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Conflicts, Investments & Trump: Emoluments for Him, & Fiduciary Rule for You

March 1, 2017 – It is not a surprise that Donald Trump has not divested himself of any of his holdings, any of which is positioned to give the appearance of impropriety or conflict. It should also come as no surprise that the same individual elected by less than half of the voters, would not turn over tax returns requested by legislators and by the voting public. It should also come as no surprise that this same individual shows contempt for the laws of ethics and divestiture when conflicts of interest arise. One of those conflicts includes his lack of transparency–or engendered ‘trust’ that is required by the Emoluments clause of the US Constitution, which proscribes:

No title of nobility shall be granted by the United States: and no person holding any office of profit or trust under them, shall, without the consent of the Congress, accept of any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.

Article I, Section 9, Clause 8

What this means is that no one holding office of ‘Profit or Trust’ under the US Government shall without Congressional permission can accept any present or “Emolument, Office, or Title–of any kind–from any nobility or from any foreign state, i.e., on behalf of a foreign country. This means that anyone holding a ‘fiduciary office of trust and profit’ shall NOT receive ‘gifts’ of any kind. Otherwise, it would at minimum create the appearance of conflict of interest on the surface without further evaluation.

So what is an ‘Emolument?’

According to Black’s Law Online Dictionary – Online Legal Dictionary, 2nd Ed., an “Emolument”is:

“The profit arising from office or employment; that which is received as a compensation for services, or which is annexed to the possession of office as salary, fees, and perquisites; advantage; gain, public or private.

According to Merriam-Webster Online Dictionary, an “Emolument” not only reflects the explanation given above, but also includes the archaic term, one closest in time to the writing of the Constitution:advantage.”

With these definitions as our backdrop, let’s now look to some of the Trump holdings–including  where money would most likely flow from those real estate ventures. At minimum, here is a short list of the conflicts:

  1. Trump Tower: one tenant is Industrial and Commercial Bank of China (ICBC), which has links to the Government of China
  2. Deutsche Bank: Trump owes money to, while bank has ties to German Government;
  3. Financial ties to China and other nations and governments around the globe:
  4. Trump Hotel in DC in the US Government owned US Post Office building: where a chief Executive he will represent the interests of the United States, as landlord, and also the tenant renting the building to which foreign dignitaries have already booked, no doubt to curry favor with the new president.

Conflicts-Ethics and Trump

It is no surprise that such conflicts of interest can be, even under the best of intentions–inappropriate for a leader, let alone the leader of the most powerful nation in the world to possess. But longstanding ethics rules were put in place so that transparency is unmistaken. Yet, it appears that not only does the new president not ascribe to the tenets of transparency, he has put in place a delay, and possible permanent stop to the Obama era action set to take place on April 10–“the Fiduciary rule.” This rule would make mandatory that investment advisors–brokers, especially with regard to retirement accounts disclose a conflict of interest–something by definition of a person imbued with a position of trust and confidence–a “fiduciary” should actually already be doing. Currently only the “suitability standard” not the “fiduciary standard applies, which can mean that retirees can be easily misled about what investments are right for them. And most importantly, suitability by itself does not mean the best deal for the client.

What does lack of transparency say about Trump’s Motives?

Since Trump will not release his tax returns, and has multiple investments everywhere, is possibly engaged in multiple conflicts of interest, violation of emoluments clause and other rules requiring divestment, it should come as no surprise that he would help the financial industry to hide investment incentives from investing consumers. This is quite troubling.

Recent ‘Executive Order’ Delays & Potentially Nixes Consumer-Friendly ‘Fiduciary Rule’

This recent executive action by Trump to “delay and possibly nix” the scheduled implementation of this consumer-friendly “fiduciary rule.” This means that investment advisors–specifically brokers can “continue on in secrecy” that is not telling their clients that they are selling them investments that benefit themselves more than their own clients. Without the “fiduciary rule” in place, not only allows investment advisors to obfuscate informing clients of conflict–it is the antithesis of what investing consumers already expect when they make investments–specifically retirement investments they believe provide the greatest benefit to themselves and their families.

According to Forbes, The delay of the rule, and potential revision or rescinding of the fiduciary rule, is an overt attempt to protect the status quo of financial advice in the United States.” And that status quo, is to keep investors in the dark about what is in the best interests of the client vs the financial advisor.

Author’s Note: -One can only envision this lack of transparency will deepen the divide in America–if the “status quo” is embraced. That is, if President Trump is allowed to ‘retain’ emoluments as well as the presidency–left to conduct a multi-billion dollar, multi-national business as just business as usual. Where the President retains all his holdings, refrains from being forthright about his investments with the American public and with congress, continues to reap unlimited and unknown financial benefits from both US and foreign governments–while keeping Americans and the investing public in the dark. If left unabated, this certainly would be troubling new precedent at the highest level that America has never seen, nor our nation’s founders had envisioned. – M.K. Elloian, Esq.