Understanding the Concept of Blind Trusts
A blind trust is a system that requires public officials to place their financial assets, such as stocks, into the hands of an independent third party while they are in office. This ensures they have no control or influence over these assets during their tenure, preventing potential conflicts of interest. In Korea, this is referred to as '백지신탁', and internationally, it is known as a 'blind trust'. The main purpose of this system is to allow high-ranking officials or legislators to engage in investments while maintaining fairness in governance.
How Blind Trusts Work
Once an official's assets are placed in a blind trust, they lose the right to make decisions regarding the buying and selling of those assets. They also cannot exercise any rights associated with being a shareholder. This ensures that even if the official owns stocks, they cannot engage in actions that might benefit their investments, thus maintaining a fair and unbiased approach to governance.
International Implementation
The blind trust system was first introduced in the United States and is currently used in various advanced economies. The goal is to prevent public officials from using their positions to influence the value of stocks or bonds they own. In the U.S., this system applies broadly to high-ranking officials, including the president, vice president, cabinet members, military generals, and others.
Upon assuming office, U.S. officials are required to transfer their financial securities into a blind trust. This transfer must be pre-approved by the Office of Government Ethics, and the trustee who manages these assets must have no connection to the public official or their work. Trustees are required to provide quarterly reports, summarizing the financial status of the trust. However, specific details about the assets within the trust remain undisclosed to the official. Communication between the trustee and the official must be in writing, and no verbal exchanges are allowed.
Due to these restrictions, officials are kept unaware of how their money is invested while they are in office. This prevents any temptation to influence policy decisions that might benefit their investments, ensuring the integrity of their role.
Blind Trusts in South Korea
South Korea adopted a similar system in 2005, with the passage of an amendment to the Public Officials Ethics Act. As of November that year, the blind trust system applies to high-ranking officials, including members of the National Assembly, ministers, vice ministers, and other Grade 1 public officials. Additionally, those in stock-related roles, such as employees in the Ministry of Finance or the Financial Supervisory Commission, are subject to this law from Grade 4 and above.
In Korea, if the combined value of stocks held by an official, their spouse, and direct family members exceeds 30 million won, they must sell or transfer their stocks into a blind trust. This threshold ensures that officials with significant financial interests are subject to the rules. Exceptions can only be made if the Stock Trust Review Committee, established under the Ministry of the Interior and Safety, determines that there is no conflict of interest between the stocks and the official's duties.
The blind trust system plays a critical role in safeguarding the fairness and impartiality of public decision-making, helping maintain public trust in government institutions.
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