DOL, UBS to Extend Credit Suisse 401(k) Asset Management Exemption

Financial Planners

Labor Department proposed extending exemptions to UBS Group and Credit Suisse GroupYou will be able to manage the assets of retirement plans managed by ERISA. After the merger later this month.

Both companies had relied on temporary exemptions required to operate as qualified professional asset managers (QPAMs) due to repeated violations of the law. In a notice published in the Federal Register on May 12, the DOL said it intended to apply these exemptions for a year after UBS’s merger with Credit Suisse, announced in March, was completed.

QPAM is a registered investment advisor that can make transactions that are normally prohibited to “interested parties” on behalf of plans under the Employee Retirement Income Security Act. Due to the growing need for integrity in managing regulated retirement plan assets, QPAMs may face criminal convictions and be disqualified. However, as noted in the ruling, the DOL often grants temporary waivers primarily to give plans that work with QPAM the opportunity to find another QPAM.

“This proposed one-year waiver would allow plans to terminate their affiliation with affiliated QPAMs and affiliated QPAMs in an orderly and cost-effective manner in the event of additional convictions or planning decisions. It is designed to be otherwise prudent to do so,” the regulator wrote.

If approved, the waiver would continue for one year from the date of the merger, but the DOL may extend the waiver as necessary to protect the interests of its plans to work with UBS on behalf of UBS. It said it reserves the right to consider new applications to QPAM. Both companies have waivers and did not engage in any disqualifying conduct while using those waivers, so it makes sense to apply the waivers to the combined company, the DOL explained.

“Because of the number of convictions and the seriousness of the underlying conduct of the contaminated entities currently coexisting under UBS corporate umbrella, the covered plan fiduciaries have been granted an extension of this one-year exemption after the deadline by the Department. The DOL wrote that it strongly warns that it may not “merge.”

The DOL said it was not informed of the merger by either company, and actually learned of it through media reports, but later confirmed it to UBS. UBS formally requested the updated waiver on April 17, according to the DOL. The DOL said the stock sale that would formally decide on the merger is expected to take place on May 31.

Brad Faye, a member of Seward & Kisell’s ERISA and Executive Compensation Group, said the exemptions companies receive from the DOL require that the company and its affiliates do not commit new offenses. explain. Since the two companies have merged, their respective exemptions do not apply to the other entity, which is now an affiliate. Waivers need to be updated so affiliate offenses are not counted as “new”.

The DOL emphasized that the waiver is intended to protect the plan from the consequences of UBS’ immediate disqualification, including the costs of finding a new QPAM and negotiating a new contract.

The convictions outlined against UBS and Credit Suisse in the DOL’s proposal included wire fraud, tax fraud, money laundering and currency manipulation. According to the DOL, Credit Suisse has been helping U.S. individuals avoid taxes for “decades.”

Groom Law Group partner David Levine explains that many financial institutions are large, consolidated companies with many divisions. If he one department in the enterprise violates the law, it is not necessarily a threat to the plan whether he can continue to operate as a QPAM, because the person in charge of the retirement plan is not involved in the crime. Levine stresses that he shouldn’t let one troubled part of the business drown out another just because they’re under the same corporate umbrella.

One large company may have many pension plan customers, and immediate disqualification of an entire bank could have “historic ramifications for the retirement industry,” Fay said. He added that the DOL is aware that there are

The merger of the two companies was spearheaded in March by the intervention of the Swiss Federal Ministry of Finance, the Swiss National Bank and the Swiss Financial Market Supervisory Authority FINMA. Both parties said the move was taken to protect “the whole Swiss economy” in the face of the threat of Credit Suisse bankruptcy.

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