UBS Gets Stern Regulator Caveat on Post-Merger 401(k) Management

The US Labor Department is tentatively willing to grant UBS Group AG and Credit Suisse Group AG an exemption to continue managing US retirement assets ahead of their planned merger, but, in a rare move, cautioned plans that they may need to seek new investment firms in the future.

Both multinational investment banks were relying on individual exemptions to manage pension assets in the US after they were caught up in a series of foreign price fixing and fraud schemes dating back to at least 2013.

DOL’s proposed exemption, issued Thursday, would allow the merged bank to continue operating as a qualified professional asset manager (QPAM) for one year, even though neither bank filed an application with regulators due to the “exigent circumstances giving rise to the Merger.”

QPAMs are a gold standard for investment management in the US retirement industry. Together, UBS and Credit Suisse could play an outsized role in that market, adding weight to the department’s forewarning. Retirement plans that partner with the merged bank could fall victim to a suite of prohibited transactions if they lost their QPAM shield.

Regulators issued UBS as the acquirer a stern warning to follow up with officials regularly on the merger progress. The exemption would terminate immediately if the bank or any of its corporate entities were convicted of more foreign or domestic felonies.

“Covered Plan fiduciaries are strongly cautioned that the Department might not extend this one-year exemption following its expiration due to the significant number of convictions and the seriousness of the underlying conduct of the tainted entities that will now reside together within the UBS corporate umbrella following the Merger,” the department wrote.

UBS is expected to close out its purchase of Credit Suisse by late May. The emergency sale backed by the Swiss government was initiated to quiet market upheaval in the wake of two high-profile bank collapses in the US.