also be adversely affected.
Payments on the notes are subject
to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes.
The notes are our senior unsecured debt securities. As a result, your receipt of all payments of interest and principal on the
notes is dependent upon our ability to repay our obligations on the applicable payment date. No assurance can be given as to what
our financial condition will be at any time during the term of the notes or on the maturity date. If we become unable to meet our
financial obligations as they become due, you may not receive the amounts payable under the terms of the notes.
Our credit ratings are an assessment
by ratings agencies of our ability to pay our obligations. Consequently, our perceived creditworthiness and actual or anticipated
decreases in our credit ratings or increases in our credit spreads prior to the maturity date of the notes may adversely affect
the market value of the notes. However, because your return on the notes depends upon factors in addition to our ability to pay
our obligations, such as the difference between the interest rates accruing on the notes and current market interest rates, an
improvement in our credit ratings will not reduce the other investment risks related to the notes.
The public offering price you pay
for the notes will exceed their initial estimated value.
The initial estimated value of the notes that is provided in this
preliminary pricing supplement, and that will be provided in the final pricing supplement, are each an estimate only, determined
as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain
assumptions and variables, including our credit spreads, our internal funding rate, mid-market terms on hedging transactions, expectations
on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These pricing models rely in
part on certain forecasts about future events, which may prove to be incorrect.
The initial estimated value does not
represent a minimum or maximum price at which we, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”)
or any of our affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The value
of your notes at any time after the date of this pricing supplement will vary based on many factors that cannot be predicted with
accuracy, including our creditworthiness and changes in market conditions.
The quoted price of any of our affiliates
for the notes could be higher or lower than the price that you paid for them.
If you attempt to sell the notes prior
to maturity, their market value may be lower than the price you paid for them and lower than their initial estimated value. This
is due to, among other things, changes in the level of market interest rates, our internal funding rate, and the inclusion in the
public offering price of the underwriting discount and the hedging related charges, all as further described in "Structuring
the Notes" on page PS-12. These factors, together with various credit, market and economic factors over the term of the notes,
are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect the value of
the notes in complex and unpredictable ways.
We cannot assure you that a trading
market for the notes will ever develop or be maintained.
We will not list the notes on any securities exchange. We cannot predict
how the notes will trade in any secondary market, or whether that market will be liquid or illiquid.
The development of a trading market
for the notes will depend on our financial performance and other factors. The number of potential buyers of the notes in any secondary
market may be limited. We anticipate that MLPF&S will act as a market-maker for the notes, but neither MLPF&S nor any of
our other affiliates is required to do so. MLPF&S may discontinue its market-making activities as to the notes at any time.
To the extent that MLPF&S engages in any market-making activities, it may bid for or offer the notes. Any price at which MLPF&S
may bid for, offer, purchase, or sell any notes may differ from the values determined by pricing models that it may use, whether
as a result of dealer discounts, mark-ups, or other transaction costs. These bids, offers, or completed transactions may affect
the prices, if any, at which the notes might otherwise trade in the market.
In addition, if at any time MLPF&S
were to cease acting as a market-maker for the notes, it is likely that there would be significantly less liquidity in the secondary
market and there may be no secondary market at all for the notes. In such a case, the price at which the notes could be sold likely
would be lower than if an active market existed and you should be prepared to hold the notes until maturity.
Many economic and other factors
will impact the market value of the notes
. The market for, and the market value of, the notes may be affected by a number of
factors that may either offset or magnify each other, including:
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the time remaining to maturity of the notes;
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the aggregate amount outstanding of the notes;
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the level, direction, and volatility of market interest rates generally;
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general economic conditions of the capital markets in the United
States;
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geopolitical conditions and other financial, political, regulatory,
and judicial events that affect the capital markets generally;
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our financial condition and creditworthiness; and
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any market-making activities with respect to the notes.
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Our trading and hedging activities may
create conflicts of interest with you.
We or one or more of our affiliates, including MLPF&S, may engage in trading activities
related to the notes that are not for your account or on your behalf. We expect to enter into arrangements to hedge the market
risks associated with our obligation to pay the amounts due under the notes. We may seek competitive terms in entering into the
hedging arrangements for the notes, but are not required to do so, and we may enter into such hedging arrangements with one of
our subsidiaries or affiliates. This hedging activity is expected to result in a profit to those engaging in the hedging activity,
which could be more or less than initially expected, but which could also result in a loss for the hedging counterparty. These
trading and hedging activities may present a conflict of interest between your interest in the notes and the interests we and our
affiliates may have in our proprietary accounts, in facilitating transactions for our other customers, and in accounts under our
management.
You must rely on your own evaluation
of the merits of an investment linked to CMS10.
In the ordinary course of their businesses, we or our affiliates may have expressed
views on expected movements in CMS10 and related interest rates, and may do so in the future. These views or reports may be communicated
to our clients and clients of our affiliates. However, these views are subject to change from time to time. Moreover, other professionals
who deal in markets relating to CMS10 may at any time have significantly different views from those of ours or our affiliates.
For these reasons, you are encouraged to derive information concerning CMS10 and related interest rates from multiple sources,
and you should not rely on the views expressed by us or our affiliates.
Neither the offering of the notes nor
any views which we or our affiliates from time to time may express in the ordinary course of their businesses constitutes a recommendation
as to the merits of an investment in the notes.
Recent regulatory investigations
regarding potential manipulation of CMS10 rates may adversely affect your notes.
It has been reported that certain U.S. and
non-U.S. regulators are investigating potential manipulation of CMS10 and other swap rates. If such manipulation occurred, it may
have resulted in CMS10 being artificially lower (or higher) than it would otherwise have been. Any changes or reforms affecting
the determination or supervision of CMS10 in light of these investigations may result in a sudden or prolonged decrease in reported
CMS10, which may have an adverse impact on the trading market for CMS-benchmarked securities, such as your notes, the market value
of your notes and the payments on your notes during the Floating Rate Period.
THE
CMS10
CMS10 is a “constant maturity
swap rate” that measures the fixed rate of interest payable on a hypothetical fixed-for-floating U.S. dollar interest rate
swap transaction with a maturity of 10 years. In such a hypothetical swap transaction, the fixed rate of interest, payable semi-annually
on the basis of a 360-day year consisting of twelve 30-day months, is exchangeable for a floating 3-month LIBOR-based payment stream
that is payable quarterly on the basis of the actual number of days elapsed during a quarterly period in a 360-day year. “LIBOR”
is the London Interbank Offered Rate and is a common rate of interest used in the swaps industry.
Historical Levels of CMS10
The following graph
sets forth the historical performance of the CMS10 based on the daily historical levels from January 1, 2008 through August 8,
2017. We obtained the rates below from the Bloomberg Professional Services. We have not undertaken any independent review of, or
made any due diligence inquiry with respect to, the information obtained from the Bloomberg Professional Services. The rates displayed
in the graph below are for illustrative purposes only.
The rates reported
by the Bloomberg Professional Services may not be indicative of the CMS10 that will be derived from the applicable Reuters page.
U.S.
FEDERAL INCOME TAX SUMMARY
The following summary of the material
U.S. federal income tax considerations of the acquisition, ownership, and disposition of the notes is based upon the advice of
Morrison & Foerster LLP, our tax counsel. The following discussion supplements, and to the extent inconsistent supersedes,
the discussions under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and under “U.S.
Federal Income Tax Considerations” in the accompanying prospectus supplement and is not exhaustive of all possible tax considerations.
This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated under
the Code by the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations), rulings, current
administrative interpretations and official pronouncements of the Internal Revenue Service (“IRS”), and judicial decisions,
all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect.
No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax
consequences described below. This summary does not include any description of the tax laws of any state or local governments,
or of any foreign government, that may be applicable to a particular holder.
This summary is directed solely to
U.S. Holders and Non-U.S. Holders that, except as otherwise specifically noted, will purchase the notes upon original issuance
and will hold the notes as capital assets within the meaning of Section 1221 of the Code, which generally means property held
for investment, and that are not excluded from the discussion under “U.S. Federal Income Tax Considerations” in the
accompanying prospectus. This summary assumes that the issue price of the notes, as determined for U.S. federal income tax purposes,
equals the principal amount thereof.
U.S. Holders
The notes will be treated as variable
rate debt instruments providing for stated interest at a single fixed rate and one or more qualified floating rates. Under Treasury
regulations applicable to such instruments, you generally will be required to account for interest on the notes as described below.
You will be required to construct an “equivalent fixed rate debt instrument” for the notes and apply the general rules
applicable to debt instruments described under the section of the prospectus entitled “U.S. Federal Income Tax Considerations—Taxation
of Debt Securities.” The applicable rules require (i) replacing the initial fixed rate by a “qualified floating rate”
that would preserve the fair market value of the notes, and (ii) determining the fixed rate substitute for each floating rate.
The fixed rate substitute for each qualified floating rate is the value of the rate on the issue date of the notes. The equivalent
fixed rate debt instrument is the hypothetical instrument that has terms that are identical to those of the notes, except that
the equivalent fixed rate debt instrument provides for the fixed rate substitutes in lieu of the rates on the notes. Under these
rules, the equivalent fixed rate debt instrument will have stated interest equal to the fixed rate substitutes. The amount of OID
is determined for the equivalent fixed rate debt instrument under the rules applicable to fixed rate debt instruments and is taken
into account as if the holder held the equivalent fixed rate debt instrument. Please see the discussion in the prospectus under
the section entitled “U.S. Federal Income Tax Considerations—Taxation of Debt Securities—Consequences to U.S.
Holders—Original Issue Discount” for a discussion of these rules. Under these rules, the notes may be issued with OID.
Whether the notes will be treated as being issued with OID will depend on rates in effect on the issue date and, in that event,
the final pricing supplement will so specify. You will be required to make appropriate adjustments for interest actually paid on
the notes. Qualified stated interest and OID, if any, allocable to an accrual period must be increased (or decreased) if the interest
actually accrued or paid during an accrual period exceeds (or is less than) the interest assumed to be accrued or paid during the
accrual period under the equivalent fixed rate debt instrument. This increase or decrease is an adjustment to qualified stated
interest for the accrual period if the equivalent fixed rate debt instrument provides for qualified stated interest and the increase
or decrease is reflected in the amount actually paid during the accrual period. Otherwise, this increase or decrease is an adjustment
to OID, if any, for the accrual period.
Upon the sale, exchange, retirement,
or other disposition of a note, a U.S. Holder will recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange, retirement, or other disposition (less an amount equal to any accrued interest not previously included in income
if the note is disposed of between interest payment dates, which will be included in income as interest income for U.S. federal
income tax purposes) and the U.S. Holder’s adjusted tax basis in the note. A U.S. Holder’s adjusted tax basis in a
note generally will be the cost of the note to such U.S. Holder, increased by any OID previously included in income with respect
to the note, and decreased by the amount of any payment (other than a payment of qualified stated interest) received in respect
of the note. Any gain or loss realized on the sale, exchange, retirement, or other disposition of a note generally will be capital
gain or loss and will be long-term capital gain or loss if the note has been held for more than one year. The ability of U.S. Holders
to deduct capital losses is subject to limitations under the Code.
Non-U.S. Holders
Please see the discussion under “U.S.
Federal Income Tax Considerations—Taxation of Debt Securities—Consequences to Non-U.S. Holders” in the accompanying
prospectus for the material U.S. federal income tax consequences that will apply to Non-U.S. Holders of the notes.
Backup Withholding and Information Reporting
Please see the discussion under “U.S.
Federal Income Tax Considerations—Taxation of Debt Securities—Backup Withholding and Information Reporting” in
the accompanying prospectus for a description of the applicability of the backup withholding and information reporting rules to
payments made on the notes.
You should consult your own tax
advisor concerning the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as
any tax consequences arising under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of
changes in U.S. federal or other tax laws.
SUPPLEMENTAL
PLAN OF DISTRIBUTION—conflicts of interest
Our broker-dealer subsidiary, MLPF&S,
will act as our selling agent in connection with the offering of the notes. The selling agent is a party to the Distribution Agreement
described in the “Supplemental Plan of Distribution (Conflicts of Interest)” beginning on page S-23 of the accompanying
prospectus supplement.
The selling agent will receive the
compensation set forth on the cover page of this pricing supplement as to the notes sold through its efforts. We or one of our
affiliates may pay varying selling concessions of up to 2.50% in connection with the distribution of the notes to other registered
broker-dealers.
The selling agent is a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, the offering of the notes will conform to the
requirements of FINRA Rule 5121.
The selling agent is not acting as
your fiduciary or advisor solely as a result of the offering of the notes, and you should not rely upon any communication from
the selling agent in connection with the notes as investment advice or a recommendation to purchase the notes. You should make
your own investment decision regarding the notes after consulting with your legal, tax, and other advisors.
Under the terms of our distribution
agreement with MLPF&S, MLPF&S will purchase the notes from us on the issue date as principal at the purchase price indicated
on the cover of this pricing supplement, less the indicated underwriting discount.
MLPF&S may sell the notes to other
broker-dealers that will participate in the offering and that are not affiliated with us, at an agreed discount to the principal
amount. Each of those broker-dealers may sell the notes to one or more additional broker-dealers. MLPF&S has informed us that
these discounts may vary from dealer to dealer and that not all dealers will purchase or repurchase the notes at the same discount.
MLPF&S and any of our other broker-dealer
affiliates may use this pricing supplement, and the accompanying prospectus supplement and prospectus for offers and sales in secondary
market transactions and market-making transactions in the notes. However, they are not obligated to engage in such secondary market
transactions and/or market-making transactions. Our affiliates may act as principal or agent in these transactions, and any such
sales will be made at prices related to prevailing market prices at the time of the sale.
STRUCTURING
THE NOTES
The notes are our debt securities, the
return on which is linked to the performance of CMS10. As is the case for all of our debt securities, including our market-linked
notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. In addition, because
market-linked notes result in increased operational, funding and liability management costs to us, we typically borrow the funds
under these notes at a rate that is more favorable to us than the rate that we might pay for a conventional fixed or floating rate
debt security. This generally relatively lower internal funding rate, which is reflected in the economic terms of the notes, along
with the fees and charges associated with market-linked notes, typically results in the initial estimated value of the notes at
the time the terms of the notes are set and on the pricing date being less than their public offering price.
In order to meet our payment obligations
on the notes, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call
options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are
determined based upon terms provided by MLP&S and its affiliates, and take into account a number of factors, including our
creditworthiness, interest rate movements, the volatility of the CMS10, the tenor of the notes and the hedging arrangements. The
economic terms of the notes and their initial estimated value depend in part on the terms of these hedging arrangements.
MLPF&S has advised us that the hedging
arrangements will include hedging related charges, reflecting the costs associated with, and our affiliates’ profit earned
from, these hedging arrangements. Since hedging entails risk and may be influenced by unpredictable market forces, actual profits
or losses from these hedging transactions may be more or less than this amount.
For further information, see “Risk
Factors” beginning on page PS-5 of this pricing supplement.
ERISA
CONSIDERATIONS
Each fiduciary of a pension, profit-sharing,
or other employee benefit plan subject to the Employee Retirement Income Security Act of 1974 (“ERISA”) (a “Plan”),
should consider the fiduciary standards of ERISA in the context of the Plan’s particular circumstances before authorizing
an investment in the notes. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy
the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the
Plan.
In addition, we and certain of our
subsidiaries and affiliates, including MLPF&S, may be each considered a party in interest within the meaning of ERISA, or a
disqualified person (within the meaning of the Code), with respect to many Plans, as well as many individual retirement accounts
and Keogh plans (also “Plans”). Prohibited transactions within the meaning of ERISA or the Code would likely arise,
for example, if the notes are acquired by or with the assets of a Plan with respect to which we or any of our affiliates is a party
in interest, unless the notes are acquired under an exemption from the prohibited transaction rules. A violation of these prohibited
transaction rules could result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or administrative exemption.
Under ERISA and various prohibited
transaction class exemptions (“PTCEs”) issued by the U.S. Department of Labor, exemptive relief may be available for
direct or indirect prohibited transactions resulting from the purchase, holding, or disposition of the notes. Those exemptions
are PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1
(for certain transactions involving insurance company separate accounts), PTCE 84-14 (for certain transactions determined by independent
qualified asset managers), and the exemption under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code for certain
arm’s-length transactions with a person that is a party in interest solely by reason of providing services to Plans or being
an affiliate of such a service provider (the “Service Provider Exemption”).
Because we may be considered a party
in interest with respect to many Plans, the notes may not be purchased, held, or disposed of by any Plan, any entity whose underlying
assets include plan assets by reason of any Plan’s investment in the entity (a “Plan Asset Entity”) or any person
investing plan assets of any Plan, unless such purchase, holding, or disposition is eligible for exemptive relief, including relief
available under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or the Service Provider Exemption, or such purchase, holding, or disposition
is otherwise not prohibited. Any purchaser, including any fiduciary purchasing on behalf of a Plan, transferee or holder of the
notes will be deemed to have represented, in its corporate and its fiduciary capacity, by its purchase and holding of the notes
that either (a) it is not a Plan or a Plan Asset Entity and is not purchasing such notes on behalf of or with plan assets of any
Plan or any plan subject to similar laws or (b) its purchase, holding, and disposition are eligible for exemptive relief or such
purchase, holding, and disposition are not prohibited by ERISA or Section 4975 of the Code or similar laws.
Further, any person acquiring or holding
the notes on behalf of any plan or with any plan assets shall be deemed to represent on behalf of itself and such plan that (x)
the plan is paying no more than, and is receiving no less than, adequate consideration within the meaning of Section 408(b)(17)
of ERISA in connection with the transaction or any redemption of the notes, (y) none of us, MLPF&S, or any other selling agent
directly or indirectly exercises any discretionary authority or control or renders investment advice or otherwise acts in a fiduciary
capacity with respect to the assets of the plan within the meaning of ERISA and (z) in making the foregoing representations and
warranties, such person has applied sound business principles in determining whether fair market value will be paid, and has made
such determination acting in good faith.
The fiduciary investment considerations
summarized above generally apply to employee benefit plans maintained by private-sector employers and to individual retirement
accounts and other arrangements subject to Section 4975 of the Code, but generally do not apply to governmental plans (as defined
in Section 3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA), and foreign plans (as described in Section
4(b)(4) of ERISA). However, these other plans may be subject to similar provisions under applicable federal, state, local, foreign,
or other regulations, rules, or laws (“similar laws”). The fiduciaries of plans subject to similar laws should also
consider the foregoing issues in general terms as well as any further issues arising under the applicable similar laws.
In addition, any purchaser, that is
a Plan or a Plan Asset Entity or that is acquiring the notes on behalf of a Plan or a Plan Asset Entity, including any fiduciary
purchasing on behalf of a Plan or Plan Asset entity, will be deemed to have represented, in its corporate and its fiduciary capacity,
by its purchase and holding of the notes that (a) none of us, MLPF&S, or any of our other affiliates is a “fiduciary”
(under Section 3(21) of ERISA, or under any final or proposed regulations thereunder, or with respect to a governmental, church,
or foreign plan under any similar laws) with respect to the acquisition, holding or disposition of the notes, or as a result of
any exercise by us or our affiliates of any rights in connection with the notes, (b) no advice provided by us or any of our affiliates
has formed a primary basis for any investment decision by or on behalf of such purchaser in connection with the notes and the transactions
contemplated with respect to the notes, and (c) such purchaser recognizes and agrees that any communication from us or any of our
affiliates to the purchaser with respect to the notes is not intended by us or any of our affiliates to be impartial investment
advice and is rendered in its capacity as a seller of such notes and not a fiduciary to such purchaser. Purchasers of the notes
have exclusive responsibility for ensuring that their purchase, holding, and disposition of the notes do not violate the prohibited
transaction rules of ERISA or the Code or any similar regulations applicable to governmental or church plans, as described above.
This discussion is a general summary
of some of the rules which apply to benefit plans and their related investment vehicles. This summary does not include all of the
investment considerations relevant to Plans and other benefit plan investors such as governmental, church, and foreign plans and
should not be construed as legal advice or a legal opinion. Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons
considering purchasing the notes on behalf of or with “plan assets” of any Plan or other benefit plan investor consult
with their legal counsel prior to directing any such purchase.