Maybe Not Such a Bad Actor – Department of Labor Clarifies Anti-Criminal Rule Under ERISA Rules

by Dechert LLP

The U.S. Department of Labor (the “Department”) on November 1, 2013 issued Advisory Opinion 2013-05A (the “Opinion”) concerning the application of certain anti-criminal provisions under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In particular, as discussed below, the Opinion generally provides clarification regarding what may be considered a “conviction” for purposes of Prohibited Transaction Class Exemption 84-14 (the “QPAM Exemption”). 

You may already be aware of the recent rule-making activities by the Securities and Exchange Commission to disqualify securities offerings involving “bad actors” from being eligible for certain exemptions that may apply to otherwise covered private offerings. Previous DechertOnPoints published on July 26, 2013 and September 27, 2013 discuss some recent developments regarding the securities-law rules governing bad actors. 

Similar issues can arise under ERISA. For instance, Section 411 of ERISA prohibits a person who is convicted of certain enumerated crimes from serving in various capacities, including as a plan fiduciary, for 13 years after such conviction (or until the end of imprisonment, if later). Additionally, under the QPAM Exemption, which may exempt from the prohibited-transaction rules of ERISA (and corresponding tax rules) certain transactions involving plan assets managed by a “qualified professional asset manager” (a “QPAM”), a manager that may otherwise qualify as a QPAM is generally disqualified from relying upon the QPAM Exemption if it or any of its affiliates has been convicted of certain crimes during the prior 10 years. 

In a number of cases, questions can arise as to whether a “conviction” has occurred for purposes of Section 411 of ERISA or the QPAM Exemption. For example, in McKinney v. Moore, 40 Empl. Bens. Cas. (BNA) 2793 (S.D.N.Y. 2007), the court held that a deferred prosecution agreement of a union official constituted a “conviction” for purposes of Section 411 of ERISA. See also Int’l Longshoremen’s Ass’n v. United States, 451 F. Supp. 685 (S.D. Ala. 1978) (holding that a plea of nolo contendere was equivalent to a “conviction” for purposes of Section 411 of ERISA).  

Dechert LLP recently procured from the Department clarification that, in the view of the Department, a deferred prosecution agreement is indeed not a “conviction” for purposes of the QPAM Exemption. This clarification may be helpful to ERISA managers who have entered into deferred prosecution agreements or whose affiliates have done so. It should be noted that, under certain circumstances (for example, in the case of investment advisers that have a number of affiliates), this issue may have greater relevance in the context of the QPAM Exemption than in the context of Section 411 of ERISA generally, because the anti-criminal rule under the QPAM Exemption also extends to parties who are affiliated with a QPAM under the potentially broad definition of “affiliate” set forth in Part VI(d) of the QPAM Exemption.

Written by:

Dechert LLP

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.