Title 19A — Subtitle 06. Blind Trusts

General Provisions Article, §5-501, Annotated Code of Maryland, establishes nonparticipation requirements for employees and officials of the State when the official matter is one in which they have an interest or which involves as a party a business entity with which they have certain economic relationships. General Provisions Article, §5-502, prohibits these officials and employees from having a financial interest in an entity that is subject to their authority or that of an agency with which they are affiliated or that has or is negotiating a contract with the agency. Exception from the prohibitions of General Provisions Article, §§5-501 and 5-502, Annotated Code of Maryland, is provided for persons under the authority of the State Ethics Commission pursuant to regulations of the Commission where it determines that there is no conflict or appearance of conflict, and where the exception would not be inconsistent with the purposes of the Law.

The purpose of this subtitle is to define the circumstances under which a certified blind trust or an excepted blind trust would be viewed by the Commission as meeting the statutory criteria for exception from these conflict of interest provisions. An underlying concept is that, in situations where a trust is created by an independent third party or there are diversified holdings in a trust created by a government official or employee, and where the official or employee does not know the identity of the financial interests and does not control these interests, then his or her official actions would not be influenced or appear to be influenced by private interests. Thus, the general public policy goal to be achieved through reliance on a blind trust is an actual “blindness” or lack of knowledge or control by the official or employee with respect to the interests held in trust.

The regulations in this subtitle apply to an individual serving as an official or employee in State government, as defined in §G of this regulation.

In addition to §§C—H of this regulation, the definitions set forth in COMAR 19A.01.02.02 have the meanings indicated where they appear in this subtitle.

“Certified blind trust” means a blind trust arrangement for the management of interests held by an official or employee that is determined by the Commission to meet the criteria for certification under COMAR 19A.06.02.

“Excepted blind trust” means a trust that is determined by the Commission to qualify for exception pursuant to COMAR 19A.06.02.05.

“Holding” includes shares of stock or similar securities or interests.

“Interested party” means an official or employee covered by these regulations, and a member of the official's or employee's household as defined in COMAR 19A.01.01.02R.

“Official or employee” includes State employees, public officials, and State officials, except State officials in the Legislative and Judicial branches of State government.

“Trustee” includes a financial institution or other qualifying entity named in a trust instrument and also any officer, director, or employee of the institution or entity.

An interest is not viewed as held by an official or employee for purposes of General Provisions Article, Title 5, Annotated Code of Maryland, if the interest of the official or employee is included in a certified blind trust as set forth in this subtitle.

An interest covered by §A of this regulation is excepted from:

A trust that complies with the appropriate procedural requirements of COMAR 19A.06.03, and that meets the substantive requirements set forth in Regulations .02—.04 of this chapter, may be certified by the Commission as a blind trust for purposes of COMAR 19A.06.01.03.

A blind trust arrangement by an official or employee will be considered for certification only if in connection with the submission the official or employee certifies that:

A trust shall be certified only if the holdings transferred to it by the official or employee meet the requirements of §B of this regulation.

A trust shall be:

For a trust to qualify for certification the trustee shall be independent of and unassociated with the official or employee in both reality and appearance.

The trustee:

To be certified as a blind trust pursuant to this subtitle, a trust shall be established by a trust instrument containing the provisions in §§B—H of this regulation.

The trustee shall have absolute discretion and authority to manage and control the trust assets, including the authority to purchase and sell trust holdings.

An interested party may not have the ability to learn of the assets of the trust or the actions of the trustee, and may not receive reports on the assets or income except those necessary (without identifying any particular asset or holding) for filing personal income tax returns.

Tax returns of the trust shall be prepared and filed by the trustee and may not be available to any interested party.

There may not be direct or indirect communication between the trustee and any interested party except directions regarding the disposition of income or general decisions regarding the approach of the trust as a short-term income or long-term growth approach. Any permitted communications shall be in writing, with copies provided to the Commission.

An interested party may not seek to obtain information regarding the trust or its assets.

Securities may not be purchased that would result in the holdings in any entity exceeding 20 percent of the total trust assets, or any industry or economic sector exceeding 30 percent of the total trust assets, except when the particular holdings present no conflict of interest under General Provisions Article, Title 5, Annotated Code of Maryland.

The trust instrument shall provide for termination of the trust at the earliest of the following:

A request for certification of a blind trust shall be in writing addressed to the Commission.

Before a trust can be certified, each proposed trust document and proposed trustee shall be approved by the Commission.

Appropriate documentation to establish the independence of the trustee shall be provided to the Commission with the request for certification, on an executed Certificate of Independence form to be established by the Commission.

A trust shall be certified in writing by the Commission based upon a determination that:

Within 30 days after certification of a trust by the Commission, the official or employee shall file with the Commission a:

The list of holdings provided pursuant to §A(2) of this regulation shall be available for public inspection and copying in accordance with General Provisions Article, §5-606, Annotated Code of Maryland.

The trustee shall, within 30 days after the end of any calendar year in which the trust is in effect, submit a Certificate of Compliance to the Commission on a form established by the Commission certifying the trust's continued compliance with the provisions of this chapter.

The trustee shall maintain the books of account and other records of the trust and copies of the trust's tax returns, and make them available for inspection and copying at the times requested by the Commission or the Commission's staff.

The Commission shall maintain a continued assessment of the appropriateness of any approval of a trustee or certification of a trust. If, based on information obtained in review of records or from any other source, the Commission has reason to believe that continued approval or certification is no longer appropriate, it shall provide notice to the official or employee of the intention to revoke the approval or certification, and provide the official or employee an opportunity to be heard by the Commission in informal procedures consistent with the Commission's advisory opinion process as set forth in COMAR 19A.01.02.

Failure by any interested party or the trustee to comply with the provisions of these regulations or General Provisions Article, Title 5, Annotated Code of Maryland, if related to the trust, shall result in revocation of the certification and make the official or employee subject to any appropriate enforcement or other action for violation of the provisions of General Provisions Article, Title 5, Annotated Code of Maryland, from the point in time where the failure to comply occurred.

Within 60 days of termination of a trust for any reason as set forth in COMAR 19A.06.02.04H the official or employee shall file a public financial disclosure statement in accordance with the provisions of General Provisions Article, §5-607, Annotated Code of Maryland, disclosing the assets of the trust as of the date of termination.

An exception allowed from the participation and interest prohibitions of General Provisions Article, §§5-501 and 5-502, Annotated Code of Maryland, becomes void and of no effect when a trust is terminated for any reason.

During the existence of a blind trust certified in accordance with this chapter, the official or employee may propose a substitute or successor trustee.

The request for certification of a substitute or successor trustee shall be in writing and include all appropriate documentation and information as required by Regulation .02 of this chapter.

The Commission shall approve a substitute or successor trustee: