The qualified professional asset manager exemption, or QPAM exemption, was created in 1984 and allows institutions to engage in transactions involving U.S. retirement assets from 401(k) plans, individual retirement accounts and corporate pension plans that are otherwise prohibited under the Employee Retirement Income Security Act. The proposal, originally unveiled in July, is aimed at modernizing the exemption to reflect the changes in the financial services industry over nearly four decades.
The proposal's initial comment period closed in October, and a supplemental comment period closed in January after a public hearing on the proposal was held in November.
Lisa M. Gomez, assistant secretary of labor for the Employee Benefits Security Administration, said in a statement that reopening the comment period once more will ensure EBSA "receives additional input from all interested stakeholders, including information related to questions raised during the public hearing."
Under the proposal, the ways an institution could be excluded from using the exemption would be expanded to explicitly include firms that have entered into a "deferred prosecution agreement," which the proposal describes as "any conduct that forms the basis for a non-prosecution or deferred prosecution agreement that, if successfully prosecuted, would have constituted a crime." Also, any firm that provides materially misleading information to the Labor Department in connection with the conditions of the exemption would be barred from utilizing it, according to the proposal.
The proposal also stipulates that if a QPAM or affiliate is convicted of a crime in a foreign country, those firms would lose their QPAM eligibility. In November 2020 under the Trump administration, the Labor Department issued an opinion letter that said foreign convictions weren't disqualifying to obtain a QPAM exemption. But in March 2021 under the Biden administration, the Labor Department revoked that opinion letter.
During the comment periods and public hearing last year, the proposal faced pushback from industry stakeholders.
At the November public hearing, Dennis Simmons, executive director for the Committee on Investment of Employee Benefit Assets, whose 115 members are asset owners with more than $2.5 trillion of defined benefit and defined contribution plan assets, asked the department to withdraw the proposal and said fundamental changes are not needed because the exemption already works well to protect plans and their participants.
The QPAM exemption is a "very important tool for protecting plan fiduciaries, and importantly for easing the administrative burden on pension fiduciaries who might otherwise have to comb through many transactions and investments to determine whether certain transactions may or may not raise technical risks of party and inter-affiliation," Mr. Simmons said, according to a transcript of the hearing.