Under ERISA Section 406(a), the fiduciary cannot cause the fund to engage in a sale or exchange, leasing of property, loan or extension of credit, or the furnishing of goods, services or facilities, between the plan and any party in interest.
If an investment fund holds plan assets subject to ERISA, then the manager (or any other entity that has discretionary authority over the investment of the fund’s assets) is a fiduciary with respect to investing plans. These changes would impose new compliance duties on managers and may cause greater use of other available prohibited transaction exemptions, such as the 2006 service provider exemption under Section 408(b)(17) of ERISA, as appropriate. This alert provides a high-level summary of these non-crime related provisions, which we expect to have widespread implications for most asset managers. Beyond this expected focus on crimes, the proposed amendment includes multiple changes to the QPAM Exemption requirements that, if finalized, would impact any entity seeking to utilize the exemption, including a new requirement to register with the DOL. The proposed amendment has been released against the backdrop of numerous global financial institutions having sought individual exemptive relief from the DOL over the past decult of criminal convictions stemming from the activities of their foreign affiliates. Department of Labor (DOL) published in the Federal Register a proposed amendment to the qualified professional asset manager (QPAM) class prohibited transaction exemption 84-14 (PTE 84-14 or QPAM Exemption), which would make it more difficult to rely on the exemption in certain circumstances, including when the QPAM, its affiliates or any 5% or more owners have been convicted of certain crimes.
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