352 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules

collect earnings information, through a

number of other collection instruments

already approved by OMB. In most

cases, we will obtain this information

through forms W–2 and schedule SEs

approved for use by IRS. In those cases

where additional information is

required, we expect to obtain that

information during the initial claims

interview through forms approved for

use by SSA (primarily the SSA–1

(Application for Retirement Benefits;

OMB Approval Number 0960–0007) and

the SSA–795 (Statement of Claimant or

Other Person; OMB Approval Number

0960–0045)). In addition, SSA has

developed a new form to collect the

additional information needed from

employers to correctly adjust benefits in

special wage payment situations. We

will submit this form to OMB for its

review under section 3507(d) of the

Paperwork Reduction Act of 1995.

(Catalog of Federal Domestic Assistance

Program Nos. 96.001 Social Security—

Disability Insurance; 96.002 Social

Security—Retirement Insurance; 96.004

Social Security—Survivors Insurance)

List of Subjects in 20 CFR Part 404

Administrative practice and

procedure, Blind, Disability benefits,

Old-Age, Survivors, and Disability

Insurance, Reporting and recordkeeping

requirements, Social security.

Dated: November 1, 1996.

Shirley S. Chater,

Commissioner of Social Security.

For the reasons set out in the

preamble, part 404 of chapter III of title

20 of the Code of Federal Regulations is

proposed to be amended as follows:

PART 404—FEDERAL OLD-AGE,

SURVIVORS AND DISABILITY

INSURANCE

1. The authority citation for subpart E

of part 404 continues to read as follows:

Authority: Secs. 202, 203, 204 (a) and (e),

205 (a) and (c), 222(b), 223(e), 224, 225, and

702(a)(5) of the Social Security Act (42 U.S.C.

402, 403, 404 (a) and (e), 405(a) and (c),

422(b), 423(e), 424a, 425, and 902(a)(5)).

2. Section 404.452 is amended by

revising paragraphs (a)(1) and (a)(2),

revising the last sentence of paragraph

(b), and revising paragraph (d) to read as

follows:

§ 404.452 Reports to Social Security

Administration of earnings; wages; net

earnings from self-employment.

(a) * * *

(1) The individual attained the age of

70 in or before the first month of

entitlement to benefits in the taxable

year, or

(2) The individual’s benefit payments

were suspended under the provisions

described in § 404.456 for all months in

a taxable year in which the individual

was entitled to benefits and was under

age 70.

(b) * * * The filing of an income tax

return or a form W–2 with the Internal

Revenue Service may serve as the report

required to be filed under the provisions

of this section where the income tax

return or form W–2 shows the same

wages and net earnings from selfemployment that must be reported to

the Administration under this section.

* * * * *

(d) Information to be provided to us.

The report should show the name and

social security claim number of the

beneficiary about whom the report is

made; identify the taxable year for

which the report is made; show the total

amount of wages for which the

beneficiary rendered services during the

taxable year (if applicable), the amount

of net earnings from self-employment

for such year (if applicable); and show

the name and address of the individual

making the report. To overcome the

presumption that the beneficiary

rendered services for wages exceeding

the allowable amount and rendered

substantial services in self-employment

in each month (see § 404.435), we must

also be told the specific months in

which the beneficiary did not render

services in employment for wages of

more than the allowable amount (as

described in § 404.435) and did not

render substantial services in selfemployment (as described in §§ 404.446

and 404.447).

* * * * *

[FR Doc. 97–100 Filed 1–2–97; 8:45 am]

BILLING CODE 4190–29–P

20 CFR Parts 404 and 416

[Regulations Nos. 4 and 16]

RIN 0960–AD73

Federal Old-Age, Survivors, and

Disability Insurance and Supplemental

Security Income for the Aged, Blind,

and Disabled; Standards of Conduct

for Claimant Representatives

AGENCY: Social Security Administration.

ACTION: Proposed rules.

SUMMARY: These proposed rules would

revise our regulations governing

representation of claimants seeking

Social Security or supplemental security

income (SSI) benefits under title II or

XVI of the Social Security Act (the Act).

They would establish standards of

conduct and responsibility for persons

serving as representatives and further

define our expectations regarding their

obligations to those they represent and

to us. They would include statutorily

and administratively imposed

requirements and prohibitions.

DATES: To be sure that your comments

are considered, we must receive them

no later than March 4, 1997.

ADDRESSES: Comments should be

submitted in writing to the

Commissioner of Social Security, P.O.

Box 1585, Baltimore, MD 21235, sent by

telefax to (410) 966–2830, sent by E-mail

to ‘‘regulations@ssa.gov’’, or delivered

to the Division of Regulations and

Rulings, Social Security Administration,

3–B–1 Operations Building, 6401

Security Boulevard, Baltimore, MD

21235, between 8:00 a.m. and 4:30 p.m.

on regular business days. Comments

received may be inspected during these

hours by making arrangements with the

contact person shown below.

FOR FURTHER INFORMATION CONTACT:

Richard M. Bresnick, Legal Assistant,

Division of Regulations and Rulings,

Social Security Administration, 6401

Security Boulevard, Baltimore, MD

21235, (410) 965–1758.

SUPPLEMENTARY INFORMATION

Purpose and Scope

Existing regulations governing

representatives’ conduct (§§ 404.1740, et

seq. and 416.1540, et seq.) under titles

II and XVI primarily reiterate various

statutory provisions set forth in the Act.

Sections 404.1745 and 416.1545 also

provide that a representative may be

suspended or disqualified if he or she

has violated those rules, been convicted

of a violation of section 206 of the Act

or ‘‘otherwise refused to comply with

our rules and regulations on

representing claimants in dealings with

us.’’ This is consistent with section

206(a)(1) of the Act, which provides that

the Commissioner of Social Security

(the Commissioner) may ‘‘suspend or

prohibit from further practice before

him any such person, agent, or attorney

who refuses to comply with the

Commissioner’s rules and regulations

* * *.’’ Since their inception, the

regulations have reflected the

Commissioner’s (formerly the Secretary

of Health and Human Services’ (the

Secretary’s)) broad authority over

matters involving representatives’

activities in their dealings with us.

These proposed rules specifically

provide enforceable standards governing

aspects of practice, performance and

conduct for all persons who act as

claimants’ representatives. The

proposed rules also recognize potential

changes in the procedures used by the
Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules 353

Social Security Administration (SSA) to

process claims, the increased

participation of compensated

representatives in the adjudicative

process, the special circumstances

presented by SSA’s nonadversarial

hearings, and statutory amendments,

such as the anti-fraud provisions of the

Social Security Independence and

Program Improvements Act of 1994,

Public Law (Pub. L.) 103–296. The

existing regulations pertaining to

representatives’ conduct have been

largely unchanged since their

promulgation in 1980, and do not

adequately address actual and potential

problems resulting from the

participation of representatives in the

claims process.

Although we realize that most

representatives do a conscientious job in

assisting their clients, our experience

has convinced us that there are

sufficient instances of questionable

conduct to warrant promulgation of

additional regulatory authority. The

existing regulations do not address a

representative’s willful or negligent

delay, refusal to cooperate, failure to

adequately prepare and present the

claimant’s case and other deficiencies.

The proposed rules correct these

omissions and are necessary to protect

the claimant and the process from those

individuals who are incapable of

providing, or unwilling to provide,

meaningful assistance in expeditiously

resolving pending claims.

Although there are disparities in the

levels of skill, experience, education

and professional status among those

who serve as representatives, we believe

all such individuals must be bound by

the same set of rules. In determining

appropriate standards, we considered

the requirements and intent of the Act

and its implementing regulations,

administrative law principles applicable

to adjudication and the American Bar

Association’s (ABA) Model Rules of

Professional Conduct and Model Code

of Professional Responsibility.

There are comparable rules in part

410, subpart F (§§ 410.684, et seq.)

governing representative conduct under

the Black Lung benefits program. We are

not revising those rules, however.

Executive Order 12866, Regulatory

Planning and Review, issued by the

President on October 4, 1993 (58 FR

51735), provides that ‘‘Federal agencies

should promulgate only such

regulations as are required by law, are

necessary to interpret the law, or are

made necessary by compelling public

need * * *.’’ Because we have found no

problems with representative conduct in

claims involving Black Lung benefits

comparable to those that have led to

these proposed rules for titles II and

XVI, there is no compelling need to

revise the Black Lung rules.

We expect that the proposed rules

will further clarify our expectations

regarding the obligations of

representatives to provide competent

representation of their clients, in

accordance with procedural and

evidentiary requirements of the claims

process. Moreover, the proposed

regulations, when published, will

constitute official notice concerning our

requirements and prohibitions.

To address the concerns of claimants

and others with a stake or interest in the

issue of claimant representation in

drafting the proposed rules, we obtained

information from various sources. We

conducted focus groups with claimants

and beneficiaries as part of our

disability process redesign initiative.

We also used information gathered in

investigating nearly 600 complaints of

representative misconduct made by

claimants from 1988 to date.

Communication With Claimants

Participants in the public dialogue

conducted in conjunction with our

disability process redesign initiative

frequently complained about the lack of

timely or effective assistance on the part

of claimants’ representatives. They felt

that some representatives delayed

submitting evidence until the case

reached the hearing level in order to

increase the amount of past-due benefits

and thereby increase the amount of their

fees. Others did not believe that all

representatives provided adequate

assistance in the preparation or

presentation of the case. In the latter

category, there were recurring

complaints that the claimant did not see

or have any contact with the

representative until shortly before the

hearing when the representative,

allegedly for the first time, would

review the file. These claimants did not

believe that the representative was

adequately prepared to present their

case, or had provided any assistance in

ensuring that the record was complete.

Some individuals complained that their

representatives’ failure to obtain

medical documentation for inclusion in

the record, despite being informed that

the evidence was available and material,

forced them personally to obtain the

required documentation. The

dissatisfaction with the quality and

effectiveness of representatives’ services

was strong enough to prompt the

Disability Process Redesign Team to

include within its recommendations

provisions aimed at correcting

shortcomings in the representatives’

performance.

The comments received from focus

groups and at public meetings are

consistent with written complaints we

receive about representatives who do

not participate or cooperate in the

processing of claims. We have seen

instances where a representative

demands that all communications with

the claimant be made through his or her

office and refuses, at lower levels of

adjudication, to produce available

medical evidence or make his or her

client available for a consultative

examination. Some representatives, as a

matter of practice, do not submit

available evidence until the day of the

hearing even though in some cases the

matter might have been favorably

decided some time before on the basis

of new medical reports. In addition to

delaying payment unnecessarily in

some cases, this practice can further

delay disposition of a claim when the

administrative law judge or expert

witnesses do not have an opportunity to

review and consider the new evidence

prior to the hearing.

Consultation With the Representative

Community

In February 1995 we requested

comments on a draft proposal from 33

separate groups and organizations

comprising the attorney and nonattorney representative community.

These groups included professional

organizations, interest groups, think

tanks, the Legal Services Corporation,

and various private representative

organizations.

We received 92 individual responses.

Many were supportive, especially

regarding the need to provide standards

for non-attorney representatives. Many,

however, were opposed to more

regulation of their professional conduct.

We carefully considered all of the

individual views and concerns in

formulating these proposed rules. A

summary of the major views and

concerns and our responses follows.

1. A common complaint was that the

proposed standards used terms that

were too vague and ambiguous, such as

‘‘timely,’’ ‘‘diligence,’’ ‘‘as soon as

possible’’ and ‘‘matters at issue.’’ To be

responsive to these concerns and further

clarify our requirements, we have

modified the language that was most

often identified as ambiguous.

For example, the earlier language in

what are now proposed

§§ 404.1740(b)(1) and (2) and

416.1540(b)(1) and (2) called for

representatives to diligently develop the

record and submit evidence as soon as

possible. In these proposed rules, we

ask representatives to submit evidence

‘‘as soon as practicable, but no later than
354 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules

the due date designated by the Agency,

except for good cause shown.’’ We

believe this standard is more specific,

and gives representatives some

discretion in the submission of

information and evidence. Also, in

place of the phrase ‘‘matters at issue’’ in

what are now proposed

§§ 404.1740(b)(2)(ii) and

416.1540(b)(2)(ii), we say ‘‘pertaining to

specifically identified issues.’’ In

proposed §§ 404.1740(b)(3)(i) and

416.1540(b)(3)(i), we narrowed the

‘‘matters at issue’’ to those matters

‘‘establishing entitlement or eligibility

to the claimed right or benefit.’’

Some individuals found the entire

substance of the proposed standards to

be ambiguous, although one believed

they were drawn too narrowly and

should be expanded. Several argued that

the proposals did not provide adequate

notice to representatives of the exact

types of conduct we would find to

violate these regulations.

It is our position that the proposed

rules define with specificity the types of

conduct subject to regulation. Similar to

other codes of conduct (e.g., the ABA

Model Rules), the proposed regulations

do not list every act or omission which

might constitute a violation. Such a

listing would be virtually impossible

given the limitless factual situations

involved in claims processing. Rather,

we intend to deal with each complaint

on a case-by-case basis to determine

whether under the attending

circumstances, a representative engaged

in actionable misconduct. In making

this determination we will apply an

objective test, that is, whether a

reasonable person, in light of all the

circumstances, would consider the act

or omission violative of the rule in

question.

This has been our practice in the past.

In all but the most egregious instances

of potential misconduct, we give

representatives notice of the alleged

wrongdoing and an opportunity to

respond before formal charges are ever

proposed. Once it is determined that a

formal complaint is warranted, the

Deputy Commissioner for Programs,

Policy, Evaluation and Communications

(or other official the Commissioner may

designate) reviews the proposal

independently from the investigative

component and makes a decision

whether to file a complaint.

We believe that the internal checks

and balances within our operating

procedures provide adequate safeguards

against abuse of discretion or arbitrary

action. Even after a complaint is served,

a representative is entitled to file an

answer and petition for withdrawal of

the complaint. Thereafter, the accused

party has a right to a full evidentiary

hearing, and a right to request review of

the resulting decision. In view of these

elaborate safeguards, administered at

each step by independent decision

makers, it is unlikely that an honest

mistake or a reasonable

misunderstanding on the part of a

representative would result in

sanctions.

2. A majority of responding attorneys

complained that, since their conduct

already is governed by their individual

State bar codes of conduct and ethical

rules, a separate SSA code of conduct is

redundant. Several individuals

expressed the opinion that SSA simply

can refer an attorney to his or her State

bar disciplinary authority when we

suspect misconduct. Another

recognized that State bar rules are not

applicable to representatives who are

not attorneys, but opined that there are

not enough non-attorney representatives

to warrant standards of conduct for nonattorneys.

Bar rules differ in language and

format among the 50 States, the District

of Columbia and the U.S. territories. As

the administrator of a national program,

however, SSA should not be expected or

required to apply local rules, or local

interpretations of the rules, to problems

which extend beyond the boundaries of

local jurisdictions. Furthermore, if we

applied local rules or local

interpretations rather than a national

standard, it is conceivable that attorneys

in one area could be subject to

discipline for conduct that another

jurisdiction would not find actionable.

We do not believe it benefits the

attorneys, the claimants or SSA to have

this type of inconsistency in effecting

the Commissioner’s statutory obligation

to regulate the conduct of

representatives.

Moreover, attorneys often represent

claimants in jurisdictions other than

those in which they are licensed to

practice law. In those instances, it

would be unclear which jurisdiction’s

rules would apply, which could lead to

inconsistent application of the rules

among attorneys practicing in the same

geographical area.

Also, under existing laws, referral of

suspected attorney misconduct to a

State bar disciplinary authority could

possibly constitute a violation of the

provisions of section 1106 of the Act

and, under certain circumstances, the

Privacy Act (5 U.S.C. 552a) on

maintaining the confidentiality of

personal information that we maintain

in our files.

A major concern is the fact that

currently there is no external authority

enforcing standards or rules of conduct

for representatives who are not

attorneys. Contrary to one individual’s

opinion, individual non-attorney

representatives and representative

organizations represent a substantial

number of claimants. Within the last 7

years, suspension/disqualification

actions against non-attorneys comprised

approximately 36 percent of SSA’s

representative disciplinary actions.

Therefore, it is essential to provide rules

that will govern the conduct of nonattorneys who practice before us.

Moreover, it is only fair and equitable to

hold all representatives who practice

before us to the same standards.

3. A majority of responding

individuals objected to the earlier

wording of what now are proposed

§§ 404.1740(b)(1) and 416.1540(b)(1),

which required representatives to

‘‘[e]xercise diligence in developing the

record on behalf of his or her client by

obtaining and submitting, as soon as

possible, all information and evidence

intended for inclusion in the record.’’

They argued that SSA was attempting

to improperly delegate to claimants and

representatives its own duty to develop

the record, which could place

representatives at the mercy of arbitrary

or unreasonable SSA requests for

information. They also pointed out that

the original language did not allow for

discretion in situations involving

uncooperative treating physicians and

uncooperative or uneducated claimants.

The claimant has a right to receive

benefits under the Act only after

establishing that he or she satisfies the

underlying statutory and regulatory

requirements.

Historically, SSA has assisted

claimants in gathering evidence and

perfecting the claim. Current workloads

and revised processing procedures will

require, however, that the claimant take

a more active role in establishing

entitlement or eligibility. The

representative, as the designated agent

of the claimant, will be called upon to

respond to our requests just as an

unrepresented claimant will be required

to cooperate.

Our intention is for the representative

to ensure that the claimant’s evidence is

available for inclusion in the record

when the claim is ready for

adjudication, unless there is a valid

reason for the delay. This is consistent

with the ABA Model Rules, which state

at Rule 3.2—Expediting Litigation, that

‘‘[a] lawyer shall make reasonable efforts

to expedite litigation consistent with the

interests of the client.’’ The comment

accompanying the rule states that

‘‘[d]elay should not be indulged merely

for the convenience of the advocates,’’

and ‘‘[r]ealizing financial or other
Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules 355

benefit from otherwise improper delay

in litigation is not a legitimate interest

of the client.’’

It is in the best interests of the

claimant to have full adjudication of the

claim as early in the adjudicative

process as possible. Although there will

be instances when evidence is not

readily available despite reasonable

effort, we believe that in most cases the

information can be secured timely.

In our experience, some

representatives do not submit evidence

promptly and fail to cooperate with our

attempts to obtain necessary

information and evidence. Under our

current rules at §§ 404.1715(a) and

416.1515(a), we are required to send the

representative requests for information

and evidence. Since we may not contact

a represented claimant directly, the

claimant often does not even know the

claim is being delayed by the

representative. Although this practice is

not pervasive, when it does occur we

are required to engage in unwarranted

and time-consuming efforts to develop

the evidence. More importantly,

however, the claimant is harmed by

delay in the disposition of the claim.

We do not believe that our proposed

rules unduly burden claimants or

representatives. The duties in question

only require a good faith effort to assist

the claimant in timely submission of

material information and evidence that

the claimant wants included in the

record.

Many individuals complained that

compliance with what are now

proposed §§ 404.1740(b)(2) and

416.1540(b)(2), which originally asked

representatives to ‘‘[p]romptly comply,

at every stage of the administrative

review process, with our requests for

information and evidence,’’ might place

them in violation of their own State bar

rules requiring zealous advocacy and

protection of confidential client

information.

We recognize that State bar rules vary

in their interpretation of an attorney’s

duty to maintain the confidences and

secrets of the client. We believe that our

proposed rules, as we have modified

them in response to individual

representatives’ concerns, will permit

an attorney to satisfy our requirements

without risking unauthorized

disclosures of information.

Under the ABA Model Rules, an

attorney may reveal information that is

‘‘impliedly authorized in order to carry

out the representation.’’ Moreover, Rule

1.6a provides that the attorney is not

barred from making disclosures if ‘‘the

client consents after consultation.’’ We

believe that an attorney can act in

accordance with State bar rules by

informing the client that SSA requires

certain information and evidence from

claimants, and that as the claimant’s

representative, the attorney must either

comply with these requests or tell SSA

that the claimant declines to furnish the

data. Taking these rules into

consideration, we have modified

proposed §§ 404.1740(b)(2) and

416.1540(b)(2) to permit representatives

to protect a client’s confidentiality by

notifying SSA that ‘‘the claimant does

not consent to release of some or all of

the [requested] material.’’

We do not believe, however, that

deliberate and purposeful withholding

from us of information or evidence is

justifiable under the various State bar

rules. In fact, such actions may be illegal

and subject to severe penalty. Section

206 of Public Law 103–296 adds a new

section 1129 to the Social Security Act,

providing that: ‘‘Any person * * * who

makes, or causes to be made, a

statement or representation of a material

fact for use in determining [the right to

benefits under title II or title XVI] that

the person knows or should know is

false or misleading or knows or should

know omits a material fact * * * shall

be subject to, in addition to any other

penalties that may be prescribed by law,

a civil money penalty of not more than

$5,000 * * * .’’ A material fact is

defined as ‘‘one which the

Commissioner of Social Security may

consider in evaluating whether an

applicant is entitled to benefits * * * .’’

(See sections 1129(a) (1) and (2) of the

Act.)

Further, section 205(u)(1)(A) of the

Act, as added by section 206(d) of

Public Law 103–296, provides that the

Commissioner ‘‘shall immediately

redetermine the entitlement of

individuals to monthly insurance

benefits under * * * [title II] if there is

reason to believe that fraud or similar

fault was involved in the application of

the individual for such benefits * * * .’’

Section 1631(e)(6)(A)(i) of the Act,

which also was added by section 206(d)

of Public Law 103–296, is a comparable

provision covering eligibility for title

XVI benefits. Similar fault is defined in

sections 205(u)(2) and 1631(e)(6)(B) of

the Act as knowingly making ‘‘an

incorrect or incomplete statement that is

material to the determination’’ or

knowingly concealing ‘‘information that

is material to the determination.’’

Moreover, section 205(a) of the Act

provides that the Commissioner shall

adopt ‘‘reasonable and proper rules and

regulations to regulate and provide for

the nature and extent of the proofs and

evidence and the method of taking and

furnishing the same in order to establish

the right to benefits hereunder.’’ This

section is made applicable to the title

XVI program by section 1631(d)(1) of

the Act.

In our view, the provisions of

proposed §§ 404.1740(b)(2) and

416.1540(b)(2) require the representative

to comply with our requests made under

statutory authority for full and accurate

disclosure of material facts to the same

extent that the claimant is required to

do so. In assessing any allegation raised

against a representative regarding failure

to comply with our request for

information, we will consider the

reasonableness of the request, the

relevance of the information requested,

and any factors that may interfere with

the procurement of requested

information.

4. A few individuals questioned the

need for any rules or standards of

conduct, expressing their opinion that

representatives rarely engage in

misconduct sufficient to warrant

formalized investigative and

disciplinary procedures. Several

speculated that only representatives

who were not attorneys engaged in

misconduct warranting SSA attention.

From August 1988 through August

1995, the Office of Hearings and

Appeals received approximately 566

referrals of representative misconduct.

Some of these referrals complained of

questionable conduct which warranted

corrective action, but which was not

covered by any existing regulatory

authority. Of the remaining referrals, we

were able to close many without formal

disciplinary action. In approximately

160 claims, we closed the disciplinary

referral upon the representative’s refund

to a claimant or to SSA of monies

collected without authorization or as a

result of Agency overpayments to

representatives. As of August 15, 1995,

we have collected from these

representatives a total of $279,411.98,

returning $176,096 of this amount to the

claimants who had been overcharged,

and the remainder to SSA.

We also have filed approximately 136

formal complaints against

representatives. We were able to resolve

many complaints before a formal

hearing. The remainder, however, have

resulted in the suspension or

disqualification of 57 representatives.

Approximately 64 percent of the

suspended or disqualified

representatives were attorneys.

We believe these general statistics

provide ample evidence of the need to

continue our investigative and

disciplinary role. We expect the

proposed rules and standards to provide

the representative community with

improved notice of the conduct we view

as inappropriate, and supply SSA with
356 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules

the tools to address representatives’

conduct that falls below our published

standards.

5. Several individuals were confused

about the addition of the word ‘‘retain’’

in what are now proposed

§§ 404.1740(c)(2) and 416.1540(c)(2),

which state that a representative shall

not ‘‘[k]nowingly charge, collect or

retain * * * any fee for

representational services in violation of

applicable law or regulation.’’ They

questioned whether this was a change in

SSA’s policy permitting representatives

to collect money toward payment of

their fees before any fee is authorized,

as long as the collection is placed in a

trust or escrow account.

This is not a policy change. Social

Security Ruling (SSR) 82–39 still

permits representatives to solicit from

claimants a deposit of money into a

trust or escrow account as a means of

assuring payment of the fees for services

in connection with such representation,

as long as the claimant willingly enters

into the trust or escrow agreement and

willingly deposits the money in the

trust or escrow account; none of the

money in the account is paid over to the

representative unless and until SSA

authorizes a fee, and then only in an

amount up to, but not exceeding, the

authorized fee; and any funds in the

account in excess of the authorized fee

are refunded promptly to the claimant.

We have added the word ‘‘retain’’ to

cover those situations in which the

representative has charged or collected

a fee and has improperly retained the

fee despite a claimant’s or SSA’s request

for refund. If a representative places the

money charged and collected from a

claimant into a trust or escrow account,

and complies with the conditions set

forth in SSR 82–39, we will not consider

that money to be an improperly retained

fee.

6. A few individuals were concerned

with what are now proposed

§§ 404.1740(c)(3) and 416.1540(c)(3),

which prohibit representatives from

knowingly making or participating in

the making or presentation of false oral

or written statements, assertions or

representations about a material fact

concerning a matter within our

jurisdiction. They suggested that it

required them to be a guarantor of a

claimant’s testimony, or to impeach

their own client if they suspected that

the client was presenting false evidence

or testimony.

This prohibition applies only to

knowing presentations of false

statements. There already exist both

criminal and civil penalties for

knowingly making or participating in

the making of false representations to a

claimant or to SSA. (See 18 U.S.C. 1001

and sections 208 and 1129 of the Act.)

By incorporating this prohibition in our

rules of conduct, we place

representatives on notice that, in

addition to the criminal and civil

sanctions possible for this misconduct,

the making or presentation of such false

statements also may lead to their

suspension or disqualification from

representing claimants in matters before

us.

We do not place an affirmative duty

on representatives to impeach their

clients or guarantee a client’s honesty.

Nonetheless, we do expect

representatives who practice before us

not to knowingly prompt, encourage or

engage in false or misleading

representations about material facts in

connection with the representation of a

claimant.

7. Several individuals expressed

concern about what are now proposed

§§ 404.1740(c)(4) and 416.1540(c)(4),

which prohibit willfully or negligently

delaying, or causing to be delayed, the

processing of a claim. They suggested

that it was overly broad, and could be

interpreted to prohibit even such

reasonable delays as scheduling

conflicts, illness, family emergency and

claimants’ continuing treatment.

Black’s Law Dictionary defines an act

or omission as willfully done ‘‘if done

voluntarily and intentionally and with

the specific intent to do something the

law forbids, or with the specific intent

to fail to do something the law requires

to be done.’’ It includes actions engaged

in with a bad motive or purpose, with

indifference to the natural

consequences, or without justifiable

excuse. A negligent action involves the

failure to exhibit the conduct or care a

reasonable person would exhibit under

similar circumstances. It is

characterized chiefly by inadvertence,

thoughtlessness and inattention.

Under our proposed standard

prohibiting willful or negligent delay,

SSA does not intend to penalize

reasonable or justifiable delays, or

delays that may occur even when

reasonable care is taken in claim

preparation. In determining whether a

representative has violated this rule we

will look to the gravity of the act or

omission, the consequences for the

claimant, whether the behavior reflects

a pattern or practice, and other factual

circumstances particular to the matter.

8. The draft proposal had language

prohibiting representatives from

engaging in disruptive, defiant or

confrontational behavior or repeated

challenges to the presiding official’s

authority, which clearly exceed the

bounds of zealous advocacy. Many

individuals found this provision to be

vague and an interference with their

duty to provide zealous advocacy.

In response to these concerns, we

modified the language in proposed

§§ 404.1740(c)(7)(ii) and

416.1540(c)(7)(ii) to prohibit ‘‘[w]illful

behavior which has the effect of

improperly disrupting proceedings or

obstructing the adjudicative process.’’

We envision actionable conduct under

this provision to include grossly

undignified or discourteous behavior

and inflammatory language directed at

the presiding official which prejudice

the orderly presentation and reception

of evidence.

This rule is not intended to inhibit

zealous advocacy or vigorous dissent,

but to prevent conduct or language

which significantly exceeds the bounds

of civility, and disrupts a proceeding. In

determining whether a representative

has violated this provision, we will look

at the totality of the circumstances,

including the egregiousness of the

conduct, its impact on the claimant or

the Agency, possible provocation and

whether the behavior reflects a pattern

or practice.

9. The draft proposal included a

prohibition against soliciting or

accepting from SSA direct payment of

fees from past-due benefits, in violation

of law or regulation, for services

performed by a person other than an

attorney. Many individuals

misunderstood the intent of this

provision, believing that it meant either

that non-attorney representatives could

not be paid for their representational

services, or that attorneys could not

receive direct payment from SSA for

persons other than attorneys who

provided representational services

under their direct supervision.

Because of the confusion involving

this provision, and the fact that SSA

currently is considering separate

regulations to address direct payment of

fees in more detail, this provision is not

included in these proposed rules.

10. The draft proposal contained a

prohibition against making off-therecord communications relevant to the

merits of an adjudication to anyone

involved in the administrative review

process. Many individuals found this

provision to be vague and undefined.

They were concerned that it prohibited

communications to SSA in claims that

had extenuating circumstances, such as

claimants who were terminally ill or

suicidal. In their opinion, it would

unduly formalize nonadversarial

proceedings, would foster inefficiency

by requiring increased documentation of

SSA contacts, and would be in conflict
Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules 357

with SSA’s goal of expediting claims

processing.

We agreed that the provision was

confusing and possibly

counterproductive, so it is not included

in these proposed rules.

11. The draft proposal also contained

a prohibition against engaging in

dilatory tactics or neglectful actions

which are prejudicial to the fair or

orderly conduct of oral proceedings.

Some individuals pointed out that it

was vague and duplicated an existing

provision. We agreed, and this provision

is not included in these proposed rules.

Explanation of Revisions

These proposed regulations would

revise §§ 404.1740, 404.1745, 404.1750,

404.1765, 404.1770, 404.1799, 416.1540,

416.1545, 416.1550, 416.1565, and

416.1599.

Proposed §§ 404.1740(b) and

416.1540(b) describe affirmative duties,

which are certain obligations that a

representative must actively perform in

his or her representation of claimants in

matters before us. We expect these

affirmative duties to promote efficiency

and timeliness in assisting the claimant

to meet the burden of proving eligibility

for benefits.

Proposed §§ 404.1740(b)(1) and

416.1540(b)(1) require the representative

to exercise diligence in obtaining and

submitting that evidence which the

claimant wants the decision maker to

consider in ruling on a claim.

Proposed §§ 404.1740(b)(2)(i) and

416.1540(b)(2)(i) require that the

representative provide, upon request,

information regarding the claimant’s

medical treatment, vocational factors or

other specifically identified matters, or

provide notification that the claimant

does not consent to release the

information.

Proposed §§ 404.1740(b)(2)(ii) and

416.1540(b)(2)(ii) require that the

representative provide, upon request,

evidence material to identified issues

which the representative or claimant

already has or may readily obtain. This

rule requires furnishing evidence

already in the possession of the

representative or claimant, or obtaining

copies of existing evidence not already

of record. The provision also mandates

that the representative and claimant

furnish all the pertinent evidence

requested, even if it is ostensibly

unfavorable to the claimant, or provide

notification by the representative that

the claimant does not consent to its

release.

Proposed §§ 404.1740(b)(3) and

416.1540(b)(3) are intended to establish

minimum requirements governing the

competency and behavior of

representatives in their dealings with

us. They seek to ensure that the

representative does not become a

hindrance, either through ignorance or

willful obstruction, in our attempts to

provide a fair and expeditious

disposition of the claim for benefits.

We have weighed the possibility of

testing or other formal certification

procedures for non-attorney

representatives, but rejected the idea as

infeasible at this time. Nonetheless, in

order to identify those persons who do

not possess the requisite qualifications,

we are considering possible revisions to

§§ 404.1705 and 416.1505 to define in

greater detail the minimum

requirements to serve as a

representative.

Any individual who provides services

as a representative for a fee shall be

expected to demonstrate, in the

performance of those services, sufficient

knowledge of the claims process to be

of assistance to the claimant. Ignorance

of substantive provisions of law or

procedural requirements shall not be

considered a mitigating factor for acts or

omissions which impede or disrupt the

efficient and orderly disposition of a

claim.

Proposed §§ 404.1740(b)(3)(i) and

416.1540(b)(3)(i) essentially state that

the representative must understand

what the claimant must prove in order

to qualify for benefits, and know how to

obtain and submit evidence regarding

the claim.

Proposed §§ 404.1740(b)(3)(ii) and

416.1540(b)(3)(ii) require the

representative to promptly answer our

requests and communications

pertaining to the pending claim. It is not

permissible for the representative to

ignore official communications.

Proposed §§ 404.1740(b)(3)(iii) and

416.1540(b)(3)(iii) require cooperation

in developing the record, which may

typically include transactions requiring

the participation of the claimant, such

as consenting to a treating source’s

release of medical records, scheduling

consultative examinations and

scheduling conferences or hearing dates.

Proposed §§ 404.1740(c) and

416.1540(c) describe prohibited actions,

which are certain acts or activities that

a representative must avoid. In part, the

prohibited actions incorporate various

statutory provisions set forth in the Act

and other legislation.

Proposed §§ 404.1740(c)(1) and

416.1540(c)(1) are based on the

prohibitions set forth in section

206(a)(5) of the Act and are selfexplanatory. A representative’s honest

mistake would not be construed as

knowingly misleading a claimant. In

determining whether a representative

knowingly misled a claimant, we will

consider whether the action involved

matters that the representative should

have known were untrue.

Proposed §§ 404.1740(c)(2) and

416.1540(c)(2) are based on the

provisions of sections 206 (a) and (b) of

the Act and apply to all fee collections.

With regard to section 206(a)(4) of the

Act, we will assume in the absence of

evidence to the contrary that work

performed by support staff in a law

office is performed under the

supervision of an attorney, thereby

permitting the attorney to validly claim

direct payment from past-due benefits

for those services in a title II claim. This

assumption will not apply, however,

when a person other than an attorney

appears alone at a hearing to provide

representation on behalf of a claimant.

In those cases, the person shall be

considered the representative and will

be required to file a fee petition or fee

agreement for his or her services, and

will not be entitled to receive direct

payment from past-due benefits for the

representation at the hearing.

Proposed §§ 404.1740(c)(3) and

416.1540(c)(3) are based generally on

the criminal prohibitions in 18 U.S.C.

1001 and the provisions governing civil

monetary penalties and assessments set

forth in section 1129 of the Act and are

self-explanatory.

Proposed §§ 404.1740(c)(4) and

416.1540(c)(4) are directed against

practices where willful or negligent acts

or omissions have the effect of delaying

the disposition of a claim for benefits.

Proposed §§ 404.1740(c)(5) and

416.1540(c)(5) are based on the

provisions of section 1106 of the Act,

which prohibit disclosure by any person

of information obtained by the Agency

in conjunction with a claim, except as

may be authorized by regulations

prescribed by us.

Proposed §§ 404.1740(c)(6) and

416.1540(c)(6) prohibit a representative

from offering or giving anything of value

to persons involved in the adjudication

except as remuneration to a witness for

legitimate expenses or for services

rendered. The intent is to prevent the

fact or the appearance of attempting to

influence the disposition of a claim by

bestowing gifts or favors on individuals

in a position to materially affect the

outcome.

Proposed §§ 404.1740(c)(7) and

416.1540(c)(7) are directed at conduct

undertaken during the course of oral

proceedings which is disruptive and

detrimental to due process and the

administration of justice.

Proposed §§ 404.1740(c)(7)(i) and

416.1540(c)(7)(i) prohibit repeated

instances of unexcused absences or
358 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules

tardiness because such conduct

adversely affects claimants, diminishes

the ability of the Agency to operate

efficiently and harms other applicants

by disrupting hearing schedules and

work flow.

Proposed §§ 404.1740(c)(7)(ii) and

416.1540(c)(7)(ii) address deliberate acts

which have the effect of disrupting the

proceedings or diverting the attention of

the participants from the purpose of the

hearing to matters irrelevant to the

merits of the case.

Proposed §§ 404.1740(c)(7)(iii) and

416.1540(c)(7)(iii) are based in part on

the provisions of section 206(a)(5) of the

Act, 18 U.S.C. 111 and 28 CFR 64.2(x).

They prohibit threatening or

intimidating the participants in an oral

proceeding or the employees assigned to

our offices. Actual or implied threats of

violence will not be tolerated.

Proposed §§ 404.1745 and 416.1545

explain that we may begin proceedings

to suspend or disqualify a person who

does not meet our qualifications for a

representative or who violates our rules

and standards governing representatives

in their dealings with us.

Proposed §§ 404.1750 (a) and (d),

404.1765 (a) and (e), 404.1799 (c) and

(e), 416.1550 (a) and (d), 416.1565 (a)

and (e), and 416.1599 (c) and (e) are

being modified to reflect current Agency

official titles and organizational

changes.

Proposed §§ 404.1765(g)(3) and

416.1565(g)(3) are being revised to

remove the first word ‘‘not’’ from each

paragraph. This corrects errors made

when the regulations on representation

of parties were reorganized, renumbered

and republished on August 5, 1980 (45

FR 52078). When the original regulation

was published as § 404.983(f) on April

26, 1969 (34 FR 6973, 6974), it provided

that ‘‘[i]f the individual has filed an

answer and if the hearing officer

believes that there is relevant and

material evidence available which has

not been presented at the hearing, the

hearing officer may at any time prior to

the mailing of notice of the decision, or

submittal of a recommended decision,

reopen the hearing for the receipt of

such evidence.’’ This is consistent with

the preceding language in § 404.983(f),

which states that if a representative ‘‘has

filed no answer he shall have no right

to present evidence * * * .’’

In the 1980 final rule, the former

§ 404.983(f) was renumbered as

§ 404.1765(f), with a parallel SSI

provision at § 416.1565(f). Paragraph

(f)(2) addressed representatives who do

not answer charges and paragraph (f)(3)

addressed those who do. Paragraph

(f)(3) (45 FR 52078, 52093, 52108)

contained a misprint, however, which

read, ‘‘If the representative did not file

an answer to the charges * * * .’’ Thus,

paragraphs (f)(2) and (f)(3) were

inconsistent and conflicting.

Subsequently, in 1991, paragraph (f) of

§§ 404.1765 and 416.1565 was

redesignated as paragraph (g) (56 FR

24129, 24131, 24132).

The 1980 misprint substantively

changed the meaning of current

paragraph (g)(3). As specifically

explained in the preamble to those

rules, however, SSA never intended to

make any substantive changes in those

regulations. The regulations were

rewritten for the purpose of reorganizing

and restating them more clearly in

simpler language. The misprint has

created confusion in the representative

disciplinary process. Consequently, we

are taking this opportunity to correct the

error to reflect the original intent of the

regulations.

We also are correcting another minor

misprint in the current § 404.1765(g)(3)

by making ‘‘decisions’’ singular for

correctness and consistency with

§ 416.1565(g)(3).

Finally, in proposed § 404.1770,

paragraphs (a)(3) and (b)(3) are being

amended to correct a publication error

that occurred after paragraph (a)(3) was

revised in 1991. As correctly published

in final rules on May 29, 1991 (56 FR

24129, 24132), paragraph (a)(3) was

revised to show that the hearing officer

shall mail a copy of the decision to the

parties at their last known addresses.

When codified in the 1992 volume of

the Code of Federal Regulations,

however, the revised language of

paragraph (a)(3) was erroneously placed

in paragraph (b)(3), superseding that

existing language addressing the effect

of a final decision imposing a

suspension upon a representative. With

this correction, we will accurately

reflect the language and purpose of

paragraphs (a)(3) and (b)(3) and bring

§ 404.1770 into conformity with its

equivalent § 416.1570.

Electronic Versions

The electronic file of this document is

available on the Federal Bulletin Board

(FBB) at 9:00 a.m. on the date of

publication in the Federal Register. To

download the file, modem dial (202)

512–1387. The FBB instructions will

explain how to download the file and

the fee. This file is in WordPerfect and

will remain on the FBB during the

comment period.

Regulatory Procedures

Executive Order 12866

We have consulted with the Office of

Management and Budget (OMB) and

determined that these rules do not meet

the criteria for a significant regulatory

action under Executive Order 12866.

Thus, they were not subject to OMB

review.

Regulatory Flexibility Act

We certify that the proposed rules, if

promulgated, will not have a significant

economic impact on a substantial

number of small entities. The provisions

of the proposed rules that involve

entities were developed to allow them

to provide representational services

without generating any supplemental

reporting requirements. The proposed

rules will not result in any increased

legal accounting or consulting costs to

small businesses or small organizations,

will not adversely affect competition in

the marketplace, or create barriers to

entry on the part of small entities. In

fact, these rules may facilitate such

entry into the representation sphere.

The regulations will provide uniform

standards applicable to all entities who

engage in the business and tend to

disqualify the unscrupulous and the

incompetent practitioners, thereby

expanding demand for others willing

and able to perform the service.

Therefore, a regulatory flexibility

analysis as provided in Public Law 96–

354, the Regulatory Flexibility Act, is

not required.

Paperwork Reduction Act

These regulations impose no

reporting/recordkeeping requirements

necessitating clearance by OMB.

(Catalog of Federal Domestic Assistance

Program Nos. 96.001, Social SecurityDisability Insurance; 96.002, Social SecurityRetirement Insurance; 96.004, Social

Security-Survivors Insurance; 96.006,

Supplemental Security Income)

List of Subjects

20 CFR Part 404

Administrative practice and

procedure, Blind, Disability benefits,

Old-Age, Survivors and Disability

Insurance, Reporting and recordkeeping

requirements, Social Security.

20 CFR Part 416

Administrative practice and

procedure, Aged, Blind, Disability

benefits, Public assistance programs,

Reporting and recordkeeping,

Supplemental Security Income (SSI)

requirements.

Dated: December 23, 1996.

Shirley S. Chater,

Commissioner of Social Security.

For the reasons set forth in the

preamble, part 404, subpart R, chapter

III of title 20 of the Code of Federal
Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules 359

Regulations is proposed to be amended

as set forth below.

PART 404—FEDERAL OLD-AGE,

SURVIVORS AND DISABILITY

INSURANCE (1950– )

1. The authority citation for subpart R

of part 404 continues to read as follows:

Authority: Secs. 205(a), 206, and 702(a)(5)

of the Social Security Act (42 U.S.C. 405(a),

406, and 902(a)(5)).

2. Section 404.1740 is revised to read

as follows:

§ 404.1740 Rules of conduct and

standards of responsibility for

representatives.

(a) Purpose and scope. (1) All

attorneys or other persons acting on

behalf of a party seeking a statutory

right or benefit shall, in their dealings

with us, faithfully execute their duties

as agents and fiduciaries of a party. A

representative shall provide competent

assistance to the claimant and recognize

the authority of the Agency to lawfully

administer the process. The following

provisions in this section set forth

certain affirmative duties and prohibited

actions which shall govern the

relationship between the representative

and the Agency, including matters

involving our administrative procedures

and fee collections.

(2) Moreover, all representatives shall

be forthright in their dealings with us

and with the claimant and shall

comport themselves with due regard for

the nonadversarial nature of the

proceedings by complying with our

rules and standards, which are intended

to ensure orderly and fair presentation

of evidence and argument.

(b) Affirmative duties. A

representative shall:

(1) Promptly obtain all information

and evidence which the claimant wants

to submit in support of the claim and

forward the same for consideration as

soon as practicable, but no later than the

due date designated by the Agency,

except for good cause shown;

(2) Comply with our requests for

information or evidence at any stage of

the administrative review process as

soon as practicable, but no later than the

due date designated by the Agency,

except for good cause shown. This

includes the obligation to:

(i) Provide, upon request,

identification of all known medical

sources, updated information regarding

medical treatment, new or corrected

information regarding work activity,

other specifically identified information

pertaining to the claimed right or

benefit, or notification by the

representative after consultation with

the claimant that the claimant does not

consent to the release of some or all of

the material; and

(ii) Provide, upon request, all

evidence and documentation pertaining

to specifically identified issues which

the representative or the claimant either

has within his or her possession or may

readily obtain, or notification by the

representative after consultation with

the claimant that the claimant does not

consent to the release of some or all of

the material;

(3) Conduct his or her dealings in a

manner which does not obstruct the

efficient, fair or orderly conduct of the

administrative review process,

including duties to:

(i) Be cognizant of the matters at issue

in establishing entitlement or eligibility

to the claimed right or benefit, and

knowledgeable of our evidentiary and

procedural requirements in order to

provide competent assistance to the

party he or she represents;

(ii) Provide timely and responsive

answers to requests from the Agency for

information pertinent to processing of

the claim; and

(iii) Cooperate with our attempts to

obtain information and documentation,

or complete processing requirements for

a claimed right or benefit.

(c) Prohibited actions. A

representative shall not:

(1) In any manner or by any means

threaten, coerce, intimidate, deceive or

knowingly mislead a claimant, or

prospective claimant or beneficiary,

regarding benefits or other rights under

the Act;

(2) Knowingly charge, collect or

retain, or make any arrangement to

charge, collect or retain, from any

source, directly or indirectly, any fee for

representational services in violation of

applicable law or regulation;

(3) Knowingly make or present, or

participate in the making or

presentation of, false oral or written

statements, assertions or representations

about a material fact concerning a

matter within our jurisdiction;

(4) Willfully or negligently delay, or

cause to be delayed, by any act or

omission, without good cause, the

processing of a claim at any stage of the

administrative review process;

(5) Divulge, except as may be

authorized by regulations prescribed by

us, any information we furnish or

disclose about a claim or prospective

claim of another person;

(6) Attempt to influence, directly or

indirectly, the outcome of a decision,

determination or other administrative

action by offering or granting a loan,

gift, entertainment or anything of value

to a presiding official, Agency employee

or witness who is or may reasonably be

expected to be involved in the

administrative review process, except as

reimbursement for legitimately incurred

expenses or lawful compensation for the

services of an expert witness retained on

a non-contingency basis to provide

evidence; or

(7) Engage in actions or behavior

prejudicial to the fair and orderly

conduct of oral proceedings, including

but not limited to:

(i) Repeated instances of unauthorized

absences, or persistent tardiness at

scheduled proceedings;

(ii) Willful behavior which has the

effect of improperly disrupting

proceedings or obstructing the

adjudicative process; and

(iii) Threatening or intimidating

language, gestures or actions directed at

a presiding official, witness or Agency

employee.

3. Section 404.1745 is revised to read

as follows:

§ 404.1745 Violations of our requirements,

rules, or standards.

When we have evidence that a

representative fails to meet our

qualification requirements or has

violated the rules governing dealings

with us, we may begin proceedings to

suspend or disqualify that individual

from acting in a representational

capacity before us. We may file charges

seeking such sanctions when we have

evidence that a representative:

(a) Does not meet the qualifying

requirements described in § 404.1705;

(b) Has violated the affirmative duties

or engaged in the prohibited actions set

forth in § 404.1740; or

(c) Has been convicted of a violation

under section 206 of the Act.

4. Section 404.1750 is amended by

revising paragraphs (a) and (d) to read

as follows:

§ 404.1750 Notice of charges against a

representative.

(a) The Deputy Commissioner for

Programs, Policy, Evaluation and

Communications (or other official the

Commissioner may designate), or his or

her designee, will prepare a notice

containing a statement of charges that

constitutes the basis for the proceeding

against the representative.

* * * * *

(d) The Deputy Commissioner for

Programs, Policy, Evaluation and

Communications (or other official the

Commissioner may designate), or his or

her designee, may extend the 30-day

period for good cause.

* * * * *

5. Section 404.1765 is amended by

revising paragraph (a), the second
360 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules

sentence of paragraph (e), and paragraph

(g)(3) to read as follows:

§ 404.1765 Hearing on charges.

(a) Scheduling the hearing. If the

Deputy Commissioner for Programs,

Policy, Evaluation and Communications

(or other official the Commissioner may

designate), or his or her designee, does

not take action to withdraw the charges

within 15 days after the date on which

the representative filed an answer, we

will hold a hearing and make a decision

on the charges.

* * * * *

(e) Parties. * * * The Deputy

Commissioner for Programs, Policy,

Evaluation and Communications (or

other official the Commissioner may

designate), or his or her designee, shall

also be a party to the hearing.

* * * * *

(g) * * *

(3) If the representative did file an

answer to the charges, and if the hearing

officer believes that there is material

evidence available that was not

presented at the hearing, the hearing

officer may at any time before mailing

notice of the hearing decision reopen

the hearing to accept the additional

evidence.

* * * * *

6. Section 404.1770 is amended by

revising the first sentence of paragraph

(a)(3) and by revising paragraph (b)(3) to

read as follows:

§ 404.1770 Decision by hearing officer.

(a) * * *

(3) The hearing officer shall mail a

copy of the decision to the parties at

their last known addresses. * * *

(b) * * *

(3) If the final decision is that a

person is suspended for a specified

period of time from being a

representative in dealings with us, he or

she will not be permitted to represent

anyone in dealings with us during the

period of suspension unless authorized

to do so under the provisions of

§ 404.1799.

7. Section 404.1799 is amended by

revising the first sentence of paragraph

(c) and the second sentence of

paragraph (e) to read as follows:

§ 404.1799 Reinstatement after

suspension or disqualification—period of

suspension not expired.

* * * * *

(c) The Appeals Council shall allow

the Deputy Commissioner for Programs,

Policy, Evaluation and Communications

(or other official the Commissioner may

designate), or his or her designee, upon

notification of receipt of the request, 30

days in which to present a written

report of any experiences with the

suspended or disqualified person

subsequent to that person’s suspension

or disqualification. * * *

* * * * *

(e) * * * It shall also mail a copy to

the Deputy Commissioner for Programs,

Policy, Evaluation and Communications

(or other official the Commissioner may

designate), or his or her designee.

* * * * *

For the reasons set forth in the

preamble, part 416, subpart O, chapter

III of title 20 of the Code of Federal

Regulations is proposed to be amended

as set forth below.

PART 416—SUPPLEMENTAL

SECURITY INCOME FOR THE AGED,

BLIND, AND DISABLED

8. The authority citation for subpart O

of part 416 continues to read as follows:

Authority: Secs. 702(a)(5) and 1631(d) of

the Social Security Act (42 U.S.C. 902(a)(5)

and 1383(d)).

9. Section 416.1540 is revised to read

as follows:

§ 416.1540 Rules of conduct and

standards of responsibility for

representatives.

(a) Purpose and scope. (1) All

attorneys or other persons acting on

behalf of a party seeking a statutory

right or benefit shall, in their dealings

with us, faithfully execute their duties

as agents and fiduciaries of a party. A

representative shall provide competent

assistance to the claimant and recognize

the authority of the Agency to lawfully

administer the process. The following

provisions in this section set forth

certain affirmative duties and prohibited

actions which shall govern the

relationship between the representative

and the Agency, including matters

involving our administrative procedures

and fee collections.

(2) Moreover, all representatives shall

be forthright in their dealings with us

and with the claimant and shall

comport themselves with due regard for

the nonadversarial nature of the

proceedings by complying with our

rules and standards, which are intended

to ensure orderly and fair presentation

of evidence and argument.

(b) Affirmative duties. A

representative shall:

(1) Promptly obtain all information

and evidence which the claimant wants

to submit in support of the claim and

forward the same for consideration as

soon as practicable, but no later than the

due date designated by the Agency,

except for good cause shown;

(2) Comply with our requests for

information or evidence at any stage of

the administrative review process as

soon as practicable, but no later than the

due date designated by the Agency,

except for good cause shown. This

includes the obligation to:

(i) Provide, upon request,

identification of all known medical

sources, updated information regarding

medical treatment, new or corrected

information regarding work activity,

other specifically identified information

pertaining to the claimed right or

benefit, or notification by the

representative after consultation with

the claimant that the claimant does not

consent to the release of some or all of

the material; and

(ii) Provide, upon request, all

evidence and documentation pertaining

to specifically identified issues which

the representative or the claimant either

has within his or her possession or may

readily obtain, or notification by the

representative after consultation with

the claimant that the claimant does not

consent to the release of some or all of

the material;

(3) Conduct his or her dealings in a

manner which does not obstruct the

efficient, fair or orderly conduct of the

administrative review process,

including duties to:

(i) Be cognizant of the matters at issue

in establishing entitlement or eligibility

to the claimed right or benefit, and

knowledgeable of our evidentiary and

procedural requirements in order to

provide competent assistance to the

party he or she represents;

(ii) Provide timely and responsive

answers to requests from the Agency for

information pertinent to processing of

the claim; and

(iii) Cooperate with our attempts to

obtain information and documentation,

or complete processing requirements for

a claimed right or benefit.

(c) Prohibited actions. A

representative shall not:

(1) In any manner or by any means

threaten, coerce, intimidate, deceive or

knowingly mislead a claimant, or

prospective claimant or beneficiary,

regarding benefits or other rights under

the Act;

(2) Knowingly charge, collect or

retain, or make any arrangement to

charge, collect or retain, from any

source, directly or indirectly, any fee for

representational services in violation of

applicable law or regulation;

(3) Knowingly make or present, or

participate in the making or

presentation of, false oral or written

statements, assertions or representations

about a material fact concerning a

matter within our jurisdiction;

(4) Willfully or negligently delay, or

cause to be delayed, by any act or
Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Proposed Rules 361

omission, without good cause, the

processing of a claim at any stage of the

administrative review process;

(5) Divulge, except as may be

authorized by regulations prescribed by

us, any information we furnish or

disclose about a claim or prospective

claim of another person;

(6) Attempt to influence, directly or

indirectly, the outcome of a decision,

determination or other administrative

action by offering or granting a loan,

gift, entertainment or anything of value

to a presiding official, Agency employee

or witness who is or may reasonably be

expected to be involved in the

administrative review process, except as

reimbursement for legitimately incurred

expenses or lawful compensation for the

services of an expert witness retained on

a non-contingency basis to provide

evidence; or

(7) Engage in actions or behavior

prejudicial to the fair and orderly

conduct of oral proceedings, including

but not limited to:

(i) Repeated instances of unauthorized

absences, or persistent tardiness at

scheduled proceedings;

(ii) Willful behavior which has the

effect of improperly disrupting

proceedings or obstructing the

adjudicative process; and

(iii) Threatening or intimidating

language, gestures or actions directed at

a presiding official, witness or Agency

employee.

10. Section 416.1545 is revised to read

as follows:

§ 416.1545 Violations of our requirements,

rules, or standards.

When we have evidence that a

representative fails to meet our

qualification requirements or has

violated the rules governing dealings

with us, we may begin proceedings to

suspend or disqualify that individual

from acting in a representational

capacity before us. We may file charges

seeking such sanctions when we have

evidence that a representative:

(a) Does not meet the qualifying

requirements described in § 416.1505;

(b) Has violated the affirmative duties

or engaged in the prohibited actions set

forth in § 416.1540; or

(c) Has been convicted of a violation

under section 1631(d) of the Act.

11. Section 416.1550 is amended by

revising paragraphs (a) and (d) to read

as follows:

§ 416.1550 Notice of charges against a

representative.

(a) The Deputy Commissioner for

Programs, Policy, Evaluation and

Communications (or other official the

Commissioner may designate), or his or

her designee, will prepare a notice

containing a statement of charges that

constitutes the basis for the proceeding

against the representative.

* * * * *

(d) The Deputy Commissioner for

Programs, Policy, Evaluation and

Communications (or other official the

Commissioner may designate), or his or

her designee, may extend the 30-day

period for good cause.

* * * * *

12. Section 416.1565 is amended by

revising paragraph (a), the second

sentence of paragraph (e), and paragraph

(g)(3) to read as follows:

§ 416.1565 Hearing on charges.

(a) Scheduling the hearing. If the

Deputy Commissioner for Programs,

Policy, Evaluation and Communications

(or other official the Commissioner may

designate), or his or her designee, does

not take action to withdraw the charges

within 15 days after the date on which

the representative filed an answer, we

will hold a hearing and make a decision

on the charges.

* * * * *

(e) Parties. * * * The Deputy

Commissioner for Programs, Policy,

Evaluation and Communi cations (or

other official the Commissioner may

designate), or his or her designee, shall

also be a party to the hearing.

* * * * *

(g) * * *

(3) If the representative did file an

answer to the charges, and if the hearing

officer believes that there is material

evidence available that was not

presented at the hearing, the hearing

officer may at any time before mailing

notice of the hearing decision reopen

the hearing to accept the additional

evidence.

* * * * *

13. Section 416.1599 is amended by

revising the first sentence of paragraph

(c) and the second sentence of

paragraph (e) to read as follows:

§ 416.1599 Reinstatement after

suspension or disqualification—period of

suspension not expired.

* * * * *

(c) The Appeals Council shall allow

the Deputy Commissioner for Programs,

Policy, Evaluation and Communications

(or other official the Commissioner may

designate), or his or her designee, upon

notification of receipt of the request, 30

days in which to present a written

report of any experiences with the

suspended or disqualified person

subsequent to that person’s suspension

or disqualification. * * *

* * * * *

(e) * * * It shall also mail a copy to

the Deputy Commissioner for Programs,

Policy, Evaluation and Communications

(or other official the Commissioner may

designate), or his or her designee.

* * * * *

[FR Doc. 97–38 Filed 1–2–97; 8:45 am]

BILLING CODE 4190–29–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–252233–96]

RIN 1545–AU73

Continuity of Interest and Business

Enterprise

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document proposes rules

providing that for certain

reorganizations, transfers by the

acquiring corporation of target assets or

stock to certain controlled corporations,

and under prescribed conditions,

transfers of target assets to partnerships,

will not disqualify the transaction from

satisfying the continuity of interest and

continuity of business enterprise

requirements. This document also

provides notice of a public hearing on

these proposed regulations.

DATES: Comments must be received by

April 3, 1997. Requests to speak and

outlines of topics to be discussed at the

public hearing scheduled for

Wednesday, May 7, 1997 must be

received by Wednesday, April 16, 1997.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–252233–96),

room 5228, Internal Revenue Service,

POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions

may be hand delivered between the

hours of 8 a.m. and 5 p.m. to

CC:DOM:CORP:R (REG–252233–96),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue,

NW., Washington, DC. Alternatively,

taxpayers may submit comments

electronically via the Internet by

selecting the ‘‘Tax Regs’’ option on the

IRS Home Page, or by submitting

comments directly to the IRS Internet

site at http://www.irs.ustreas.gov/prod/

taxlregs/comments.html. The public

hearing will be held in the Auditorium,

Internal Revenue Building, 1111

Constitution Avenue NW., Washington

DC.