UBS gets warning, temporary nod to run U.S. pension money
The DOL issued its warning after a French court convicted UBS this month of helping French citizens stash funds in undeclared Swiss accounts.
(Bloomberg) –The U.S. Labor Department is granting UBS Group AG permission to continue managing U.S. pensions unhindered for one year despite a new criminal conviction in France, while cautioning the Swiss banking giant that a future conviction anywhere in the world could jeopardize that status.
The regulator issued its warning Tuesday after a French court convicted UBS this month of helping French citizens stash funds in undeclared Swiss accounts. The court ordered the bank to pay more than 4.5 billion euros ($5.12 billion).
Like all parties that manage pensions overseen by the Labor Department, UBS must obtain a waiver to continue those operations uninterrupted after certain criminal convictions, regardless of where they occur. UBS oversees $11.5 billion in U.S. pensions as part of $781 billion in assets under management globally, according to the bank.
“The department cautions that the relief in this exemption will terminate immediately if an entity within the UBS corporate structure” is found guilty of any crime outlined in Labor Department regulations, the regulator warned.
UBS remains focused on serving the needs of its pension plan clients, according to Peter Stack, a spokesman. UBS has previously said the French court didn’t address most of the bank’s arguments and called its ruling “inconsistent and contradictory.”
The Labor Department didn’t immediately respond to requests for comment.
The UBS exemption goes into effect from the date of the judgment in the French First Instance Court against UBS, UBS France or both, according to a summary published in the Federal Register.
Although the Labor Department granted UBS’s request to continue operating as a so-called Qualified Professional Asset Manager, or QPAM, it rejected other elements of the bank’s application.
For example, it denied UBS’s request to exhaust all avenues of appeal in France before being considered convicted. Regulators also rebuffed UBS’s request to delay telling its pension and Individual Retirement Account customers why it had to apply for the exemption.
This isn’t the first time UBS has had to seek permission to keep managing money for U.S. retirees. The Swiss institution was one of several U.S. and foreign banks that were forced to apply for similar waivers following convictions in 2016.
The Labor Department’s latest announcement follows its rejection in December of BNP Paribas SA’s application for a similar wavier. That rare rejection is expected to make it more difficult for the French bank to manage Americans’ pension assets. The effect may be limited, though, because BNP Paribas is a minor player among U.S. retirement managers, with only about $1 billion in pension assets.
Regulatory waivers have become politically fraught in recent years, with lawmakers, including Senator Elizabeth Warren, a Massachusetts Democrat and presidential candidate, and Representative Maxine Waters of California, who now chairs the House Financial Services Committee, having called for tougher reviews of banks accused of crimes.
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