[Federal Register Volume 61, Number 139 (Thursday, July 18, 1996)]
[Proposed Rules]
[Pages 37426-37427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18327]
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DEPARTMENT OF JUSTICE
United States Trustees
28 CFR Part 58
RIN 1105-AA32
Qualifications and Standards for Standing Trustees
AGENCY: Department of Justice.
ACTION: Proposed rule.
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SUMMARY: The Department of Justice is proposing to amend the
qualifications required for an individual to be appointed as a standing
trustee. The Department of Justice is also proposing to issue standards
to govern the standing trustee. Finally, the Department of Justice is
correcting certain typographical errors in part 58.
DATES: Written comments must be submitted on or before September 16,
1996.
ADDRESSES: Please submit written comments to the Office of the General
Counsel, Executive Office for United States Trustees, 901 E Street NW.,
Room 740, Washington, DC 20530.
FOR FURTHER INFORMATION CONTACT:
Martha L. Davis, General Counsel, or Jeanne M. Crouse, Attorney, (202)
307-1399. This is not a toll-free number.
SUPPLEMENTARY INFORMATION: Under the provisions of 28 U.S.C. 586, the
United States Trustee is responsible for appointing individuals to
serve as standing trustees in cases filed under chapter 12 and chapter
13 of the Bankruptcy Code, 11 U.S.C. 101 et seq., subject to the
approval of the Attorney General. Section 586 also directs the United
States Trustee to supervise standing trustees and their administration
of cases. The Attorney General has general supervision over each United
States Trustee and is authorized to prescribe by rule qualifications
for appointment of a standing trustee by the United States Trustee. See
28 U.S.C. 586 (c)-(d). Finally, the Attorney General, in consultation
with the United States Trustee, is responsible for fixing a percentage
fee and the maximum annual compensation for each standing trustee
subject to the limitations set forth in the statute, including the
actual and necessary expenses of the trustee. By internal order, the
Attorney General has delegated to the Director of the Executive Office
for United States Trustees (the ``Director'') the authority to fix
percentage fees and compensation and the authority to issue rules
governing qualifications for appointment and conduct of standing
trustees after appointment.
The qualifications promulgated by the Attorney General are
currently found in Secs. 58.3 and 58.4 of title 28 to the Code of
Federal Regulations. The proposed rule amends these qualifications and
formally incorporates certain fiduciary standards that govern the
conduct of a standing trustee and his or her operation. These standards
address the hiring of relatives, dealings with related parties, and
employment relationships among standing trustees.
This rule will aid the Director and the United States Trustees in
supervising standing trustees in the administration of cases and in
evaluating the actual, necessary expenses of standing trustees relative
to fixing appropriate percentage fees and compensation. Adherence to
the rule should assist the fair and impartial administration of the
office of the standing trustee, help maximize the efficiency and
purposes of case administration, and work to avoid improprieties,
whether actual or perceived, that could diminish the integrity of the
administrative process.
Executive Order 12866
This proposed rule has been drafted and reviewed in accordance with
Executive Order 12866, section 1(b), Principles of Regulation. The
Director has determined that this rule is not a ``significant
regulatory action'' under Executive Order 12866 section 3(f),
Regulatory Planning and Review.
Regulatory Flexibility Act
The Director, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this proposed rule and by approving it
certifies that this rule will not have a significant impact on a
substantial number of small entities.
Paperwork Reduction Act
This proposed rule contains no new information collection or
recordkeeping requirements under the Paperwork Reduction Act (44 U.S.C.
3501 et seq.).
List of Subjects in 28 CFR Part 58
Bankruptcy, Trusts, and Trustees.
For the reasons set forth in the preamble, the Department of
Justice proposes to amend 28 CFR part 58 as follows:
PART 58--REGULATIONS RELATING TO THE BANKRUPTCY REFORM ACTS OF 1978
AND 1994
1. The authority citation for part 58 is revised to read as
follows:
Authority: 28 U.S.C. 509, 510, 586, 5 U.S.C. 301.
2. In Sec. 58.1, paragraph (a) is revised to read as follows:
Sec. 58.1 Authorization to establish panels of private trustees.
(a) Each U.S. Trustee is authorized to establish a panel of private
trustees (the ``panel'') pursuant to 28 U.S.C. 586(a)(1).
* * * * *
3. Section 58.4 is revised to read as follows:
Sec. 58.4 Qualifications for appointment as standing trustee and
fiduciary standards.
(a) As used in this section--
(1) The term standing trustee means an individual appointed
pursuant to 28 U.S.C. 586(b).
(2) The term relative means an individual related by affinity or
consanguinity within the third degree as determined by the law of the
jurisdiction where the standing trustee is located, an individual in a
step or adoptive relationship within such third degree, or an
individual whose close association is the equivalent of a spousal
relationship.
(3) The term financial or ownership interest excludes ownership of
stock in a publicly-traded company if the ownership interest is not
controlling.
(b) To be eligible for appointment as a standing trustee, an
individual must have the qualifications for membership on a private
panel of trustees set forth in Sec. 58.3(b) (1)-(4), (6)-(8). An
individual need not be an attorney to be eligible for appointment as a
standing trustee. A corporation or partnership may be appointed as
standing trustee only with the approval of the Director.
(c) The United States Trustee shall not appoint as a standing
trustee any individual who, at the time of appointment, is:
(1) A relative of another standing trustee in the region in which
the standing trustee is to be appointed;
(2) A relative of a standing trustee in the region in which the
standing trustee is to be appointed, who, within the
[[Page 37427]]
preceding one-year period, died, resigned, or was removed as a standing
trustee from a case;
(3) A relative of a bankruptcy judge or a clerk of the bankruptcy
court in the region in which the standing trustee is to be appointed;
(4) An employee of the Department of Justice within the preceding
one-year period; or
(5) A relative of a United States Trustee or an Assistant United
States Trustee, a relative of an employee in any of the offices of the
United States Trustee in the region in which the standing trustee is to
be appointed, or a relative of an employee in the Executive Office for
United States Trustees.
(d) A standing trustee must, at a minimum, adhere to the following
fiduciary standards:
(1) Employment of relatives.
(i) A standing trustee shall not employ a relative of the standing
trustee.
(ii) A standing trustee shall also not employ a relative of the
United States Trustee or of an Assistant United States Trustee in the
region in which the trustee has been appointed or a relative of a
bankruptcy court judge or of the clerk of the bankruptcy court in the
judicial district in which the trustee has been appointed.
(iii)(A) Paragraphs (d)(1) (i) and (ii) of this section shall not
apply to a spouse of a standing trustee who was employed by the
standing trustee as of August 1, 1995.
(B) For all other relatives employed by a standing trustee as of
August 1, 1995, paragraphs (d)(1)( (i) and (ii) of this section shall
be fully implemented by October 1, 1998, unless specifically provided
below:
(1) The United States Trustee shall have the discretion to grant a
written waiver for a period of time not to exceed 2 years upon a
written showing by the standing trustee of extraordinary and compelling
circumstances that make the continued employment of a relative
necessary for a standing trustee's performance of his or her duties.
(2) Additional waivers, not to exceed a period of two years each,
may be granted under paragraph (d)(1)(iii)(B)(1) of this section
provided the standing trustee makes a similar written showing within 90
days prior to the expiration of a present waiver and the United States
Trustee determines that the circumstances for waiver are met.
(3) No waivers will be granted for a relative of the United States
Trustee or of an Assistant United States Trustee.
(2) Related party transactions.
(i) A standing trustee shall not direct debtors or creditors to an
individual or entity that provides products or services, such as
insurance or financial counseling, if a standing trustee is a relative
of that individual or if the standing trustee or relative has a
financial or ownership interest in the entity.
(ii) A standing trustee shall not contract or allocate expenses
with himself or herself, with a relative, or with any entity in which
the standing trustee or a relative of the standing trustee has a
financial or ownership interest if the costs are to be paid as an
expense out of the fiduciary expense fund.
(iii)(A) The United States Trustee may grant a waiver from
compliance with paragraph (d)(2)(ii) of this section for up to three
years following the appointment of a standing trustee if the newly-
appointed standing trustee can demonstrate in wiring that a waiver is
necessary and the cost is at or below market.
(B) The United States Trustee may grant a provisional waiver from
compliance with the allocation prohibition contained in paragraph
(d)(2)(ii) of this section if one of the following conditions is
present:
(1) A standing trustee has insufficient receipts to earn the
maximum annual compensation determined by the Director during any one
of the last three fiscal years and provides the United States Trustee
with an appraisal or other written evidence that the allocation is
appropriate, or
(2) A Chapter 13 standing trustee also serves as a trustee in
Chapter 12 cases and provides the United States Trustee with an
appraisal or other written evidence that the allocation between Chapter
13 and Chapter 12 cases is appropriate.
(C) Except as otherwise provided below, a standing trustee may seek
a reasonable extension of time from the United States Trustee to comply
with paragraph (d)(2)(ii) of this section. To obtain an extension, a
standing trustee must demonstrate by an appraisal or other written
evidence, satisfactory to the United States Trustee, that the expense
is at or below market rate. In no event shall an extension be granted
for the use and occupation of real estate beyond October 1, 2005. For
personal property and personal service contracts, no extension shall be
granted beyond one year from the date on which this paragraph becomes
effective.
(3) Employment of Other Standing Trustees. A standing trustee shall
not employ or contract with another standing trustee to provide
personal services for compensation payable from fiduciary expense
funds. This section does not prohibit the standing trustee from
reimbursing the actual expenses incurred by another standing trustee
who provides assistance to the standing trustee provided that the
reimbursement has been pre-approved by the United States Trustee.
Dated: July 12, 1996.
Joseph Patchan,
Director.
[FR Doc. 96-18327 Filed 7-17-96; 8:45 am]
BILLING CODE 4410-01-M
