The ranking Republican member of the Senate Health, Education, Labor and Pensions (HELP) Committee has taken aim at the Department of Labor’s (DOL) proposed changes to the Qualified Professional Asset Manager (QPAM) exemption.
In a Nov. 29 letter to Acting Labor Secretary Julie Su, Sen. Bill Cassidy, M.D. (R-LA) argued that the proposed changes would allow the Chinese Communist Party (CCP) to “weaponize” its criminal enforcement power against American citizens and businesses for political purposes.
“DOL’s proposal uses the U.S. legal system to help China suppress its own citizens and harm the American economy by facilitating foreign targeting of American citizens, residents, and businesses,” Sen. Cassidy stated.
The DOL in July 2022 released a proposed amendment to Prohibited Transaction Class Exemption 84–14—also known as the QPAM exemption—that would, among other things, expand the types of misconduct that disqualify plan asset managers from using the exemption and stipulate that foreign convictions disqualify firms from utilizing the QPAM.
In general, the QPAM exemption permits various parties who are related to plans to engage in transactions involving plan and individual retirement account assets if the assets are managed by QPAMs that are independent of the parties in interest and that meet specified financial standards.
Sen. Cassidy argues that the provision to revoke an advisor’s exemption if they have been convicted of a financial crime by other countries would assist adversarial governments like the CCP. Additionally, he notes that, under the proposal, an agreement settled out of court between governments and businesses would be considered a conviction by DOL, meaning that American asset managers and businesses would lose QPAM status and be financially harmed even if they are not indicted or found guilty in court.
To that end, the senator says he’s concerned that this proposed policy change would empower the CCP to use U.S. law to fraudulently target American businesses and threaten individuals who oppose the CCP regime. As an example, he points to the CCP’s apparent use of threats of financial crimes against Americans who support democracy in Hong Kong, including in 2022 when individuals attempted to bribe a federal official to obtain the tax returns of a U.S.-based pro-democracy activist with the intent to threaten them with criminal allegations.
“I am particularly alarmed that DOL proposes to consider convictions from hostile countries like China, and treat deferred prosecution agreements and non-prosecution agreements as convictions,” Sen. Cassidy wrote. He also raised concerns that the new policy would limit retirement investment options for companies, threatening Americans’ retirement security as a result of CCP political persecution.
The American Retirement Association has also previously raised concerns with the proposed QPAM amendments, arguing that the changes would “needlessly” disrupt plan relationships and increase costs for plan sponsors and participants—with no obvious corresponding benefit.
As it turns out, the DOL appears to be getting closer to releasing a final rule to amend the QPAM exemption. While all the recent attention has been on the fiduciary investment advice proposal, the DOL on Nov. 14 submitted to the White House Office of Management and Budget a final rule for review. The OMB generally has up to 90 days to vet the guidance and either approve it for release or send it back for modifications. Note that there is no minimum period for review.
Meanwhile, in noting the serious nature of the issues, Sen. Cassidy has requested that the DOL respond to a series of questions on the proposed changes by Dec. 13, 2023.
