[Code of Federal Regulations]
[Title 5, Volume 3]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR2634.403]

[Page 516-518]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
                CHAPTER XVI--OFFICE OF GOVERNMENT ETHICS
 
PART 2634_EXECUTIVE BRANCH FINANCIAL DISCLOSURE, QUALIFIED TRUSTS, AND 
CERTIFICATES OF DIVESTITURE--Table of Contents
 
                       Subpart D_Qualified Trusts
 
Sec. 2634.403  Qualified blind trusts.

    (a) Definition. A qualified blind trust is a trust in which the 
filer, his spouse, or his minor or dependent child has a beneficial 
interest, which is certified pursuant to Sec. 2634.405 of this subpart 
by the Director of the Office of Government Ethics, and which includes 
in the trust instrument in the provisions required by paragraph (b) of 
this section, and has an independent trustee as defined in Sec. 
2634.406 of this subpart. See section 102(f)(3) of the Act.
    (b) Required provisions. The instrument which establishes a blind 
trust must adhere substantively to model drafts circulated by the Office 
of Government Ethics, and must provide that:
    (1) The primary purpose of the blind trust is to confer on the 
independent trustee and any other designated fiduciary the sole 
responsibility to administer the trust and to manage trust assets 
without the participation by, or the knowledge of, any interested party. 
This includes the duty to decide when and to what extent the original 
assets of the trust are to be sold or disposed of and in what 
investments the proceeds of sale are to be reinvested;
    (2) The trustee and any other designated fiduciary in the exercise 
of their authority and discretion to manage and control the assets of 
the trust shall not consult or notify any interested party;
    (3) None of the assets initially placed in the trust's portfolio 
shall include assets the holding of which by any interested party would 
be prohibited by the Act, by the implementing regulations, or by any 
other applicable Federal law, Executive order, or regulation;
    (4) Any portfolio asset transferred to the trust by an interested 
party is free of any restriction with respect to its transfer or sale, 
except as fully described in schedules attached to the trust instrument, 
and as approved by the Director of the Office of Government Ethics;
    (5) During the term of the trust, the interested parties shall not 
pledge, mortgage, or otherwise encumber their interests in the property 
held by the trust;
    (6) The trustee shall promptly notify the filer and the Director of 
the Office of Government Ethics when any particular asset transferred to 
the trust by an interested party has been completely disposed of or when 
the value of that asset is reduced to less than $1,000;
    (7) The trustee or his designee shall prepare the trust's income tax 
return. Under no circumstances shall the trustee or any other designated 
fiduciary disclose publicly, or to any interested party, the trust's tax 
return, any

[[Page 517]]

information relating to that return except for a summary of trust income 
in categories necessary for an interested party to complete his 
individual tax return, or any information which might specifically 
identify current trust assets, or those assets which have been sold or 
disposed of from trust holdings, other than information relating to the 
sale or disposition of original trust assets under paragraph (b)(6) of 
this section;
    (8) An interested party shall not receive any report on trust 
holdings and sources of trust income, except that the trustee shall, 
without identifying specifically any asset or holding:
    (i) Report quarterly the aggregate market value of the assets 
representing the interested party's interest in the trust;
    (ii) Report the net income or loss of the trust, and any other 
information necessary to enable the interested party to complete his 
individual income tax return; and
    (iii) Report annually, for purposes of section 102(a)(1)(B) of the 
Act, the aggregate amount of the trust's income attributable to the 
interested party's beneficial interest in the trust, categorized in 
accordance with Sec. 2634.302(b);
    (9) There shall be no direct or indirect communication with respect 
to the trust between an interested party and the independent trustee or 
any other designated fiduciary with respect to the trust unless:
    (i) Such communication is in writing, with the prior written 
approval of the Director of the Office of Government Ethics and is filed 
with the Director in accordance with Sec. 2634.408(c) of this subpart; 
and
    (ii) It relates only:
    (A) To the request for a distribution from the trust, which does not 
specify whether the distribution shall be made in cash or in kind;
    (B) To the general financial interest and needs of the interested 
party including, but not limited to, a preference for maximizing current 
income or long-term capital appreciation;
    (C) To notification of the trustee by the interested party that the 
interested party is prohibited by subsequently applicable statute, 
Executive order, or regulation from holding an asset, and to directions 
to the trustee that the trust shall not hold that asset; or
    (D) To instructions to the trustee to sell all of an asset which was 
initially placed in the trust by an interested party, and which, in the 
determination of the filer creates a real or apparent conflict due to 
duties subsequently assumed by the filer (but the filer is not required 
to give such directions);
    Note: By the terms of paragraph (3)(C)(vi) of section 102(f) of the 
Act, communications which solely consist of requests for distributions 
of cash or other unspecified assets of the trust are not required to be 
in writing. Further, there is no statutory mechanism for pre-screening 
of proposed communications. However, experience of the Office of 
Government Ethics over the years dictates the necessity of prohibiting 
any oral communications between the trustee and an interested party with 
respect to the trust and pre-screening all proposed written 
communications, to prevent inadvertent prohibited communications and 
preserve confidence in the Federal qualified trust program. Accordingly, 
under its authority pursuant to paragraph (3)(D) of section 102(f) of 
the Act, the Office of Government Ethics will not approve proposed trust 
instruments which do not contain language conforming to this policy, 
except in unusual cases where compelling necessity is demonstrated to 
the Director, in his sole discretion.
    (10) The interested parties shall not take any action to obtain, and 
shall take reasonable action to avoid receiving, information with 
respect to the holdings and the sources of income of the trust, 
including a copy of any trust tax return filed by the trustee, or any 
information relating to that return, except for the reports and 
information specified in paragraphs (b)(6) and (b)(8) of this section;
    (11) An independent trustee and any other designated fiduciary shall 
file, with the Director of the Office of Government Ethics by May 15th 
following any calendar year during which the trust was in existence, a 
properly executed Certificate of Compliance in the form prescribed in 
appendix B to this part. In addition, the independent trustee and such 
fiduciary shall maintain and make available for inspection by the Office 
of Government Ethics, as it may from time to time direct, the trust's 
books of account and other

[[Page 518]]

records and copies of the trust's tax returns for each taxable year of 
the trust;
    (12) Neither the trustee nor any other designated fiduciary shall 
knowingly and willfully, or negligently:
    (i) Disclose to any interested party any information regarding the 
trust that may not be disclosed pursuant to title I of the Act, the 
implementing regulations, or the trust instrument;
    (ii) Acquire any holding the ownership of which is prohibited by, or 
not in accordance with, the terms of the trust instrument;
    (iii) Solicit advice from any interested party with respect to the 
trust, if such solicitation is prohibited by title I of the Act, the 
implementing regulations, or the trust instrument; or
    (iv) Fail to file any document required by title I of the Act or by 
this part;
    (13) An interested party shall not knowingly and willfully, or 
negligently:
    (i) Solicit or receive any information regarding the trust that may 
not be disclosed pursuant to title I of the Act, the implementing 
regulations, or the trust instrument; or
    (ii) Fail to file any document required by title I of the Act or by 
this part;
    (14) No person, including investment counsel, investment advisers, 
accountants, and tax preparers, may be employed or consulted by an 
independent trustee or any other designated fiduciary to assist in any 
capacity to administer the trust or to manage and control the trust 
assets, unless the following four conditions are met:
    (i) When any interested party learns about such employment or 
consultation, the person must sign the trust instrument as a party, 
subject to the prior approval of the Director of the Office of 
Government Ethics;
    (ii) Under all the facts and circumstances, the person is determined 
pursuant to the requirements for eligible entities under Sec. 2634.406 
of this subpart to be independent of any interested party with respect 
to the trust arrangement;
    (iii) The person is instructed by the independent trustee or other 
designated fiduciary not to disclose publicly or to any interested party 
information which might specifically identify current trust assets which 
have been sold or disposed of from trust holdings, other than 
information relating to the sale or disposition of original trust assets 
under paragraph (b)(6) of this section; and
    (iv) The person is instructed by the trustee or other designated 
fiduciary to have no direct communication with respect to the trust with 
any interested party, and to make all indirect communications with 
respect to the trust only through the trustee, pursuant to paragraph 
(b)(9) of this section;
    (15) The trustee shall not acquire by purchase, grant, gift, 
exercise of option, or otherwise, without the prior written approval of 
the Director of the Office of Government Ethics, securities, cash, or 
other property from any interested party;
    (16) The existence of any banking or other client relationship 
between any interested party and an independent trustee or any other 
designated fiduciary shall be disclosed in schedules attached to the 
trust instrument, and no other such relationship shall be instituted 
unless that relationship is disclosed to the Director of the Office of 
Government Ethics; and
    (17) The independent trustee and any other designated fiduciary 
shall be compensated in accordance with schedules annexed to the trust 
instrument.

[57 FR 11814, Apr. 7, 1992; 57 FR 21854, May 22, 1992]