The U.S. Department of Labor (the “DOL”) recently issued an information letter, dated November 9, 2012 (the “Information Letter”), in which it confirms that, for all purposes of determining what parties are “related” to a qualified professional asset manager (“QPAM”) under prohibited transaction class exemption 84-14 (the “QPAM Exemption”), only direct ownership interests, and not indirect ownership, should be considered. The “QPAM Exemption is an exemption that allows certain investment managers that are QPAMs to enter into transactions that might otherwise be “prohibited transactions” under the Employee Retirement Income Security Act of 1974 (“ERISA”), if specified conditions are satisfied. One of those conditions is that the other party to the transaction not be “related” to the QPAM.

In Advisory Opinion 2011-06A, dated February 4, 2011, the DOL opined that two particular entities were not “related” for purposes of the QPAM Exemption despite the fact that there was some common ownership of the two entities. Advisory Opinion 2011-06A was helpful to investment managers in that it clarified that the QPAM Exemption is potentially available notwithstanding certain types of affiliation between the QPAM and the transaction counterparty. However, uncertainty arose with respect to the application of the “related” parties condition of the QPAM Exemption because in Advisory Opinion 2011-06A, in analyzing whether a particular party was “related” to another for purposes of the QPAM Exemption, the DOL recited that the party in question did not own, directly or indirectly, a sufficient interest in the other party.