Chicago Bank Begs Pardon for French Fiasco Feds
Published Date: 1/21/2025
Notice
Summary
Northern Trust and its affiliates want a special okay from the government to keep doing some financial work despite a past legal issue in France. If approved, this exemption would let them operate under certain rules from March 2025 to March 2030. People can share their thoughts or ask for a hearing by March 7, 2025.
Analyzed Economic Effects
4 provisions identified: 2 benefits, 2 costs, 0 mixed.
Five-Year Exemption Lets Northern Keep QPAM Status
The Department proposes to allow Northern Trust’s qualifying asset managers (Northern QPAMs) to rely on Prohibited Transaction Class Exemption 84-14 for five years from March 5, 2025 through March 4, 2030, notwithstanding the March 5, 2024 conviction of Northern Trust Fiduciary Services (Guernsey) Limited (NTFS) in France. This lets ERISA-covered plans and IRAs that use Northern continue to rely on the QPAM exemption during that period.
Risk of Major Transition Costs If Exemption Denied
The Applicant says that if Northern QPAMs lose the ability to rely on the QPAM exemption, Covered Plans could face long and costly transitions: consultant costs estimated at $25,000–$75,000 to $30,000–$100,000, legal fees estimated at $5,000–$30,000 (and $15,0000–$150,000 for alternative investments), plus substantial trading-related costs (the Applicant estimates total trading-related costs of $197,926,400 for U.S. equity holdings, $4,546,557 for Americas ex-US, $23,888,223 for EMEA, and $51,658,350 for APAC).
Keeps Access To Derivatives, Hedging, 144A Securities
The proposed exemption would allow Northern QPAMs to keep using the QPAM Exemption for transactions that include global fixed income, global equities, futures, options, swaps and other derivatives, investments in alternative plan-asset funds (including hedge funds), and Rule 144A debt securities for the Exemption Period March 5, 2025–March 4, 2030. This preserves the ability of Covered Plans to engage in hedging, certain fixed income transactions, and similar strategies that the Applicant says are key to risk and return management.
Exemption Ends Immediately If More Crimes or Violations Occur
The relief would terminate immediately during the Exemption Period if Northern or an affiliate is convicted of a crime covered by PTE 84-14 section I(g) (other than the existing Conviction) or another disqualifying violation occurs. The Department notes it may grant a new exemption later, but it would not be required to do so.
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