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Money Management

Labor Department grants exemptions to 5 managers affiliated with banks connected to LIBOR cases

The U.S. Department of Labor headquarters stands in Washington, D.C., U.S., on Wednesday, July 3, 2013. The U.S. Department of Labor is scheduled to release unemployment rate figures on Friday, July 5. Photographer: Andrew Harrer/Bloomberg

Five money managers affiliated with banks convicted of currency price fixing received exemptions to continue serving retirement fund clients, according to a Department of Labor notice in the Federal Register.

The exemptions for qualified professional asset managers, known as QPAMs, are required whenever a money manager's affiliates or parent is convicted on criminal charges.

The notice was published late last month. Labor Department officials proposed in November 2016 to grant the exemptions for money management units of Deutsche Bank, Citigroup, Barclays Capital, J.P. Morgan Chase and UBS, under certain conditions, and gave temporary exemptions while reviewing the cases.

For all five financial institutions, the exemptions were granted because they were considered administratively feasible, in the interests of plans served by the money managers, and "protective of the rights of the participants and beneficiaries" of those plans, according to the notice.

Each exemption comes with specific conditions, which in general require informing all ERISA-covered plans and IRAs receiving discretionary fiduciary services; hiring independent auditors; and developing training programs for all relevant defined benefit QPAM asset/portfolio management, trading, legal, compliance and internal audit personnel at least annually.

Deutsche Bank, Citigroup, Barclays Capital, and J.P. Morgan Chase affiliates were granted five-year exemptions, while UBS received one for three years.

Citigroup and Barclays Capital asked for 10 years, and J.P. Morgan Chase and UBS sought one for nine years, arguing that the criminal actions were unrelated to the retirement asset management divisions, but DOL officials noted that other regulators involved in the currency fixing cases found that the firms "did not exercise adequate control."

UBS' exemption was limited to three years "in light of the severity of the misconduct, the repeated criminal violations, and the breach of a previous exemption, which was itself necessitated by criminal conduct," the DOL notice said.

Bartlett Naylor, a financial policy advocate for watchdog group Public Citizen's Congress Watch, said in an email that while the exemptions were not surprising, "it's discouraging that the Trump DOL continues the degrading use of exemptions from penalties otherwise mandatory following misconduct." In the case of Deutsche Bank, a large lender to the Trump Organization, Mr. Naylor said, "it's impossible to disentangle the president's own conflict. That further undermines American confidence that Washington will hold major Wall Street firms to account."