The U.S. Department of Labor should withdraw its proposed amendments to Prohibited Transaction Exemption 84-14, known as the Qualified Professional Asset Manager exemption, the American Bankers Association said in comments filed today with the agency. The association said that if DOL wants to move forward with changes to exemption, it should first perform a comprehensive study and assessment that includes discussions with industry stakeholders and other agencies as well as holding additional public hearings.
Under the proposed amendments, a bank or other investment manager would, among other things, be greatly restricted in its authority to direct investments and its ability to maximize investment performance for plan assets; be subject to expanded QPAM ineligibility requirements for criminal convictions and prohibited misconduct of the QPAM or an affiliate; be required to include department-crafted indemnification language in the investment management agreement; and be subject to new recordkeeping inspection and examination, requirements. ABA said the suggested revisions “are entirely unnecessary and unwarranted and may result in an unclear, imbalanced, costly and unworkable exemption, while creating significantly heightened compliance and reputation risks.”
ABA instead proposed further research if the agency wanted to continue pursuing changes. That research should include an assessment of the QPAM exemption’s established position in the retirement marketplace for day-to-day investment management activity; roundtable discussions with QPAMs, client plans that retain QPAMs, and industry stakeholders; and formal consultations with federal financial agencies and the Justice Department to determine whether significant revision to the QPAM exemption is necessary or appropriate and consistent with the rules and regulations of those agencies.
“We believe these recommendations, if implemented, not only would provide tangible benefits to Plans but also would work to avoid the compliance uncertainty, liability, and reputational exposure, and the excessive administrative and regulatory costs to QPAMs and Plans, while at the same time preserving QPAMs’ authority to pursue prudent investment strategies and investments and obtain investment management assistance and resources, in order to responsibly discharge their fiduciary obligations under ERISA,” ABA said.