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Goldman Gets Proposed Exemption to Manage Retirement Assets (1)

Dec. 31, 2020, 2:18 PMUpdated: Dec. 31, 2020, 3:50 PM

The U.S. Labor Department has preliminarily given Goldman Sachs Group Inc. permission to continue managing retirement assets for five years without disruption due to its subsidiary’s guilty plea in a global bribery scheme.

Under a proposed exemption released Thursday, Goldman would retain its status as a qualified professional asset manager, or QPAM, which is considered a necessity in the financial services industry to manage clients’ 401(k) and pension plans.

This comes as a federal judge will soon finalize settlements over the firm’s role in looting a Malaysian investment fund, an international bribery scandal in which Goldman’s affiliate has agreed to plead guilty under U.S. law.

The public has 37 days to comment on the proposal starting on Jan. 4, when it’s scheduled for formal publication. Those comments will then be reviewed by DOL to inform a final QPAM.

Goldman said in an Oct. 22 filing that it expects the DOL to approve the waiver so its retirement assets practice won’t be disrupted when a judge finalizes its deal with the U.S. Justice Department.

The Wall Street firm applied for exemptive relief because of a requirement under the 1974 Employee Retirement Income Security Act for companies facing felony convictions.

A federal judge in Brooklyn is scheduled to finalize the conviction on March 3 at a sentencing hearing for Goldman Sachs Malaysia. The judge recently agreed to postpone the hearing from Dec. 11 after the U.S. attorneys prosecuting the case requested an extension to allow more time for DOL to finish processing the QPAM application.

Goldman sought a 10-year relief period in an exemption application filed Oct. 15. But “given the magnitude, gravity, duration and pervasiveness” of the Malaysia affiliate’s misconduct and the parent company’s numerous “compliance control failures,” a five-year term would be more appropriate, DOL’s Employee Benefits Security Administration stated in the proposal.

The deal reached with the U.S. government holds Goldman responsible for raising billions for a state investment fund intended to support Malaysian citizens. Much of the fund was stolen by people tied to the former prime minister and spent on high-end art, real estate, and financing for the film “The Wolf of Wall Street.”

(Updated with additional reporting throughout. )

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Karl Hardy at khardy@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com