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More Ways Qualified Professional Asset Managers Can Lose Exemption

The U.S. Department of Labor (“DOL”) recently published amendments to narrow the Class Prohibited Transaction Exemption (PTE), also known as the qualified professional asset manager (“QPAM”) Exemption. The exemption allows QPAMs to manage multiple investments, notwithstanding general prohibitions under the Employee Retirement Income Security Act (“ERISA”). Under the amendments, QPAMs are ineligible for the exemption if they committed certain criminal conduct. The DOL also requires QPAMs to be more transparent by changing reporting and administrative duties. The effective date of this new amendment is July 17, 2024.

What Are QPAMs and Why Are They Important?

A QPAM is a bank, savings and loan association, insurance company, or registered investment adviser that meets specified asset and equity thresholds and owes fiduciary duties to its clients. To prevent QPAMs from engaging in self-dealing or conflicts of interest, ERISA typically prohibits a QPAM from managing the retirement accounts of its existing clients.  Without the exemption, a QPAM could not manage, among other things, sales, leases, loans, and the provision of services of their participants and beneficiaries as well as manage their individual retirement accounts. The QPAM Exemption allows a QPAM to manage a participant’s retirement investment funds and other assets, subject to protective measures. This new amendment increases protection to participants by expanding the types of criminal conduct that will restrict the QPAM Exemption.

Prohibited Misconduct

Crimes that already disqualify QPAMs include, felonies for abuse or misuse of the person’s employee benefit plan; felonies of larceny, theft, and robbery; and income tax evasion. The new categories of criminal misconduct include domestic and foreign actions.

General Misconduct (Domestic of Foreign)–  

The amendment states that factual findings of the following misconduct must be made either by final judgment or court-approved settlement:

  1. Engaging in intentional or continuous misconduct that violates the QPAM exemption even in non-exempt transactions; and
  2. Providing materially misleading information about the exemption to the DOL, federal agencies, and state officials.

Foreign Convictions –

  1. An QPAM can be disqualified from using the transaction exemption if an individual asset plan manager is “release[d] from imprisonment” for to a foreign criminal conviction. This provision makes the consequences of foreign convictions equivalent to those of domestic convictions.
  2. QPAMs are prohibited from entering into a non-prosecution agreement (NPA) and deferred prosecution agreement (DPA), and QPAMs are required to notify the DOL if they enter into a foreign equivalent to a DPA or NPA.

Administrative Changes

The amendments require the following administrative changes:

  1. Threshold –The amendment increases financial thresholds to qualify as a QPAM. The threshold will also increase in three-year increments beginning December 31, 2024 and ending December 31, 2030. The threshold are as followed:


Current Threshold

December 31, 2024

December 31, 2027

December 31, 2030

Bank, savings and loan association and insurance company





Registered Investment Adviser (Shareholders’ or partners equity)





Registered Investment Adviser (Current assets under management)





2. Notification – QPAMs are required to notify the DOL that they are relying on the exemption.

3. Free of Bias Statement –The terms of the transaction, commitments, investment of fund assets, and any corresponding negotiations must be based on the QPAM's "independent exercise of fiduciary judgment and free from any bias in favor of the interests of the Plan sponsoror other parties in interest." 

4. Additional Recordkeeping requirements – QPAMs are required to keep and maintain their records for six years.

5. Transition Period – QPAMs have one year from the date they are found ineligible for the exemption to transition their clients off to new asset managers. As a part of this QPAMs must indemnify their clients for losses related to the QPAM losing its exemption status.

The DOL made several other changes that affect QPAMs Exemptions. Asset managers must proactively prevent domestic and foreign misconduct that can result in a revocation of the exemption. As these changes will be enforced soon, QPAMs should review their policies to remain in compliance. The final amendments will be applied prospectively only.

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