Deutsche Bank, Citi, UBS Seek OK to Manage Pension Assets

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

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.

QPAM Exemptions

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

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

For More Information

Text of the prohibited transaction exemption requests is at

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