Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
By Sean Forbes
Nov. 18 — The Department of Labor is considering granting waivers to five major banks that would allow the banks to continue managing their share of the multi-trillion dollar U.S. 401(k) plan and retirement funds market despite their affiliates’ financial crimes.
The banks include Deutsche Bank AG, Citigroup Inc., UBS Assets Management, JP Morgan Chase & Co. and Barclays Capital Inc.
In its 572-page notice dated Nov. 18, the agency set out in detail the steps the firms would need to take if they are permitted to continue handling retirement assets subject to the Employee Retirement Income Security Act.
Most of the proposals are for one-year exemptions, but the DOL said it is also weighing whether to grant five-year exemptions. For example, asset managers related to JPMorgan would be granted a five-year exemption despite a conviction against the bank for conspiracy to fix the price of or eliminate competition in the purchase or sale of the euro/U.S. dollar currency pair exchanged in the Foreign Exchange Spot Market.
The DOL typically grants “qualified professional asset manager” status waivers when a bank’s arm that is handling pension assets is insulated from the division engaged in criminal activities. The agency has a track record of granting these requests--called prohibited transaction exemptions, or PTEs--but recently the DOL denied Royal Bank of Scotland Group Plc’s bid for a waiver that would have allowed it to manage 401(k) assets.
Over the past five years, the department has granted nine QPAM waivers--the bulk of those waivers were granted in 2015 and 2016. And many of the waivers were granted to firms, such as Deutsche Bank, that are once again seeking waivers.
Democrats have painted a target on banks that have been convicted for financial crimes, and they have urged the DOL to be more cautious when considering whether to grant a PTE. In June 2015, a dozen Democrats, including Sen. Elizabeth Warren (Mass.) and Rep. Maxine Waters (Calif.) urged Labor Secretary Thomas E. Perez to hold a public hearing over whether five major banks deserved permission to keep their QPAM status. Those banks included four that are seeking waivers now: Citigroup, UBS, JPMorgan and Barclays.
The lone bank missing from that 2015 group was Royal Bank of Scotland. In a rare action, the DOL denied RBS a waiver in October. However, the decision had little impact on the bank’s business, and it was no longer managing U.S. retirement assets.
Plan sponsors may get jittery when criminal actions in one wing of a bank could affect their relationship with their asset manager, Andrew Oringer, an ERISA attorney and partner at Dechert LLP, in New York, told Bloomberg BNA.
Where “the legal issues for the manager’s affiliated group are sufficiently divorced from the manager’s relationship with the plans, the plans as much as anyone may be concerned with any developments that could make it harder to stay with their chosen managers,” Oringer said.
“I think that the DOL understands all of this, and thus tries to proceed in a way that doesn’t dislocate the plans, where the DOL has sufficient comfort that the plans’ interests are being protected,” he said.
To contact the reporter on this story: Sean Forbes in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the prohibited transaction exemption requests is at http://src.bna.com/kaO.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)