The U.S. Department of Labor’s (the “DOL”) amendment to the qualified professional asset manager (“QPAM”) prohibited transaction class exemption 84-14 (the “Exemption”) went into effect on June 17, 2024. Current QPAMs must send a one-time email notice to the DOL no later than December 14, 2024, in order to rely on the Exemption (see below).
Updates to QPAM Financial Threshold Qualifications
The assets under management (“AUM”) threshold for registered investment advisors (“RIAs”) to qualify as a QPAM will increase incrementally from $85,000,000 to $135,868,000 between 2024 to 2030. The shareholder or partner equity (or certain guaranteed liabilities) threshold that applies to RIAs increases incrementally from $1,000,000 to $2,040,000 between 2024 to 2030. By December 31, 2024, RIAs must have an AUM of at least $101,956,000 and shareholders’ or partners’ equity of at least $1,346,000.
The equity capital threshold that applies to banks, savings and loan institutions, and insurance companies seeking to qualify as QPAM increases incrementally from $1,000,000 to $2,720,000 between 2024 and 2030.
Notification and Recordkeeping Requirements
QPAMs must now provide the DOL with an email notice of the legal name and d/b/a name of each business entity that is intended to qualify as a QPAM to QPAM@dol.gov within 90 days of its reliance on the Exemption. Current QPAMs were required to provide this initial notice by September 15, 2024. If a QPAM fails to provide the notice within the initial 90 days, the QPAM will have an additional 90 days to email the notice to the DOL but must include the reason for its failure to provide the initial notice. Current QPAMs that did not provide the initial notice by the September 15th deadline will have until December 14, 2024, to do so. QPAMs must also provide notice of any name change to the DOL within 90 days of the change.
QPAMs must now maintain records demonstrating compliance with the Exemption for six years from the date of any transaction relying on the Exemption and must make these records available to various regulatory agencies and certain benefit plan fiduciaries, contributing employers, and plan participants upon request.
Loss of QPAM Status
A QPAM will generally lose its status for ten years if the QPAM, its affiliate, or any direct or indirect owner holding a 5% or more interest in the QPAM (a “QPAM Party”) is convicted in a U.S. or foreign court or is released from prison (whichever is later) as a result of committing or attempting to commit certain financial crimes.
A QPAM will now also generally lose its status for ten years if the QPAM Party participates in “prohibited misconduct.” Prohibited misconduct includes entering into a non-prosecution or deferred prosecution agreement with any U.S. Court or regulatory agency, if the allegations that form the basis of that agreement would have constituted a criminal conviction. Prohibited misconduct also includes a Court or agency determination that the QPAM Party participated in or had knowledge of certain conduct that violates the conditions of the Exemption or providing material and misleading information to certain regulatory agencies, including the DOL, IRS, and SEC.
QPAMs must notify the DOL and each of the QPAM’s client benefit plans within 30 days of losing QPAM status as a result of a criminal conviction or prohibited misconduct and will have one year after ineligibility to help client benefit plans to make any necessary adjustments. QPAMs will now also need to notify the DOL within 30 days of entering into certain foreign non-prosecution or deferred prosecution agreements, requiring U.S. asset managers to more closely monitor their foreign affiliates.
Contacts:
Barbara Klepper I 214.745.5871 I bklepper@winstead.com
Burke McDavid I 214.745.5490 I bmcdavid@winstead.com
Andrew Rosell I 817.420.8261 I arosell@winstead.com
_____________________
Disclaimer: Content contained within this news alert provides information on general legal issues and is not intended to provide advice on any specific legal matter or factual situation. This information is not intended to create, and receipt of it does not constitute a lawyer-client relationship. Readers should not act upon this information without seeking professional counsel.