House Of Stake Foundation- Conflict of Interest Policy (v1.0 Draft)

[UhthredB]

@charleslavon

Thresholds for One to Act on their potential Conflicts

1. Observation: The sanctions framework is well tiered, but it’s ambiguous who decides when something rises from Tier 2 → Tier 3 → Tier 4.

On the subject of sanctions, the discretion of tiers falls under the authority of the Screening Committee, the Security Council, or the Third Party Auditor (in case of the first two conflicting with the complaint).

@charleslavon

Potential Improvements: We could define more objective thresholds.

1. For example, if an Interested Person holds tokens/receives income from a relevant party:
2. • Minor Exposure (0-5% of HoS yearly budget) → Level 2 (Perceived): disclose; consider voluntary recusal.
3. • Material Exposure (5-10% of HoS yearly budget) → Level 3: disclose + mandatory recusal from discussion and vote.
4. • Major Exposure (>10% of HoS yearly budget) → Level 4: full recusal and exit deliberations.
5. Token holdings in NEAR should be assumed; only project-specific token/income exposures or validator operator income should trigger Levels 3–4.

Please note that the Levels of Conflict are a framework for discovery - not sanctions. Having said that, correlating conflict levels with the annual budget for the House Of Stake could be an interesting idea. This could be a point to be finalised before the policy is voted on by the HoS governance process.

@charleslavon

• 40% threshold for an independent arbiter
• Observation: An Independent Arbiter is only invoked if ≥40% of two specific committees, the Screening Committee or Security Council, are conflicted in the same case. Requiring 40% of a governing body to be conflicted before bringing in an Independent Arbiter leaves room for serious but smaller-scale conflicts to be judged by peers who may not be truly impartial

The 40% threshold was designed with a numerical limit of 5 people each in both the bodies. The logic being that at 40% a complaint or review could still be judged by the remaining 3 people that would have otherwise been necessary for a majority decision. Also please note that with the Screening Committee being elected and the Security Council selected- the chances of both conflicting out reduces radically.

@charleslavon

Potential Improvements:

1. Define lower threshold and/or scenarios that are automatic triggers for Independent Arbiter involvement for the security and screening committees

25% would be 1.25 (in a committee of 5), so I do not understand the logic behind that number. If we reduce it to 20% (1/5), the threshold of that conflicted vote potentially affecting the quality of an outcome is relatively minor.

@charleslavon

• Any appeal where the same body would otherwise be both judge and jury.
• any case involving sitting committee members’ direct financial gain

It would not happen as per the policy, as appeals are judged by the Security Council, while the initial complaints are reviewed by the Screening Committee.
Also, it goes without saying that if any sitting committee member has a direct financial gain, they are automatically conflicted out.

@charleslavon

Community-initiated Referral: Allow token holders to petition for an Arbiter if they believe a conflict case isn’t being handled fairly. e.g. if ≥5% of token holders support the petition

Excellent suggestion - another point for the delegates to vote on and decide.

@charleslavon

• 1. Potential Improvement:
  2. Let’s require transparency that a proposal draft was authored by someone with an interest, so others don’t assume it’s an impartial proposal.

Agreed, the final proposal template will (as I drafted the proposal template as well) include a CoI declaration section (as suggested by @paulofonseca ) in every proposal.

@charleslavon

Community Reporting & Whistleblower Protections

1. Observation: It mentions “whistleblower protections” but gives no detail.
2. Potential Improvement: Codify these protections — e.g., anonymity guarantees, non-retaliation clauses, and escalation pathways if the report concerns Screening Committee members themselves.

Whistleblower policy, its features, and the mechanism fall directly under the scope of the Code Of Conduct Policy, not the COI policy. Agreed, CoC should ideally define a mechanism for this function.

@charleslavon

• Transparency vs. Privacy

1. Observation: The registry will log “category, level, governance area affected” but redact sensitive data.
2. Potential Improvement: Let’s come up with examples of a before and after document that clarifies our redaction standards. Because we may all differ on what we deem to be “sensitive” information. Without consistency, people may over-redact and undermine transparency.

Please note that the discretion of what to omit/ redact falls with the Screening Committee (as it will be on a case-by-case basis). The policy does dictate a minimum amount of disclosure as stated below. The policy also provides templates for disclosures in the Addendum.

@UhthredB

Redaction Rule: Sensitive information (e.g., personal identifiers, legally privileged details) may be redacted, but each entry must state:

• That a conflict occurred,
• General category of conflict,
• Governance area affected, and
• Resolution (disclosure, recusal, sanction).

@charleslavon

Education and Onboarding

1. Observation: Policy assumes people know when they’re conflicted.
2. Potential Improvement: Develop a mandatory onboarding session or quick guide that walks through common COI examples for House of Stake. To help avoid ignorance-based violations.

There is a guideline for discovery attached in the Addendum B with more than 21 working examples for voting and working group participation. This was reduced from 40 in the initial draft. Having said that, if the HoS DAO intends to spend resources on focused CoI training based on this Policy, I would be happy to conduct it as a separate effort. This contribution is about policy drafting - it is not fair to commission a mandatory training as part of a policy drafting experience, most often these are two separate functions.

@charleslavon

Examples of things which we can clarify in onboarding education:

1. What it means to disclose token holdings/income in projects under review. How might we do this while maintaining privacy, e.g. Disclose by bands (e.g., <$1k, $1–10k, $10–50k, >$50k) per project/proposal, rather than exact balances or wallet addresses.

Instead of specific band-based holdings disclosures (which would most probably put them in circumvention of potential investment NDAs), a better suggestion would be to disclose them as a percentage of the annual House Of Stake Budget (considering annual HoS Budgets are still powered by 0.5% inflation rewards - otherwise this matrix creates more problems than it solves). As agreed earlier, this is an excellent suggestion - but it is up to the delegates to vote this in as policy at this stage.

@charleslavon

Ownership of NEAR tokens, staking income, or validator rewards consistent with protocol participation shall not in itself constitute a Conflict of Interest. Conflicts must be tied to specific projects, proposals, or service providers whose outcomes create disproportionate or unique benefits for the Interested Person.

Goes without saying.

@charleslavon

Define “Financial Interest”. A financial interest may include any on-chain or off-chain position reasonably expected to be affected by a governance action, including but not limited to: spot token or NFT holdings; liquidity-provider (LP) shares; staking/validator income (including MEV/fee share); derivatives (perpetuals, futures, options, short positions); vault or index tokens; refunds/rebates, referral or revenue-share agreements; anticipated retroactive funding or airdrops.

All of which I agree with, but the policy terms are broad for a reason. For example, if we were to define the term ‘personal’ using the same level of minutiae, we would have to include ‘spouses’, ‘kids’, ‘grandparents’, and so forth. The term is broad, as it also needs to provide some leeway for subjectivity for the reviewers. ‘Common sense shall prevail’ is the assumption with which this policy empowers the reviewers.

Thank you @charleslavon, for the excellent suggestions and questions - please reply in the same thread if any of the answers are unresolved or not up to your standards.