A blind trust around the world is considered a useful tool that is designed to distinguish between government and business. It is quite obvious that it is economic (financial) interests that determine the political behavior of many officials. According to experts, there is nothing shameful in the capitals of officials who came to government posts.
And there is nothing surprising in the fact that citizens who have achieved certain results in business come to power structures.
However, world experience knows effective mechanisms to avoid a conflict of financial and political interests, among which is the transfer of financial assets into a “blind trust”. In this article, we will consider how blind trust practices are utilized in the USA and Canada.
Federal Government Representatives (RPOHs) do not have the right to own and acquire controlled assets in the United States before their service lives expire. This is what the Conflict of Interest Law says.
Within 120 days before joining the federal service, the RPOH official agrees to refuse / get rid of his controlled assets. He has two options: to sell assets, having concluded a transaction on the side, or to place them in a blind trust.
What are controlled assets?
These are those assets whose value can be directly or indirectly affected by policies and government decisions. Here is just a short list of assets that can be considered as controlled:
- US futures and foreign exchange trading
- public trading in securities of corporations of foreign states;
- investing in education - RESP (registered education savings plan);
- storage in the RRSP (registered pension savings plan) of both savings and investment assets.
Key features of a blind trust
A blind trust is one of the most convenient asset protection tools, when trustees (or property managers) have complete freedom of action regarding the assets that fall into their management.
And the beneficiaries do not have any information about the assets of the trust and do not have the right to intervene in the work of the managers.That is why this type of trust was called “blind”.
The key idea of using a blind trust is to avoid a conflict of interest. This is exactly the form of trust that is often used by politicians to avoid accusations of conflict of interest.
Say ‘no’ to conflicts of interest
The first elected U.S. government official to use a blind trust was the 36th President Lyndon Johnson (handed over his own television station in Austin to an independent trustee).
The period of his presidency falls on the 60s of the 20-th century, which indicates that the requirements regarding the transfer of assets of US officials to a blind trust were not yet applied at that time.
With the adoption of the Government Ethics Act of 1978, the practice of using blind trusts has significantly increased. Since then, it has become normal practice: almost all US presidents and senators before transferring to public service transferred their own assets into a blind trust.
Nowadays, for civil service officials in the US and Canada, only federal RPOHs and members of the Ontario Executive Board are required to put their assets in a blind trust, provided they decide to keep them, not sell them.
Blind trust should by no means violate the below requirements:
- The trustee should not provide information on the trust assets composition to the federal RPOH or to a member of the Ontario Executive Board;
- Officials should be completely relieved of control over trust assets;
- The trustee should not consult or request instructions from the federal RPOH or member of the Ontario Executive Board regarding trust management;
- Trusts become invalid when they are replaced by a federal RPOH or Executive Board member.
Please note: in order to receive a comprehensive legal support for issuers on the stock market in Canada, you must enlist the support of professional lawyers. IQ Decision UK experts provide legal advice on fundraising through the stock market.
The blind trust operations require careful consideration. By ordering advice on investment protection in the USA and Canada, you will receive more extensive information about this specific type of trust.
Should you seek legal advice on the private placement of securities in the United States, or support of transactions for the purchase of securities in Canada, do not hesitate to contact our experts by filling out the application form below.
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