RELATING TO ETHICS.

SB2778

THE SENATE

S.B. NO.

2778

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to ethics
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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Chapter 84,
Hawaii Revised Statutes, is amended by adding a new part to be appropriately
designated and to read as follows:

"
Part . placement
of certain assets of officials of the legislature, spouses, and dependent
children in blind trusts

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�84-A Definitions.
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As used in this part:

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"Blind trust" means a trust
agreement where neither the trustor nor the beneficiaries have any control or
influence over, or knowledge of, the assets in the trust, and which complies
with the definition of "qualified blind trust" in the Ethics in
Government Act of 1978, 5 U.S.C. App 4 101 et seq., as amended.

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"Commission" means the state
ethics commission.

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"Commodity" has the same meaning
as defined in section 127A-30.

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"Covered investment" means:

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(1)
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An
investment in a security, a commodity, or a future; and

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(2)
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Any
economic interest comparable to an interest described in paragraph (1) that is
acquired through synthetic means, including the use of a derivative which
includes an option, warrant, or other similar means.

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"Covered investment" includes an
investment or economic interest described in paragraphs (1) and (2) that is
held directly or in which an individual has an indirect, beneficial, or
economic interest through an investment fund; trust that is not a blind trust;
employee benefit plan; or a deferred compensation plan, including a carried
interest or other agreement tied to the performance of an investment, other
than a fixed cash payment.

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"Covered investment" does not
include a diversified mutual fund, including any holdings of a diversified
mutual fund; a diversified exchange-traded fund, including any holdings of a
diversified exchange-traded fund; a United States Treasury bill, note, or bond;
compensation from the primary occupation of a spouse or dependent child of an official
of the legislature; or any investment fund held in a federal, state, or county
government employee retirement plan.

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"Current" means an official who
is in service before July 1, 2026.

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"Dependent child" means a person
who is younger than the age of nineteen and is a dependent, pursuant to section
152 of the Internal Revenue Code of 1986, as amended, of the official of the
legislature.

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"Diversified" means a fund,
trust, or plan that does not have a stated policy of concentrating its
investments in any industry, business, single country other than the United
Staes, or bonds of a single state.

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"Future" means:

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(1)
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A
contract of sale for future delivery of a single security or of a narrow-based
security index, including any interest therein or based on the value of
thereof; and

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(2)
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Any
other contract for the sale of a commodity for future delivery.

"Future"
does not include any agreement, contract, or transaction excluded from 7 U.S.C.
1 et seq. sections 2(c), 2(d), 2(f), or 2(g).

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"Initial property" means an asset
or financial interest transferred to a blind trust by, or on behalf of, an
interested party or a relative of an interested party, regardless of whether
the asset or financial interest is transferred to the blind trust on or after
the date of establishment of the blind trust.

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"Interested party" means a
reporting individual, the individual's spouse, and any minor dependent child.

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"New" means a person who is not a
current official but begins service as an official after July 1, 2026.

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"Official" means the governor,
lieutenant governor, officials of the legislature, and directors of the state
departments and their deputies, regardless of the titles by which the foregoing
persons are designated; provided that with respect to the department of the
attorney general, the foregoing shall apply only to the attorney general and
the first deputy attorney general.

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"Security" means any note; stock;
treasury stock; security future; security-based swap, bond, debenture,
certificate of interest or participation in any profit-sharing agreement or in
any oil, gas, or other mineral royalty or lease; any collateral-trust
certificate; preorganization certificate or subscription; transferable share;
investment contract; voting-trust certificate; certificate of deposit for a
security; any put, call, straddle, option or privilege on any security,
certificate of deposit, or group or index of securities, including any interest
therein or based on the value thereof; any put, call, straddle, option, or
privilege entered into a national securities exchange relating to foreign
currency, or in general, any instrument commonly known as a security; or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, or warrant or right to subscribe to or purchase, any of the
foregoing.
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"Security" does not
include currency or any note, draft, bill of exchange, or banker's acceptance
that has a maturity at the time of issuance not more than nine months,
exclusive of days of grace, or any renewal thereof the maturity of which is
likewise limited.

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�84-B Placement of certain
assets in blind trusts; required; current officials; extensions.
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(a)
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Beginning August 1, 2026, each current official shall submit to the
commission a certification that:

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(1)
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The
official or spouse or dependent child of the official shall:

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(A)
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Divest
each covered investment owned by the official or any spouse or dependent child
of the official; or

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(B)
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Place
each covered investment owned by the official or any spouse or dependent child
of the official in a blind trust, including by the establishment of a blind
trust if necessary; and

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(2)
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Neither
the official nor any spouse or dependent child of the official owns a covered
investment;

provided
that an investment that achieves compliance with applicable environmental,
social, and governance criteria shall not be considered to be a covered
investment solely because of that compliance.

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(b)
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Beginning
October 1, 2026, each current official shall divest or place in a blind trust
each covered investment owned by the official or a spouse or dependent child of
the official; provided that the official or spouse or dependent child of the official
shall only be required to divest a covered investment if:

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(1)
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The
official or spouse or dependent child of the official is unable to place the
covered investment in a blind trust before July 1, 2027; and

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(2)
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The
official or spouse or dependent child of the official fails to obtain an
extension pursuant to subsection (c).

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(c)
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If
a current official or spouse or dependent child of the official is unable to
place a covered investment in a blind trust before October 1, 2026, the official
or spouse or dependent child of the official may request an extension from the
commission.
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The commission may grant one
or more extensions to the official or spouse or dependent child of the official;
provided that:

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(1)
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The
total period of time covered by all extensions granted to the official for the
covered investment shall not exceed one hundred eighty days; and

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(2)
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The
period covered by a single extension shall not exceed forty-five days.

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�84-C New officials; covered
interests; placement in blind trust; required; extensions.

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(a)
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A new official shall submit to the commission within thirty days of the
date that the person becomes an official of the legislature a certification
that:

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(1)
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The
new official or any spouse or dependent child of the official shall:

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(A)
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Divest
each covered investment owned by the official or any spouse or dependent child
of the official; or

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(B)
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Place
each covered investment owned by the official or any spouse or dependent child
of the official in a blind trust, including by the establishment of a blind
trust if necessary; and

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(2)
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Neither
the official nor any spouse or dependent child of the official owns a covered
investment.

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(b)
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A new official shall divest or place in a blind trust each covered
investment owned by the official or a spouse or dependent child of the official
within one hundred twenty days of the date that the person becomes an official;
provided that the current official or spouse or dependent child of the official
shall only be required to divest a covered investment if:

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(1)
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The
official or spouse or dependent child of the official is unable to place the
covered investment in a blind trust within the period described in subsection (b);
and

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(2)
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The
official or spouse or dependent child of the official fails to obtain an
extension pursuant to subsection (c).

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(c)
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If
a new official or spouse or dependent child of the official who is unable to
place a covered investment in a blind trust within the period described in
subsection (b), the official or spouse or dependent child of the official may
request an extension from the commission.
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The commission may grant one or more extensions to the official or
spouse or dependent child of the official; provided that:

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(1)
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The
total period of time covered by all extensions granted to the official for the
covered investment shall not exceed one hundred eighty days; and

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(2)
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The
period covered by a single extension shall not exceed forty-five days.

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�84-D Acquisitions
of covered interests during service; prohibited.
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No official or any spouse or
dependent child of the official shall acquire a covered investment during the official's
term in office.

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�84‑E Inheritance of
covered interest; placement in blind trust; required; extensions.
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(a)
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An official or any spouse or dependent child
of the official who inherits a covered investment shall divest or place the
covered investment in a blind trust within one hundred twenty days from the
date that the covered investment is inherited.

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(b)
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If an official or a spouse or dependent child
of the official is unable to place a covered investment in a blind trust within
the period described in subsection (a), the official may request an extension
from the commission.
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The commission may
grant one or more extensions to an official; provided that:

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(1)
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The
total period of time covered by all extensions granted to the official for the
covered investment shall not exceed one hundred eighty days; and

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(2)
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The
period covered by a single extension shall not exceed forty-five days.

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�84-F
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Mingling of assets.
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Any spouse or dependent child of an official
may place a covered investment in a blind trust established by the official.

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�84-G
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Separation from service; cooling-off period; required.
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During the period beginning on the date on
which a person becomes an official and ending on the date that is one hundred
eighty days after the date on which the person ceases to serve as an official
the official, and any spouse or dependent child of the official shall not:

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(1)
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Dissolve
any blind trust in which a covered investment has been placed pursuant to
sections 84-B, 84-C, 84-E, and 84-F.

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(2)
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Except
as provided in this part, control a covered investment.

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�84-H
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Public reports; transparency.
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The commission shall make available to the public on its website:

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(1)
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A
copy of:

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(A)
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Each
certification submitted to the ethics commission under sections 84-B(a) or 84-C(a);

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(B)
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Each
blind trust agreement of each official;

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(C)
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Each
notice and other documentation submitted to the commission under sections 84-I
and 84-J; and

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(D)
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Each
notice, rule, and other documentation issued by the commission under sections 84-I
and 84-J;

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(2)
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A
schedule of all assets placed in a blind trust by each official and interested
party; and

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(3)
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A
description of each extension granted and each penalty imposed by the
commission pursuant to this part.

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�84-I
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Blind trusts; trustees; officials; requirements.
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(a)
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Each
trustee of a blind trust established by an official shall submit to the official
and the commission a written notice when the trustee:

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(1)
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Learns
that:

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(A)
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An
interested party has obtained knowledge of any trust property other than the
initial property of the blind trust; or

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(B)
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The
value of the initial property of the blind trust is less than
$ ; or

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(2)
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Divests
any initial property of the blind trust.

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(b)
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Each
official who is a beneficiary of a blind trust shall submit to the commission:

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(1)
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A
copy of the executed blind trust agreement no later than thirty days from the
date of the execution;

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(2)
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A
list of each asset and each financial interest transferred to the blind trust
by an interested party no later than thirty days from the date of the transfer;

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(3)
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A
copy of each notice submitted to the official under subsection (a) no later
than thirty days from the date of its receipt;

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(4)
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A
written notice that an interested party has obtained knowledge of any holding
of the blind trust no later than thirty days from the date on which the official
discovered that the knowledge had been obtained; and

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(5)
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A
written notice of dissolution of the blind trust no later than thirty days from
the date of its dissolution.

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�84-J
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Enforcement; penalties.
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(a)
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The commission shall provide
written notice, including for the potential of civil penalties under subsection
(b), to an official who fails to:

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(1)
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Submit
a certification to the commission pursuant to sections 84-B(a) and 84-C(a) by
the required deadline; or

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(2)
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Place
one or more covered interest owned by the official or any spouse or dependent
child of the official in a blind trust by the required deadline.

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(b)
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The commission shall impose a fine of
$ on the official
to whom a notice is provided under subsection (a) every thirty days from the
date that the commission provided the notice.

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�84-K
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Rules.
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The commission shall
adopt rules pursuant to chapter 91 to carry out the purposes of this part."

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SECTION 2.
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In codifying the new sections added by section 1 of this Act, the
revisor of statutes shall substitute appropriate section numbers for the
letters used in designating the new sections in this Act.

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SECTION 3.
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This Act shall take effect on July 1, 2026.

INTRODUCED BY:

_____________________________

Report Title:

State
Ethics Commission; Governor; Lieutenant Governor; Hawaii State Legislature; Executive
Agencies; Securities; Trading; Acquisition; Ownership; Prohibited; Penalties;
Fines

Description:

Requires a
Governor, Lieutenant Governor, member of the Legislature, department heads and
their deputies, and any spouse or dependent child of a Governor, Lieutenant
Governor, member of the Legislature, or department head and their deputies to
place certain financial interests in a blind trust.
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Prohibits a Governor, Lieutenant Governor,
member of the Legislature, department head and their deputies, and any spouse
or dependent child of a Governor, Lieutenant Governor, member of the
Legislature, or department head and their deputies from acquiring certain
financial interests during their term of service.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.