Banks Get Reason for Cheer Despite Naughty Affiliates

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Sean Forbes

Five major banks got early Christmas gifts Dec. 21 from the Department of Labor: permission to keep managing pension and retirement assets despite the coal in their stockings resulting from various criminal activities by their affiliates.

Deutsche Bank AG, Citigroup Inc., UBS Assets Management, JP Morgan Chase & Co., and Barclays Capital Inc. were the likely merry recipients of temporary relief from the DOL’s Employee Benefits Security Administration. As of Dec. 21, the banks have up to a year under the Employee Retirement Income Security Act to act as qualified professional asset managers.

The exemptions come with a warning: The relief will be yanked if any entity within the banks is convicted of a crime while the exemptions are in effect. The DOL is also weighing whether to grant longer exemptions of up to five years to each of the banks.

Some Democratic lawmakers have been in a less generous mood with the banks and want the department to give the banks more of the third degree before granting the longer waivers.

On Dec. 7, the lawmakers—led by Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee, and Sen. Elizabeth Warren (D-Mass.), a member of the Senate Health, Education, Labor and Pensions Committee— said they wanted public hearings quickly to “ensure that the harmful impacts of these banks’ actions and the proposed conditions for granting them waivers are held up to public scrutiny.”

No hearings were requested for the one-year waivers, the DOL said in the temporary waivers.

The waivers allow the banks’ QPAMs to rely on a class prohibited transaction exemption from 1984. In that guidance, the department said that once an entity is convicted of specified crimes, the related QPAMs lose the ability to rely on the class exemption for 10 years following the conviction date, absent an individual exemption.


The exemptions aren’t a free pass to keep doing business as usual. The DOL emphasized in each of the bank’s exemptions, in identical language, that the QPAMs “should be held to a high standard of integrity with respect to all ERISA-covered plans and IRAs, and not just those with respect to which it relies on PTE 84-14,” referring to the 1984 class exemption.

Among the requirements to hold their QPAM status, the banks must develop written policies and procedures to ensure that their asset management divisions are insulated from their corporate management and business activities; implement and conduct a training program within six months, to be done annually; and submit the policies for independent audit.

The exemptions are effective as of the banks’ respective conviction dates.

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

For More Information

Text of the prohibited transaction exemptions is at

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