Federal Old-Age, Survivors, and Disability Insurance and Supplemental Security Income for the Aged, Blind, and Disabled; Standards of Conduct for Claimant Representatives

Federal RegisterJan 3, 1997

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SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

[Regulations Nos. 4 and 16]

RIN 0960-AD73

Federal Old-Age, Survivors, and Disability Insurance and

Supplemental Security Income for the Aged, Blind, and Disabled;

Standards of Conduct for Claimant Representatives

AGENCY: Social Security Administration.

ACTION: Proposed rules.

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SUMMARY: These proposed rules would revise our regulations governing

representation of claimants seeking Social Security or supplemental

security income (SSI) benefits under title II or XVI of the Social

Security Act (the Act). They would establish standards of conduct and

responsibility for persons serving as representatives and further

define our expectations regarding their obligations to those they

represent and to us. They would include statutorily and

administratively imposed requirements and prohibitions.

DATES: To be sure that your comments are considered, we must receive

them no later than March 4, 1997.

ADDRESSES: Comments should be submitted in writing to the Commissioner

of Social Security, P.O. Box 1585, Baltimore, MD 21235, sent by telefax

to (410) 966-2830, sent by E-mail to ``[email protected]'', or

delivered to the Division of Regulations and Rulings, Social Security

Administration, 3-B-1 Operations Building, 6401 Security Boulevard,

Baltimore, MD 21235, between 8:00 a.m. and 4:30 p.m. on regular

business days. Comments received may be inspected during these hours by

making arrangements with the contact person shown below.

FOR FURTHER INFORMATION CONTACT: Richard M. Bresnick, Legal Assistant,

Division of Regulations and Rulings, Social Security Administration,

6401 Security Boulevard, Baltimore, MD 21235, (410) 965-1758.

SUPPLEMENTARY INFORMATION

Purpose and Scope

Existing regulations governing representatives' conduct

(Secs. 404.1740, et seq. and 416.1540, et seq.) under titles II and XVI

primarily reiterate various statutory provisions set forth in the Act.

Sections 404.1745 and 416.1545 also provide that a representative may

be suspended or disqualified if he or she has violated those rules,

been convicted of a violation of section 206 of the Act or ``otherwise

refused to comply with our rules and regulations on representing

claimants in dealings with us.'' This is consistent with section

206(a)(1) of the Act, which provides that the Commissioner of Social

Security (the Commissioner) may ``suspend or prohibit from further

practice before him any such person, agent, or attorney who refuses to

comply with the Commissioner's rules and regulations * * *.'' Since

their inception, the regulations have reflected the Commissioner's

(formerly the Secretary of Health and Human Services' (the

Secretary's)) broad authority over matters involving representatives'

activities in their dealings with us.

These proposed rules specifically provide enforceable standards

governing aspects of practice, performance and conduct for all persons

who act as claimants' representatives. The proposed rules also

recognize potential changes in the procedures used by the

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Social Security Administration (SSA) to process claims, the increased

participation of compensated representatives in the adjudicative

process, the special circumstances presented by SSA's nonadversarial

hearings, and statutory amendments, such as the anti-fraud provisions

of the Social Security Independence and Program Improvements Act of

1994, Public Law (Pub. L.) 103-296. The existing regulations pertaining

to representatives' conduct have been largely unchanged since their

promulgation in 1980, and do not adequately address actual and

potential problems resulting from the participation of representatives

in the claims process.

Although we realize that most representatives do a conscientious

job in assisting their clients, our experience has convinced us that

there are sufficient instances of questionable conduct to warrant

promulgation of additional regulatory authority. The existing

regulations do not address a representative's willful or negligent

delay, refusal to cooperate, failure to adequately prepare and present

the claimant's case and other deficiencies. The proposed rules correct

these omissions and are necessary to protect the claimant and the

process from those individuals who are incapable of providing, or

unwilling to provide, meaningful assistance in expeditiously resolving

pending claims.

Although there are disparities in the levels of skill, experience,

education and professional status among those who serve as

representatives, we believe all such individuals must be bound by the

same set of rules. In determining appropriate standards, we considered

the requirements and intent of the Act and its implementing

regulations, administrative law principles applicable to adjudication

and the American Bar Association's (ABA) Model Rules of Professional

Conduct and Model Code of Professional Responsibility.

There are comparable rules in part 410, subpart F (Secs. 410.684,

et seq.) governing representative conduct under the Black Lung benefits

program. We are not revising those rules, however. Executive Order

12866, Regulatory Planning and Review, issued by the President on

October 4, 1993 (58 FR 51735), provides that ``Federal agencies should

promulgate only such regulations as are required by law, are necessary

to interpret the law, or are made necessary by compelling public need *

* *.'' Because we have found no problems with representative conduct in

claims involving Black Lung benefits comparable to those that have led

to these proposed rules for titles II and XVI, there is no compelling

need to revise the Black Lung rules.

We expect that the proposed rules will further clarify our

expectations regarding the obligations of representatives to provide

competent representation of their clients, in accordance with

procedural and evidentiary requirements of the claims process.

Moreover, the proposed regulations, when published, will constitute

official notice concerning our requirements and prohibitions.

To address the concerns of claimants and others with a stake or

interest in the issue of claimant representation in drafting the

proposed rules, we obtained information from various sources. We

conducted focus groups with claimants and beneficiaries as part of our

disability process redesign initiative. We also used information

gathered in investigating nearly 600 complaints of representative

misconduct made by claimants from 1988 to date.

Communication With Claimants

Participants in the public dialogue conducted in conjunction with

our disability process redesign initiative frequently complained about

the lack of timely or effective assistance on the part of claimants'

representatives. They felt that some representatives delayed submitting

evidence until the case reached the hearing level in order to increase

the amount of past-due benefits and thereby increase the amount of

their fees. Others did not believe that all representatives provided

adequate assistance in the preparation or presentation of the case. In

the latter category, there were recurring complaints that the claimant

did not see or have any contact with the representative until shortly

before the hearing when the representative, allegedly for the first

time, would review the file. These claimants did not believe that the

representative was adequately prepared to present their case, or had

provided any assistance in ensuring that the record was complete. Some

individuals complained that their representatives' failure to obtain

medical documentation for inclusion in the record, despite being

informed that the evidence was available and material, forced them

personally to obtain the required documentation. The dissatisfaction

with the quality and effectiveness of representatives' services was

strong enough to prompt the Disability Process Redesign Team to include

within its recommendations provisions aimed at correcting shortcomings

in the representatives' performance.

The comments received from focus groups and at public meetings are

consistent with written complaints we receive about representatives who

do not participate or cooperate in the processing of claims. We have

seen instances where a representative demands that all communications

with the claimant be made through his or her office and refuses, at

lower levels of adjudication, to produce available medical evidence or

make his or her client available for a consultative examination. Some

representatives, as a matter of practice, do not submit available

evidence until the day of the hearing even though in some cases the

matter might have been favorably decided some time before on the basis

of new medical reports. In addition to delaying payment unnecessarily

in some cases, this practice can further delay disposition of a claim

when the administrative law judge or expert witnesses do not have an

opportunity to review and consider the new evidence prior to the

hearing.

Consultation With the Representative Community

In February 1995 we requested comments on a draft proposal from 33

separate groups and organizations comprising the attorney and non-

attorney representative community. These groups included professional

organizations, interest groups, think tanks, the Legal Services

Corporation, and various private representative organizations.

We received 92 individual responses. Many were supportive,

especially regarding the need to provide standards for non-attorney

representatives. Many, however, were opposed to more regulation of

their professional conduct. We carefully considered all of the

individual views and concerns in formulating these proposed rules. A

summary of the major views and concerns and our responses follows.

1. A common complaint was that the proposed standards used terms

that were too vague and ambiguous, such as ``timely,'' ``diligence,''

``as soon as possible'' and ``matters at issue.'' To be responsive to

these concerns and further clarify our requirements, we have modified

the language that was most often identified as ambiguous.

For example, the earlier language in what are now proposed

Secs. 404.1740(b)(1) and (2) and 416.1540(b)(1) and (2) called for

representatives to diligently develop the record and submit evidence as

soon as possible. In these proposed rules, we ask representatives to

submit evidence ``as soon as practicable, but no later than

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the due date designated by the Agency, except for good cause shown.''

We believe this standard is more specific, and gives representatives

some discretion in the submission of information and evidence. Also, in

place of the phrase ``matters at issue'' in what are now proposed

Secs. 404.1740(b)(2)(ii) and 416.1540(b)(2)(ii), we say ``pertaining to

specifically identified issues.'' In proposed Secs. 404.1740(b)(3)(i)

and 416.1540(b)(3)(i), we narrowed the ``matters at issue'' to those

matters ``establishing entitlement or eligibility to the claimed right

or benefit.''

Some individuals found the entire substance of the proposed

standards to be ambiguous, although one believed they were drawn too

narrowly and should be expanded. Several argued that the proposals did

not provide adequate notice to representatives of the exact types of

conduct we would find to violate these regulations.

It is our position that the proposed rules define with specificity

the types of conduct subject to regulation. Similar to other codes of

conduct (e.g., the ABA Model Rules), the proposed regulations do not

list every act or omission which might constitute a violation. Such a

listing would be virtually impossible given the limitless factual

situations involved in claims processing. Rather, we intend to deal

with each complaint on a case-by-case basis to determine whether under

the attending circumstances, a representative engaged in actionable

misconduct. In making this determination we will apply an objective

test, that is, whether a reasonable person, in light of all the

circumstances, would consider the act or omission violative of the rule

in question.

This has been our practice in the past. In all but the most

egregious instances of potential misconduct, we give representatives

notice of the alleged wrongdoing and an opportunity to respond before

formal charges are ever proposed. Once it is determined that a formal

complaint is warranted, the Deputy Commissioner for Programs, Policy,

Evaluation and Communications (or other official the Commissioner may

designate) reviews the proposal independently from the investigative

component and makes a decision whether to file a complaint.

We believe that the internal checks and balances within our

operating procedures provide adequate safeguards against abuse of

discretion or arbitrary action. Even after a complaint is served, a

representative is entitled to file an answer and petition for

withdrawal of the complaint. Thereafter, the accused party has a right

to a full evidentiary hearing, and a right to request review of the

resulting decision. In view of these elaborate safeguards, administered

at each step by independent decision makers, it is unlikely that an

honest mistake or a reasonable misunderstanding on the part of a

representative would result in sanctions.

2. A majority of responding attorneys complained that, since their

conduct already is governed by their individual State bar codes of

conduct and ethical rules, a separate SSA code of conduct is redundant.

Several individuals expressed the opinion that SSA simply can refer an

attorney to his or her State bar disciplinary authority when we suspect

misconduct. Another recognized that State bar rules are not applicable

to representatives who are not attorneys, but opined that there are not

enough non-attorney representatives to warrant standards of conduct for

non-attorneys.

Bar rules differ in language and format among the 50 States, the

District of Columbia and the U.S. territories. As the administrator of

a national program, however, SSA should not be expected or required to

apply local rules, or local interpretations of the rules, to problems

which extend beyond the boundaries of local jurisdictions. Furthermore,

if we applied local rules or local interpretations rather than a

national standard, it is conceivable that attorneys in one area could

be subject to discipline for conduct that another jurisdiction would

not find actionable. We do not believe it benefits the attorneys, the

claimants or SSA to have this type of inconsistency in effecting the

Commissioner's statutory obligation to regulate the conduct of

representatives.

Moreover, attorneys often represent claimants in jurisdictions

other than those in which they are licensed to practice law. In those

instances, it would be unclear which jurisdiction's rules would apply,

which could lead to inconsistent application of the rules among

attorneys practicing in the same geographical area.

Also, under existing laws, referral of suspected attorney

misconduct to a State bar disciplinary authority could possibly

constitute a violation of the provisions of section 1106 of the Act

and, under certain circumstances, the Privacy Act (5 U.S.C. 552a) on

maintaining the confidentiality of personal information that we

maintain in our files.

A major concern is the fact that currently there is no external

authority enforcing standards or rules of conduct for representatives

who are not attorneys. Contrary to one individual's opinion, individual

non-attorney representatives and representative organizations represent

a substantial number of claimants. Within the last 7 years, suspension/

disqualification actions against non-attorneys comprised approximately

36 percent of SSA's representative disciplinary actions. Therefore, it

is essential to provide rules that will govern the conduct of non-

attorneys who practice before us. Moreover, it is only fair and

equitable to hold all representatives who practice before us to the

same standards.

3. A majority of responding individuals objected to the earlier

wording of what now are proposed Secs. 404.1740(b)(1) and

416.1540(b)(1), which required representatives to ``[e]xercise

diligence in developing the record on behalf of his or her client by

obtaining and submitting, as soon as possible, all information and

evidence intended for inclusion in the record.''

They argued that SSA was attempting to improperly delegate to

claimants and representatives its own duty to develop the record, which

could place representatives at the mercy of arbitrary or unreasonable

SSA requests for information. They also pointed out that the original

language did not allow for discretion in situations involving

uncooperative treating physicians and uncooperative or uneducated

claimants.

The claimant has a right to receive benefits under the Act only

after establishing that he or she satisfies the underlying statutory

and regulatory requirements.

Historically, SSA has assisted claimants in gathering evidence and

perfecting the claim. Current workloads and revised processing

procedures will require, however, that the claimant take a more active

role in establishing entitlement or eligibility. The representative, as

the designated agent of the claimant, will be called upon to respond to

our requests just as an unrepresented claimant will be required to

cooperate.

Our intention is for the representative to ensure that the

claimant's evidence is available for inclusion in the record when the

claim is ready for adjudication, unless there is a valid reason for the

delay. This is consistent with the ABA Model Rules, which state at Rule

3.2--Expediting Litigation, that ``[a] lawyer shall make reasonable

efforts to expedite litigation consistent with the interests of the

client.'' The comment accompanying the rule states that ``[d]elay

should not be indulged merely for the convenience of the advocates,''

and ``[r]ealizing financial or other

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benefit from otherwise improper delay in litigation is not a legitimate

interest of the client.''

It is in the best interests of the claimant to have full

adjudication of the claim as early in the adjudicative process as

possible. Although there will be instances when evidence is not readily

available despite reasonable effort, we believe that in most cases the

information can be secured timely.

In our experience, some representatives do not submit evidence

promptly and fail to cooperate with our attempts to obtain necessary

information and evidence. Under our current rules at Secs. 404.1715(a)

and 416.1515(a), we are required to send the representative requests

for information and evidence. Since we may not contact a represented

claimant directly, the claimant often does not even know the claim is

being delayed by the representative. Although this practice is not

pervasive, when it does occur we are required to engage in unwarranted

and time-consuming efforts to develop the evidence. More importantly,

however, the claimant is harmed by delay in the disposition of the

claim.

We do not believe that our proposed rules unduly burden claimants

or representatives. The duties in question only require a good faith

effort to assist the claimant in timely submission of material

information and evidence that the claimant wants included in the

record.

Many individuals complained that compliance with what are now

proposed Secs. 404.1740(b)(2) and 416.1540(b)(2), which originally

asked representatives to ``[p]romptly comply, at every stage of the

administrative review process, with our requests for information and

evidence,'' might place them in violation of their own State bar rules

requiring zealous advocacy and protection of confidential client

information.

We recognize that State bar rules vary in their interpretation of

an attorney's duty to maintain the confidences and secrets of the

client. We believe that our proposed rules, as we have modified them in

response to individual representatives' concerns, will permit an

attorney to satisfy our requirements without risking unauthorized

disclosures of information.

Under the ABA Model Rules, an attorney may reveal information that

is ``impliedly authorized in order to carry out the representation.''

Moreover, Rule 1.6a provides that the attorney is not barred from

making disclosures if ``the client consents after consultation.'' We

believe that an attorney can act in accordance with State bar rules by

informing the client that SSA requires certain information and evidence

from claimants, and that as the claimant's representative, the attorney

must either comply with these requests or tell SSA that the claimant

declines to furnish the data. Taking these rules into consideration, we

have modified proposed Secs. 404.1740(b)(2) and 416.1540(b)(2) to

permit representatives to protect a client's confidentiality by

notifying SSA that ``the claimant does not consent to release of some

or all of the [requested] material.''

We do not believe, however, that deliberate and purposeful

withholding from us of information or evidence is justifiable under the

various State bar rules. In fact, such actions may be illegal and

subject to severe penalty. Section 206 of Public Law 103-296 adds a new

section 1129 to the Social Security Act, providing that: ``Any person *

* * who makes, or causes to be made, a statement or representation of a

material fact for use in determining [the right to benefits under title

II or title XVI] that the person knows or should know is false or

misleading or knows or should know omits a material fact * * * shall be

subject to, in addition to any other penalties that may be prescribed

by law, a civil money penalty of not more than $5,000 * * * .'' A

material fact is defined as ``one which the Commissioner of Social

Security may consider in evaluating whether an applicant is entitled to

benefits * * * .'' (See sections 1129(a) (1) and (2) of the Act.)

Further, section 205(u)(1)(A) of the Act, as added by section

206(d) of Public Law 103-296, provides that the Commissioner ``shall

immediately redetermine the entitlement of individuals to monthly

insurance benefits under * * * [title II] if there is reason to believe

that fraud or similar fault was involved in the application of the

individual for such benefits * * * .'' Section 1631(e)(6)(A)(i) of the

Act, which also was added by section 206(d) of Public Law 103-296, is a

comparable provision covering eligibility for title XVI benefits.

Similar fault is defined in sections 205(u)(2) and 1631(e)(6)(B) of the

Act as knowingly making ``an incorrect or incomplete statement that is

material to the determination'' or knowingly concealing ``information

that is material to the determination.'' Moreover, section 205(a) of

the Act provides that the Commissioner shall adopt ``reasonable and

proper rules and regulations to regulate and provide for the nature and

extent of the proofs and evidence and the method of taking and

furnishing the same in order to establish the right to benefits

hereunder.'' This section is made applicable to the title XVI program

by section 1631(d)(1) of the Act.

In our view, the provisions of proposed Secs. 404.1740(b)(2) and

416.1540(b)(2) require the representative to comply with our requests

made under statutory authority for full and accurate disclosure of

material facts to the same extent that the claimant is required to do

so. In assessing any allegation raised against a representative

regarding failure to comply with our request for information, we will

consider the reasonableness of the request, the relevance of the

information requested, and any factors that may interfere with the

procurement of requested information.

4. A few individuals questioned the need for any rules or standards

of conduct, expressing their opinion that representatives rarely engage

in misconduct sufficient to warrant formalized investigative and

disciplinary procedures. Several speculated that only representatives

who were not attorneys engaged in misconduct warranting SSA attention.

From August 1988 through August 1995, the Office of Hearings and

Appeals received approximately 566 referrals of representative

misconduct. Some of these referrals complained of questionable conduct

which warranted corrective action, but which was not covered by any

existing regulatory authority. Of the remaining referrals, we were able

to close many without formal disciplinary action. In approximately 160

claims, we closed the disciplinary referral upon the representative's

refund to a claimant or to SSA of monies collected without

authorization or as a result of Agency overpayments to representatives.

As of August 15, 1995, we have collected from these representatives a

total of $279,411.98, returning $176,096 of this amount to the

claimants who had been overcharged, and the remainder to SSA.

We also have filed approximately 136 formal complaints against

representatives. We were able to resolve many complaints before a

formal hearing. The remainder, however, have resulted in the suspension

or disqualification of 57 representatives. Approximately 64 percent of

the suspended or disqualified representatives were attorneys.

We believe these general statistics provide ample evidence of the

need to continue our investigative and disciplinary role. We expect the

proposed rules and standards to provide the representative community

with improved notice of the conduct we view as inappropriate, and

supply SSA with

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the tools to address representatives' conduct that falls below our

published standards.

5. Several individuals were confused about the addition of the word

``retain'' in what are now proposed Secs. 404.1740(c)(2) and

416.1540(c)(2), which state that a representative shall not

``[k]nowingly charge, collect or retain * * * any fee for

representational services in violation of applicable law or

regulation.'' They questioned whether this was a change in SSA's policy

permitting representatives to collect money toward payment of their

fees before any fee is authorized, as long as the collection is placed

in a trust or escrow account.

This is not a policy change. Social Security Ruling (SSR) 82-39

still permits representatives to solicit from claimants a deposit of

money into a trust or escrow account as a means of assuring payment of

the fees for services in connection with such representation, as long

as the claimant willingly enters into the trust or escrow agreement and

willingly deposits the money in the trust or escrow account; none of

the money in the account is paid over to the representative unless and

until SSA authorizes a fee, and then only in an amount up to, but not

exceeding, the authorized fee; and any funds in the account in excess

of the authorized fee are refunded promptly to the claimant.

We have added the word ``retain'' to cover those situations in

which the representative has charged or collected a fee and has

improperly retained the fee despite a claimant's or SSA's request for

refund. If a representative places the money charged and collected from

a claimant into a trust or escrow account, and complies with the

conditions set forth in SSR 82-39, we will not consider that money to

be an improperly retained fee.

6. A few individuals were concerned with what are now proposed

Secs. 404.1740(c)(3) and 416.1540(c)(3), which prohibit representatives

from knowingly making or participating in the making or presentation of

false oral or written statements, assertions or representations about a

material fact concerning a matter within our jurisdiction. They

suggested that it required them to be a guarantor of a claimant's

testimony, or to impeach their own client if they suspected that the

client was presenting false evidence or testimony.

This prohibition applies only to knowing presentations of false

statements. There already exist both criminal and civil penalties for

knowingly making or participating in the making of false

representations to a claimant or to SSA. (See 18 U.S.C. 1001 and

sections 208 and 1129 of the Act.) By incorporating this prohibition in

our rules of conduct, we place representatives on notice that, in

addition to the criminal and civil sanctions possible for this

misconduct, the making or presentation of such false statements also

may lead to their suspension or disqualification from representing

claimants in matters before us.

We do not place an affirmative duty on representatives to impeach

their clients or guarantee a client's honesty. Nonetheless, we do

expect representatives who practice before us not to knowingly prompt,

encourage or engage in false or misleading representations about

material facts in connection with the representation of a claimant.

7. Several individuals expressed concern about what are now

proposed Secs. 404.1740(c)(4) and 416.1540(c)(4), which prohibit

willfully or negligently delaying, or causing to be delayed, the

processing of a claim. They suggested that it was overly broad, and

could be interpreted to prohibit even such reasonable delays as

scheduling conflicts, illness, family emergency and claimants'

continuing treatment.

Black's Law Dictionary defines an act or omission as willfully done

``if done voluntarily and intentionally and with the specific intent to

do something the law forbids, or with the specific intent to fail to do

something the law requires to be done.'' It includes actions engaged in

with a bad motive or purpose, with indifference to the natural

consequences, or without justifiable excuse. A negligent action

involves the failure to exhibit the conduct or care a reasonable person

would exhibit under similar circumstances. It is characterized chiefly

by inadvertence, thoughtlessness and inattention.

Under our proposed standard prohibiting willful or negligent delay,

SSA does not intend to penalize reasonable or justifiable delays, or

delays that may occur even when reasonable care is taken in claim

preparation. In determining whether a representative has violated this

rule we will look to the gravity of the act or omission, the

consequences for the claimant, whether the behavior reflects a pattern

or practice, and other factual circumstances particular to the matter.

8. The draft proposal had language prohibiting representatives from

engaging in disruptive, defiant or confrontational behavior or repeated

challenges to the presiding official's authority, which clearly exceed

the bounds of zealous advocacy. Many individuals found this provision

to be vague and an interference with their duty to provide zealous

advocacy.

In response to these concerns, we modified the language in proposed

Secs. 404.1740(c)(7)(ii) and 416.1540(c)(7)(ii) to prohibit ``[w]illful

behavior which has the effect of improperly disrupting proceedings or

obstructing the adjudicative process.'' We envision actionable conduct

under this provision to include grossly undignified or discourteous

behavior and inflammatory language directed at the presiding official

which prejudice the orderly presentation and reception of evidence.

This rule is not intended to inhibit zealous advocacy or vigorous

dissent, but to prevent conduct or language which significantly exceeds

the bounds of civility, and disrupts a proceeding. In determining

whether a representative has violated this provision, we will look at

the totality of the circumstances, including the egregiousness of the

conduct, its impact on the claimant or the Agency, possible provocation

and whether the behavior reflects a pattern or practice.

9. The draft proposal included a prohibition against soliciting or

accepting from SSA direct payment of fees from past-due benefits, in

violation of law or regulation, for services performed by a person

other than an attorney. Many individuals misunderstood the intent of

this provision, believing that it meant either that non-attorney

representatives could not be paid for their representational services,

or that attorneys could not receive direct payment from SSA for persons

other than attorneys who provided representational services under their

direct supervision.

Because of the confusion involving this provision, and the fact

that SSA currently is considering separate regulations to address

direct payment of fees in more detail, this provision is not included

in these proposed rules.

10. The draft proposal contained a prohibition against making off-

the-record communications relevant to the merits of an adjudication to

anyone involved in the administrative review process. Many individuals

found this provision to be vague and undefined. They were concerned

that it prohibited communications to SSA in claims that had extenuating

circumstances, such as claimants who were terminally ill or suicidal.

In their opinion, it would unduly formalize nonadversarial proceedings,

would foster inefficiency by requiring increased documentation of SSA

contacts, and would be in conflict

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with SSA's goal of expediting claims processing.

We agreed that the provision was confusing and possibly

counterproductive, so it is not included in these proposed rules.

11. The draft proposal also contained a prohibition against

engaging in dilatory tactics or neglectful actions which are

prejudicial to the fair or orderly conduct of oral proceedings. Some

individuals pointed out that it was vague and duplicated an existing

provision. We agreed, and this provision is not included in these

proposed rules.

Explanation of Revisions

These proposed regulations would revise Secs. 404.1740, 404.1745,

404.1750, 404.1765, 404.1770, 404.1799, 416.1540, 416.1545, 416.1550,

416.1565, and 416.1599.

Proposed Secs. 404.1740(b) and 416.1540(b) describe affirmative

duties, which are certain obligations that a representative must

actively perform in his or her representation of claimants in matters

before us. We expect these affirmative duties to promote efficiency and

timeliness in assisting the claimant to meet the burden of proving

eligibility for benefits.

Proposed Secs. 404.1740(b)(1) and 416.1540(b)(1) require the

representative to exercise diligence in obtaining and submitting that

evidence which the claimant wants the decision maker to consider in

ruling on a claim.

Proposed Secs. 404.1740(b)(2)(i) and 416.1540(b)(2)(i) require that

the representative provide, upon request, information regarding the

claimant's medical treatment, vocational factors or other specifically

identified matters, or provide notification that the claimant does not

consent to release the information.

Proposed Secs. 404.1740(b)(2)(ii) and 416.1540(b)(2)(ii) require

that the representative provide, upon request, evidence material to

identified issues which the representative or claimant already has or

may readily obtain. This rule requires furnishing evidence already in

the possession of the representative or claimant, or obtaining copies

of existing evidence not already of record. The provision also mandates

that the representative and claimant furnish all the pertinent evidence

requested, even if it is ostensibly unfavorable to the claimant, or

provide notification by the representative that the claimant does not

consent to its release.

Proposed Secs. 404.1740(b)(3) and 416.1540(b)(3) are intended to

establish minimum requirements governing the competency and behavior of

representatives in their dealings with us. They seek to ensure that the

representative does not become a hindrance, either through ignorance or

willful obstruction, in our attempts to provide a fair and expeditious

disposition of the claim for benefits.

We have weighed the possibility of testing or other formal

certification procedures for non-attorney representatives, but rejected

the idea as infeasible at this time. Nonetheless, in order to identify

those persons who do not possess the requisite qualifications, we are

considering possible revisions to Secs. 404.1705 and 416.1505 to define

in greater detail the minimum requirements to serve as a

representative.

Any individual who provides services as a representative for a fee

shall be expected to demonstrate, in the performance of those services,

sufficient knowledge of the claims process to be of assistance to the

claimant. Ignorance of substantive provisions of law or procedural

requirements shall not be considered a mitigating factor for acts or

omissions which impede or disrupt the efficient and orderly disposition

of a claim.

Proposed Secs. 404.1740(b)(3)(i) and 416.1540(b)(3)(i) essentially

state that the representative must understand what the claimant must

prove in order to qualify for benefits, and know how to obtain and

submit evidence regarding the claim.

Proposed Secs. 404.1740(b)(3)(ii) and 416.1540(b)(3)(ii) require

the representative to promptly answer our requests and communications

pertaining to the pending claim. It is not permissible for the

representative to ignore official communications.

Proposed Secs. 404.1740(b)(3)(iii) and 416.1540(b)(3)(iii) require

cooperation in developing the record, which may typically include

transactions requiring the participation of the claimant, such as

consenting to a treating source's release of medical records,

scheduling consultative examinations and scheduling conferences or

hearing dates.

Proposed Secs. 404.1740(c) and 416.1540(c) describe prohibited

actions, which are certain acts or activities that a representative

must avoid. In part, the prohibited actions incorporate various

statutory provisions set forth in the Act and other legislation.

Proposed Secs. 404.1740(c)(1) and 416.1540(c)(1) are based on the

prohibitions set forth in section 206(a)(5) of the Act and are self-

explanatory. A representative's honest mistake would not be construed

as knowingly misleading a claimant. In determining whether a

representative knowingly misled a claimant, we will consider whether

the action involved matters that the representative should have known

were untrue.

Proposed Secs. 404.1740(c)(2) and 416.1540(c)(2) are based on the

provisions of sections 206 (a) and (b) of the Act and apply to all fee

collections. With regard to section 206(a)(4) of the Act, we will

assume in the absence of evidence to the contrary that work performed

by support staff in a law office is performed under the supervision of

an attorney, thereby permitting the attorney to validly claim direct

payment from past-due benefits for those services in a title II claim.

This assumption will not apply, however, when a person other than an

attorney appears alone at a hearing to provide representation on behalf

of a claimant.

In those cases, the person shall be considered the representative

and will be required to file a fee petition or fee agreement for his or

her services, and will not be entitled to receive direct payment from

past-due benefits for the representation at the hearing.

Proposed Secs. 404.1740(c)(3) and 416.1540(c)(3) are based

generally on the criminal prohibitions in 18 U.S.C. 1001 and the

provisions governing civil monetary penalties and assessments set forth

in section 1129 of the Act and are self-explanatory.

Proposed Secs. 404.1740(c)(4) and 416.1540(c)(4) are directed

against practices where willful or negligent acts or omissions have the

effect of delaying the disposition of a claim for benefits.

Proposed Secs. 404.1740(c)(5) and 416.1540(c)(5) are based on the

provisions of section 1106 of the Act, which prohibit disclosure by any

person of information obtained by the Agency in conjunction with a

claim, except as may be authorized by regulations prescribed by us.

Proposed Secs. 404.1740(c)(6) and 416.1540(c)(6) prohibit a

representative from offering or giving anything of value to persons

involved in the adjudication except as remuneration to a witness for

legitimate expenses or for services rendered. The intent is to prevent

the fact or the appearance of attempting to influence the disposition

of a claim by bestowing gifts or favors on individuals in a position to

materially affect the outcome.

Proposed Secs. 404.1740(c)(7) and 416.1540(c)(7) are directed at

conduct undertaken during the course of oral proceedings which is

disruptive and detrimental to due process and the administration of

justice.

Proposed Secs. 404.1740(c)(7)(i) and 416.1540(c)(7)(i) prohibit

repeated instances of unexcused absences or

[[Page 358]]

tardiness because such conduct adversely affects claimants, diminishes

the ability of the Agency to operate efficiently and harms other

applicants by disrupting hearing schedules and work flow.

Proposed Secs. 404.1740(c)(7)(ii) and 416.1540(c)(7)(ii) address

deliberate acts which have the effect of disrupting the proceedings or

diverting the attention of the participants from the purpose of the

hearing to matters irrelevant to the merits of the case.

Proposed Secs. 404.1740(c)(7)(iii) and 416.1540(c)(7)(iii) are

based in part on the provisions of section 206(a)(5) of the Act, 18

U.S.C. 111 and 28 CFR 64.2(x). They prohibit threatening or

intimidating the participants in an oral proceeding or the employees

assigned to our offices. Actual or implied threats of violence will not

be tolerated.

Proposed Secs. 404.1745 and 416.1545 explain that we may begin

proceedings to suspend or disqualify a person who does not meet our

qualifications for a representative or who violates our rules and

standards governing representatives in their dealings with us.

Proposed Secs. 404.1750 (a) and (d), 404.1765 (a) and (e), 404.1799

titles and organizational changes.

Proposed Secs. 404.1765(g)(3) and 416.1565(g)(3) are being revised

to remove the first word ``not'' from each paragraph. This corrects

errors made when the regulations on representation of parties were

reorganized, renumbered and republished on August 5, 1980 (45 FR

52078). When the original regulation was published as Sec. 404.983(f)

on April 26, 1969 (34 FR 6973, 6974), it provided that ``[i]f the

individual has filed an answer and if the hearing officer believes that

there is relevant and material evidence available which has not been

presented at the hearing, the hearing officer may at any time prior to

the mailing of notice of the decision, or submittal of a recommended

decision, reopen the hearing for the receipt of such evidence.'' This

is consistent with the preceding language in Sec. 404.983(f), which

states that if a representative ``has filed no answer he shall have no

right to present evidence * * * .''

In the 1980 final rule, the former Sec. 404.983(f) was renumbered

as Sec. 404.1765(f), with a parallel SSI provision at Sec. 416.1565(f).

Paragraph (f)(2) addressed representatives who do not answer charges

and paragraph (f)(3) addressed those who do. Paragraph (f)(3) (45 FR

52078, 52093, 52108) contained a misprint, however, which read, ``If

the representative did not file an answer to the charges * * * .''

Thus, paragraphs (f)(2) and (f)(3) were inconsistent and conflicting.

Subsequently, in 1991, paragraph (f) of Secs. 404.1765 and 416.1565 was

redesignated as paragraph (g) (56 FR 24129, 24131, 24132).

The 1980 misprint substantively changed the meaning of current

paragraph (g)(3). As specifically explained in the preamble to those

rules, however, SSA never intended to make any substantive changes in

those regulations. The regulations were rewritten for the purpose of

reorganizing and restating them more clearly in simpler language. The

misprint has created confusion in the representative disciplinary

process. Consequently, we are taking this opportunity to correct the

error to reflect the original intent of the regulations.

We also are correcting another minor misprint in the current

Sec. 404.1765(g)(3) by making ``decisions'' singular for correctness

and consistency with Sec. 416.1565(g)(3).

Finally, in proposed Sec. 404.1770, paragraphs (a)(3) and (b)(3)

are being amended to correct a publication error that occurred after

paragraph (a)(3) was revised in 1991. As correctly published in final

rules on May 29, 1991 (56 FR 24129, 24132), paragraph (a)(3) was

revised to show that the hearing officer shall mail a copy of the

decision to the parties at their last known addresses. When codified in

the 1992 volume of the Code of Federal Regulations, however, the

revised language of paragraph (a)(3) was erroneously placed in

paragraph (b)(3), superseding that existing language addressing the

effect of a final decision imposing a suspension upon a representative.

With this correction, we will accurately reflect the language and

purpose of paragraphs (a)(3) and (b)(3) and bring Sec. 404.1770 into

conformity with its equivalent Sec. 416.1570.

Electronic Versions

The electronic file of this document is available on the Federal

Bulletin Board (FBB) at 9:00 a.m. on the date of publication in the

Federal Register. To download the file, modem dial (202) 512-1387. The

FBB instructions will explain how to download the file and the fee.

This file is in WordPerfect and will remain on the FBB during the

comment period.

Regulatory Procedures

Executive Order 12866

We have consulted with the Office of Management and Budget (OMB)

and determined that these rules do not meet the criteria for a

significant regulatory action under Executive Order 12866. Thus, they

were not subject to OMB review.

Regulatory Flexibility Act

We certify that the proposed rules, if promulgated, will not have a

significant economic impact on a substantial number of small entities.

The provisions of the proposed rules that involve entities were

developed to allow them to provide representational services without

generating any supplemental reporting requirements. The proposed rules

will not result in any increased legal accounting or consulting costs

to small businesses or small organizations, will not adversely affect

competition in the marketplace, or create barriers to entry on the part

of small entities. In fact, these rules may facilitate such entry into

the representation sphere. The regulations will provide uniform

standards applicable to all entities who engage in the business and

tend to disqualify the unscrupulous and the incompetent practitioners,

thereby expanding demand for others willing and able to perform the

service. Therefore, a regulatory flexibility analysis as provided in

Public Law 96-354, the Regulatory Flexibility Act, is not required.

Paperwork Reduction Act

These regulations impose no reporting/recordkeeping requirements

necessitating clearance by OMB.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social

Security-Disability Insurance; 96.002, Social Security-Retirement

Insurance; 96.004, Social Security-Survivors Insurance; 96.006,

Supplemental Security Income)

List of Subjects

20 CFR Part 404

Administrative practice and procedure, Blind, Disability benefits,

Old-Age, Survivors and Disability Insurance, Reporting and

recordkeeping requirements, Social Security.

20 CFR Part 416

Administrative practice and procedure, Aged, Blind, Disability

benefits, Public assistance programs, Reporting and recordkeeping,

Supplemental Security Income (SSI) requirements.

Dated: December 23, 1996.

Shirley S. Chater,

Commissioner of Social Security.

For the reasons set forth in the preamble, part 404, subpart R,

chapter III of title 20 of the Code of Federal

[[Page 359]]

Regulations is proposed to be amended as set forth below.

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE

(1950- )

1. The authority citation for subpart R of part 404 continues to

read as follows:

Authority: Secs. 205(a), 206, and 702(a)(5) of the Social

Security Act (42 U.S.C. 405(a), 406, and 902(a)(5)).

2. Section 404.1740 is revised to read as follows:

Sec. 404.1740 Rules of conduct and standards of responsibility for

representatives.

(a) Purpose and scope. (1) All attorneys or other persons acting on

behalf of a party seeking a statutory right or benefit shall, in their

dealings with us, faithfully execute their duties as agents and

fiduciaries of a party. A representative shall provide competent

assistance to the claimant and recognize the authority of the Agency to

lawfully administer the process. The following provisions in this

section set forth certain affirmative duties and prohibited actions

which shall govern the relationship between the representative and the

Agency, including matters involving our administrative procedures and

fee collections.

(2) Moreover, all representatives shall be forthright in their

dealings with us and with the claimant and shall comport themselves

with due regard for the nonadversarial nature of the proceedings by

complying with our rules and standards, which are intended to ensure

orderly and fair presentation of evidence and argument.

(b) Affirmative duties. A representative shall:

(1) Promptly obtain all information and evidence which the claimant

wants to submit in support of the claim and forward the same for

consideration as soon as practicable, but no later than the due date

designated by the Agency, except for good cause shown;

(2) Comply with our requests for information or evidence at any

stage of the administrative review process as soon as practicable, but

no later than the due date designated by the Agency, except for good

cause shown. This includes the obligation to:

(i) Provide, upon request, identification of all known medical

sources, updated information regarding medical treatment, new or

corrected information regarding work activity, other specifically

identified information pertaining to the claimed right or benefit, or

notification by the representative after consultation with the claimant

that the claimant does not consent to the release of some or all of the

material; and

(ii) Provide, upon request, all evidence and documentation

pertaining to specifically identified issues which the representative

or the claimant either has within his or her possession or may readily

obtain, or notification by the representative after consultation with

the claimant that the claimant does not consent to the release of some

or all of the material;

(3) Conduct his or her dealings in a manner which does not obstruct

the efficient, fair or orderly conduct of the administrative review

process, including duties to:

(i) Be cognizant of the matters at issue in establishing

entitlement or eligibility to the claimed right or benefit, and

knowledgeable of our evidentiary and procedural requirements in order

to provide competent assistance to the party he or she represents;

(ii) Provide timely and responsive answers to requests from the

Agency for information pertinent to processing of the claim; and

(iii) Cooperate with our attempts to obtain information and

documentation, or complete processing requirements for a claimed right

or benefit.

(1) In any manner or by any means threaten, coerce, intimidate,

deceive or knowingly mislead a claimant, or prospective claimant or

beneficiary, regarding benefits or other rights under the Act;

(2) Knowingly charge, collect or retain, or make any arrangement to

charge, collect or retain, from any source, directly or indirectly, any

fee for representational services in violation of applicable law or

regulation;

(3) Knowingly make or present, or participate in the making or

presentation of, false oral or written statements, assertions or

representations about a material fact concerning a matter within our

jurisdiction;

(4) Willfully or negligently delay, or cause to be delayed, by any

act or omission, without good cause, the processing of a claim at any

stage of the administrative review process;

(5) Divulge, except as may be authorized by regulations prescribed

by us, any information we furnish or disclose about a claim or

prospective claim of another person;

(6) Attempt to influence, directly or indirectly, the outcome of a

decision, determination or other administrative action by offering or

granting a loan, gift, entertainment or anything of value to a

presiding official, Agency employee or witness who is or may reasonably

be expected to be involved in the administrative review process, except

as reimbursement for legitimately incurred expenses or lawful

compensation for the services of an expert witness retained on a non-

contingency basis to provide evidence; or

(7) Engage in actions or behavior prejudicial to the fair and

orderly conduct of oral proceedings, including but not limited to:

(i) Repeated instances of unauthorized absences, or persistent

tardiness at scheduled proceedings;

(ii) Willful behavior which has the effect of improperly disrupting

proceedings or obstructing the adjudicative process; and

(iii) Threatening or intimidating language, gestures or actions

directed at a presiding official, witness or Agency employee.

3. Section 404.1745 is revised to read as follows:

Sec. 404.1745 Violations of our requirements, rules, or standards.

When we have evidence that a representative fails to meet our

qualification requirements or has violated the rules governing dealings

with us, we may begin proceedings to suspend or disqualify that

individual from acting in a representational capacity before us. We may

file charges seeking such sanctions when we have evidence that a

representative:

(a) Does not meet the qualifying requirements described in

Sec. 404.1705;

(b) Has violated the affirmative duties or engaged in the

prohibited actions set forth in Sec. 404.1740; or

4. Section 404.1750 is amended by revising paragraphs (a) and (d)

to read as follows:

Sec. 404.1750 Notice of charges against a representative.

(a) The Deputy Commissioner for Programs, Policy, Evaluation and

Communications (or other official the Commissioner may designate), or

his or her designee, will prepare a notice containing a statement of

charges that constitutes the basis for the proceeding against the

representative.

* * * * *

(d) The Deputy Commissioner for Programs, Policy, Evaluation and

Communications (or other official the Commissioner may designate), or

his or her designee, may extend the 30-day period for good cause.

* * * * *

5. Section 404.1765 is amended by revising paragraph (a), the

second

[[Page 360]]

sentence of paragraph (e), and paragraph (g)(3) to read as follows:

Sec. 404.1765 Hearing on charges.

(a) Scheduling the hearing. If the Deputy Commissioner for

Programs, Policy, Evaluation and Communications (or other official the

Commissioner may designate), or his or her designee, does not take

action to withdraw the charges within 15 days after the date on which

the representative filed an answer, we will hold a hearing and make a

decision on the charges.

* * * * *

(e) Parties. * * * The Deputy Commissioner for Programs, Policy,

Evaluation and Communications (or other official the Commissioner may

designate), or his or her designee, shall also be a party to the

hearing.

* * * * *

(g) * * *

(3) If the representative did file an answer to the charges, and if

the hearing officer believes that there is material evidence available

that was not presented at the hearing, the hearing officer may at any

time before mailing notice of the hearing decision reopen the hearing

to accept the additional evidence.

* * * * *

6. Section 404.1770 is amended by revising the first sentence of

paragraph (a)(3) and by revising paragraph (b)(3) to read as follows:

Sec. 404.1770 Decision by hearing officer.

(a) * * *

(3) The hearing officer shall mail a copy of the decision to the

parties at their last known addresses. * * *

(b) * * *

(3) If the final decision is that a person is suspended for a

specified period of time from being a representative in dealings with

us, he or she will not be permitted to represent anyone in dealings

with us during the period of suspension unless authorized to do so

under the provisions of Sec. 404.1799.

7. Section 404.1799 is amended by revising the first sentence of

paragraph (c) and the second sentence of paragraph (e) to read as

follows:

Sec. 404.1799 Reinstatement after suspension or disqualification--

period of suspension not expired.

* * * * *

Programs, Policy, Evaluation and Communications (or other official the

Commissioner may designate), or his or her designee, upon notification

of receipt of the request, 30 days in which to present a written report

of any experiences with the suspended or disqualified person subsequent

to that person's suspension or disqualification. * * *

* * * * *

(e) * * * It shall also mail a copy to the Deputy Commissioner for

Programs, Policy, Evaluation and Communications (or other official the

Commissioner may designate), or his or her designee.

* * * * *

For the reasons set forth in the preamble, part 416, subpart O,

chapter III of title 20 of the Code of Federal Regulations is proposed

to be amended as set forth below.

PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND

DISABLED

8. The authority citation for subpart O of part 416 continues to

read as follows:

Authority: Secs. 702(a)(5) and 1631(d) of the Social Security

Act (42 U.S.C. 902(a)(5) and 1383(d)).

9. Section 416.1540 is revised to read as follows:

Sec. 416.1540 Rules of conduct and standards of responsibility for