Source: https://www.federalregister.gov/articles/2011/09/30/2011-25221/executive-branch-qualified-trusts
Timestamp: 2015-03-02 03:34:28
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Federal Register | Executive Branch Qualified Trusts
Dates: Written comments by the agencies and the public on these proposed amendments are welcome and must be received by November 29, 2011.
Comments Close: 11/29/2011
-60765 (9 pages)
Shorter URL: https://federalregister.gov/a/2011-25221 Related Topics
Executive Branch Financial Disclosure, Qualified Trusts, and Certificates of Divestiture 38 actions from December 2nd, 1986 to June 2015
51 FR 43359
Revised Interim Final Rule
58 FR 38911
Proposed Amendment to Interim Final Rule
58 FR 46096
58 FR 63023
Technical (Paperwork) Amendments to Interim Final Rule
Proposed Amendments-Certificates of No New Interests for Confidential Filers
Final Amendment-Certificates of No New Interests for Confidential Filers
Updating Amendment to Part 2634
Clarifying Amendment to Section 2634.906
Minor Amdt. to Part 2634 (Transfer of Inactive in Lieu of Honoraria Charitable Paymts. Reporting)
Paperwork Revisions to Appendixes A, B, and C
Technical Amendments to Part 2634
Technical Corrections to Part 2634
Proposed Gifts Reporting Waiver Amendments
Final Rule Inflation Adjustments to Ethics Act Civil Monetary Penalties as Reflected in Part 2634
Final Gifts Reporting Waiver Amendments
Technical Amendments to Categories of Value Reporting and Gifts/Reimbursements Thresholds
Final Rule Amendment to Confer Additional Agency Confidential Report Filing Extension Authority
Final Rule Amendments to Qualified Trusts Certificates Notices
Final Rule Clarifying Amendment on Revocable Inter Vivos Trust Interpretation
67 FR 37965
Final Rule Amendments on Filing Exts. & Fee Waivers Delegations
Effective Date Correction to Final Rule Amendments on Filing Exts. & Fee Waivers Delegations
Final Rule Amendment on Reporting Period for Public Reports
Final Rule Amendment on Increased Reporting Thresholds for Gifts & Reimbursements
Proposed Rule Amendments to Certificates of Divestiture Provisions (Subpart J)
Final Rule Amendments to Certificates of Divestiture Provisions (Subpart J)
Proposed Rule Amendments to Confidential Financial Disclosure Provisions
Final Rule Amendments to Confidential Financial Disclosure Provisions
Clarifying Final Rule Amendment to Section 2634.906
Proposed Rule Amendments to Qualified Trust Provisions
Final Rule Amendments to Qualified Trust Provisions
Interim Final Rule Amendments to Contents of Public Reports (Subpart C), Implementation of STOCK Act
You may submit comments in writing to OGE on this proposed rule, identified by RIN 3209-AA00, by any of the following methods:
E-Mail: usoge@oge.gov. Include the reference “Proposed Revisions to the Executive Branch Qualified Trusts Regulation” in the subject line of the message.
Mail/Hand Delivery/Courier: Office of Government Ethics, Suite 500, 1201 New York Avenue, NW., Washington, DC 20005-3917, Attention: Deborah J. Bortot, Associate Director for Nominee Financial Disclosure, Office of General Counsel and Legal Policy.
Instructions: All submissions must include OGE's agency name and the Regulation Identifier Number (RIN), 3209-AA00, for this proposed rulemaking.
I. Background: History of the Executive Branch Qualified Trusts Program Back to Top
OGE has implemented the qualified trusts provisions for the executive branch in subparts D and E of 5 CFR part 2634 (see 57 FR 11800-11830, at 11814-11821 (Apr. 7, 1992)).
II. Analysis of Proposed Amendments Back to Top
A. Changes to Definitions: There are several definitions in the current regulation that differ somewhat from the definitions of these terms in the Ethics in Government Act. To establish consistency between the regulation and the statute, we propose to make certain changes. Proposed § 2634.402(d) would modify the definition of “interested party” so that it refers only to the employee, spouse, and minor or dependent child, just as it does in the statute. In the current regulation at § 2634.401(a)(i), the definition also includes the representatives of these individuals. This change would bring the regulation in line with the statute. Where appropriate in the regulation, such as in the provisions relating to communications among parties to the trust, the proposed regulation would add the word “representative” to the phrase “interested party.”
Proposed § 2634.406(b)(2)(i)(A) would modify the description of “widely diversified portfolio” that is currently in § 2634.404(b)(2)(i). Specifically, the proposed regulation would delete the word “industrial” in referring to a particular sector. With this change, the phrase “widely diversified” would have the same meaning as “widely diversified” in § 2634.310(c)(3). Removing the word “industrial” would provide more uniformity in the financial disclosure program by consistently defining terms that are intended to encompass the same concept.
Current § 2634.407(a) uses the language “knowingly or negligently” in connection with the restrictions on fiduciaries and interested parties. However, the statute at 5 U.S.C. app., sec. 102(f)(6)(A) and current §§ 2634.403(b)(12) and 2634.404(c)(12) identify the same restrictions, but use the language “knowingly and willfully, or negligently.” The proposed regulation would modify current § 2634.407(a) by including the word “willfully” in proposed §§ 2634.408(d) and 2634.408(e) to make the regulation consistent with the statute at 5 U.S.C. app., sec. 102(f)(6)(A). It would also make the regulation internally consistent.
The proposed language of 5 CFR 2634.405(c)(3)(ii) is identical to the current regulation at 5 CFR 2634.406(a)(3)(iii)(B). Consistent with practice, OGE interprets the restriction to apply to an individual who was a trustee for an employee on another trust.
C. Changes to the Communications Provisions: The statute allows an employee to communicate with the independent trustee to request distributions of cash or other unspecified assets from the trust. The current regulation at sections 2634.403(b)(9)(ii)(A) and 2634.404(b)(9)(ii)(A) adds a restriction that does not appear in the statute. It does not allow an executive branch employee to specify whether he wants the distribution in cash or other unspecified assets from the trust. OGE can discern no harm to the integrity of the qualified trust program by allowing the employee to specify whether he wants the distribution in cash or in other unspecified assets from the trust. Proposed § 2634.408(a) would amend the regulation by removing this restriction and allowing the employee to specify whether he wants the distribution in cash or other unspecified assets from the trust.
The proposed regulation would add a provision at § 2634.408(c)(2)(iii) about communications between the independent trustee and the interested parties relating to estimated taxes. This provision would clarify that the independent trustee and the interested parties are permitted to provide income information that is necessary to pay estimated income taxes. This communication must be approved in advance by the Director of OGE.
D. Reorganization: As part of the reorganization of the regulation, OGE proposes listing in one section, § 2634.413, all of the qualified trust documents that are publicly available. Currently, these references are scattered throughout the regulation. OGE's proposed new section would additionally indicate the exception from public availability, consistent with the statute at 5 U.S.C. app., secs. 102(f)(5)(A)(i), (f)(5)(D) and (f)(7)(B), of any qualified trust provisions relating to the testamentary disposition of trust assets. Also, the current regulation fails to list the document that identifies the assets that have been sold from a blind trust. However, the statute lists the document as publicly available. Proposed § 2634.413(a)(4) would add that document to the list of publicly available trust documents. In order to clarify that the Certificate of Independence is publicly available, the proposed rule would also add that document to the list of publicly available documents at § 2634.413(a)(5).
E. Miscellaneous Changes: The proposed regulation would add a note at § 2634.404(g) about existing qualified trusts. The note would explain that, in accordance with its current practice, OGE does not allow individuals to roll over existing trusts established in another branch of the Federal Government, or under any State law. Therefore, individuals entering the executive branch, nominees for positions appointed by the President and subject to confirmation by the Senate, and candidates for President or Vice President, need to break open any such existing trusts and disclose the trust assets on their financial disclosure report, as appropriate. However, they can establish a new qualified trust in the executive branch if they wish. The proposed regulation, at 5 CFR 2634.404(f), would eliminate the current requirement, at 5 CFR 2634.403(b)(17) and 2634.404(c)(17), in the existing regulation, that the trust instrument include the compensation schedule of the independent trustee and any other designated fiduciary. This requirement does not appear in the statute. OGE has determined after years of experience that the private proprietary interests of the independent trustee or other designated fiduciary outweighs any public interest in disclosure of the compensation schedule. The proposed regulation would also eliminate the current provisions about OGE maintaining programs to assess, on a frequent basis, the appropriateness of any trustee approval at current § 2634.406(c) and the appropriateness of any trust certification at current § 2634.405(d). This amendment would make the regulation consistent with current practice.
In addition, proposed § 2634.407(d) would eliminate the requirement in the current regulation at § 2634.405(e) that the independent trustee or settlor must get the approval of the Director of OGE before they can revoke the trust.
Finally, in an attempt to keep the qualified trust regulation in one subpart, OGE is proposing to add the financial disclosure reporting requirements for a qualified trust at § 2634.411. The current qualified trusts regulation does not explain the financial disclosure reporting requirements.
As Acting Director of OGE, I certify under the Regulatory Flexibility Act (5 U.S.C. chapter 6) that this proposed amendatory rule will not have a significant economic impact on a substantial number of small entities because it primarily affects Federal employees.
List of Subjects in 5 CFR Part 2634 Back to Top
Subpart D—Qualified Trusts Back to Top
§ 2634.401 Overview.
§ 2634.402 Definitions.
Director means the Director of the Office of Government Ethics. Employee means an officer or employee of the executive branch of the United States.
(1) Is certified pursuant to § 2634.407 of this subpart by the Director;
(2) Has a portfolio as specified in § 2634.406(a) of this subpart;
(4) Has an independent trustee as defined in § 2634.405 of this subpart.
(2) Has a portfolio as specified in § 2634.406(b) of this subpart;
§ 2634.403 General description of trusts.
(b) Qualified diversified trust. (1) An interested party may put only readily marketable securities into a qualified diversified trust. In addition, the portfolio must meet the diversification requirements of § 2634.406(b)(2) of this subpart.
§ 2634.404 Summary of procedures for creation of a qualified trust.
(b) Selecting an independent trustee. After consulting with the Office of Government Ethics, the interested party may interview entities who meet the requirements of § 2634.405(a) of this subpart in order to find one to serve as an independent trustee. At an interview, the interested party may ask general questions about the institution, such as how long it has been in business, its policies and philosophy in managing assets, the types of clients it serves, its prior performance record, and the qualifications of the personnel who would be handling the trust. Because the purpose of a qualified trust is to give an independent trustee the sole responsibility to manage the trust assets without the interested party having any knowledge of the identity of the assets in the trust, the interested party may communicate his or her general financial interests and needs to any institution which he or she interviews. For example, the interested party may communicate a preference for maximizing income or long-term capital gain or for balancing safety of capital with growth. The interested party may not give more specific instructions to the proposed trustee, such as instructing it to maintain a specific allocation between stocks and bonds, or choosing stocks in a particular industry.
§ 2634.405 Standards for becoming an independent trustee or other fiduciary.
(4) The person is instructed by the independent trustee or other designated fiduciary to have no direct communication with respect to the trust with any interested party or any representative of an interested party, and to make all indirect communications with respect to the trust only through the independent trustee, pursuant to section 2634.408(a) of this subpart.
§ 2634.406 Initial portfolio.
§ 2634.407 Certification of qualified trust by the Office of Government Ethics.
(iii) In the case of a pre-existing trust as described in § 2634.409 of this subpart which the employee asks the Office of Government Ethics to certify, a copy of the pre-existing trust instrument and a list of that trust's assets categorized as to value in accordance with § 2634.301(d).
(4) Within thirty days after the trust is certified under this section by the Director, the interested party or that party's representative must file with the Director a copy of the executed trust instrument and all annexed schedules (other than those provisions which relate to the testamentary disposition of the trust assets), including a list of the assets which were transferred to the trust, categorized as to value of each asset in accordance with § 2634.301(d).
(5) Once a trust is classified as a qualified blind or qualified diversified trust in the manner discussed in this section, § 2634.310(b) applies less inclusive financial disclosure requirements to the trust assets.
§ 2634.408 Administration of a qualified trust.
(2) The person initiating a communication approved under paragraphs (a)(1)(i) or (ii) of this section shall file a copy of the communication with the Director within five days of the date of its transmission.
(2) Annual report. In the case of a qualified blind trust, the independent trustee shall, without identifying specifically an asset or holding, report annually to the interested parties and their representatives the aggregate amount of the trust's income attributable to the interested party's beneficial interest in the trust, categorized in accordance with section 2634.302(b) to enable the employee to complete the public financial disclosure form. In the case of a qualified diversified trust, the independent trustee shall, without identifying specifically an asset or holding, report annually to the interested parties and their representatives the aggregate amount actually distributed from the trust to the interested party or applied for the party's benefit. Additionally, in the case of the blind trust, the independent trustee shall report on Schedule K-1 the net income or loss of the trust and any other information necessary to enable the interested party to complete an individual tax return. The independent trustee must follow the model document for each report and shall file a copy of the report, within five days of the date of its transmission, with the Director.
§ 2634.409 Pre-existing trusts.
§ 2634.410 Dissolution.
Within thirty days of dissolution of a qualified trust, the interested party shall file a report of the dissolution with the Director and a list of assets of the trust at the time of the dissolution, categorized as to value in accordance with § 2634.301(d).
§ 2634.411 Reporting on financial disclosure reports.
§ 2634.412 Sanctions and enforcement.
§ 2634.413 Public access.
(a) Documents subject to public disclosure requirements. The following qualified trust documents filed by a public filer, nominee, or candidate are subject to the public disclosure requirements of § 2634.603:
(b) Documents exempt from public disclosure requirements. The following documents are exempt from the public disclosure requirements of § 2634.603 and also shall not be disclosed to any interested party:
(1) Any document (and the information contained therein) filed under the requirements of § 2634.408(a) and (c) of this subpart; and
(2) Any document (and the information contained therein) inspected under the requirements of § 2634.408(d)(4) of this subpart (other than a Certificate of Compliance).
§ 2634.414 OMB control number.
Subpart E—Revocation of Trust Certificates and Trustee Approvals Back to Top
§ 2634.501 Purpose and scope.
(b) Scope. This subpart applies to all trustee approvals and trust certifications pursuant to §§ 2634.405 and 2634.407, respectively.
(a) Violations. If the Office of Government Ethics learns that violations or apparent violations of the trust restrictions exist that may warrant revocations of trust certification or trustee approval previously granted under § 2634.407 or § 2634.405, the Director may, pursuant to the procedure specified in paragraph (b) of this section, appoint an attorney on the staff of the Office of Government Ethics to review the matter. After completing the review, the attorney will submit findings and recommendations to the Director.