What is a Qualified Professional Asset Manager?
A qualified professional asset manager is a designation for a registered investment advisors who work with or manage retirement fund assets. QPAM status is an exemption from the restrictions that the Employee Retirement Income Security Act (ERISA) places on transactions involving retirement funds.
How to Be a Qualified Professional Asset Manager?
The requirements to be a QPAM are listed by the Department of Labor in the Prohibited Transaction Class Exemption Section 84-14. To qualify, an investment adviser must:
- Be a bank, savings and loan or insurance company with equity capital or net worth in excess of $1 million;
- Be an investment adviser registered with the Securities and Exchange Commission pursuant to the Investment Adviser Act and manage or advise an investment fund with at least $85 million in assets and shareholders’ or partners’ equity in excess of $1 million;
- Act as a fiduciary for the client (fund investors); and
- Not have been previously convicted of a felony affecting trust management.
How Does the Qualified Asset Manager Work?
Remember, this exemption is only relevant to funds holding retiree fund assets (defined contribution or defined benefit funds). ERISA prohibits an investment adviser from entering into transactions involving fund assets (pursuant to Section 406(a)) with any party that has an interest in the plan, such as plan sponsors of other fiduciaries (such as investment or accounting firms). A Qualified Professional Asset Manager is permitted to enter into certain types of otherwise prohibited transactions including sales, exchanges, leases, loans/extensions of credit and the provision of services between a party of interest and a pension plan. There are still prohibitions against the QPAM entering into transaction with itself or with other parties that may have the power to influence the QPAM. More specifically, the other party to the transaction cannot be a related to the QPAM or to a fiduciary who appointed/hired the QPAM. This would still be a breach of fiduciary duty.