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27 August 2010
[Federal Register: August 27, 2010 (Volume 75, Number 166)]
[Rules and Regulations]
[Page 52607-52614]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au10-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
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[[Page 52607]]
FEDERAL HOUSING FINANCE AGENCY
5 CFR Chapter LXXX
RIN 2590-AA02, 3209-AA15
Supplemental Standards of Ethical Conduct for Employees of the
Federal Housing Finance Agency
AGENCY: Federal Housing Finance Agency.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is publishing a
final regulation, with the concurrence of the Office of Government
Ethics, which supplements the Standards of Ethical Conduct for
Employees of the Executive Branch. To ensure a comprehensive and
effective ethics program at FHFA and to address ethical issues unique
to FHFA, the final regulation establishes prohibitions on the ownership
of certain financial interests and restrictions on outside employment
and business activities.
DATES: This regulation is effective August 27, 2010.
FOR FURTHER INFORMATION CONTACT: Sean Dent, Associate General Counsel,
(202) 414-3099 (not a toll-free number), Federal Housing Finance
Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The
telephone number for the Telecommunications Device for the Deaf is
(800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
The Housing and Economic Recovery Act of 2008 (HERA), Public Law
110-289, 122 Stat. 2654, amended the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.)
(Safety and Soundness Act), and the Federal Home Loan Bank Act (12
U.S.C. 1421-1449) to establish FHFA as an independent agency of the
Federal Government.\1\ FHFA was established to oversee the prudential
operations of the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation (collectively, enterprises), and the
Federal Home Loan Banks (Banks) (collectively, regulated entities) and
to ensure that they operate in a safe and sound manner including being
capitalized adequately; foster liquid, efficient, competitive and
resilient national housing finance markets; comply with the Safety and
Soundness Act and rules, regulations, guidelines and orders issued by
the Director of FHFA, and the respective authorizing statutes of the
regulated entities; and carry out their missions through activities
authorized and consistent with the Safety and Soundness Act and their
authorizing statutes; and, that the activities and operations of the
regulated entities are consistent with the public interest.
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\1\ See Division A, titled the ``Federal Housing Finance
Regulatory Reform Act of 2008,'' Title I, Sec. 1101 of HERA.
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II. Proposed Regulation; Comments Received; Technical Revisions
Proposed Regulation
Executive Order 12674, as amended by Executive Order 12731,
authorized the United States Office of Government Ethics (OGE) to
establish a single, comprehensive and clear set of executive-branch
standards of conduct. On August 7, 1992, OGE published the Standards of
Ethical Conduct for Employees of the Executive Branch (Standards).\2\
Codified at 5 CFR part 2635, the Standards took effect on February 3,
1993, and established uniform standards of ethical conduct for all
executive branch employees.
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\2\ See 57 FR 35006-35067, as corrected at 57 FR 48557 and 57 FR
52583, with additional grace period extensions at 59 FR 4779-4780,
60 FR 6390-6391, 60 FR 66857-66858, and 61 FR 40950-40952.
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With the concurrence of OGE, 5 CFR 2635.105 authorizes executive
branch agencies to publish agency-specific supplemental regulations
necessary to implement their respective ethics programs. With such
concurrence, FHFA published proposed supplemental rules for comment on
April 16, 2010 (75 FR 19909).
Comments Received
FHFA received and considered two comments from one member of the
public. The first comment relates to Sec. 9001.101. That section, as
proposed, contains cross-references to other executive branch ethics
regulations and a subsequent employment restriction of section 1317D of
the Safety and Soundness Act, 12 U.S.C. 4523, applicable to certain
highly compensated former FHFA officers and employees. Section 1317D
prohibits such highly compensated former FHFA officers and employees
from accepting compensation from an enterprise under section 1317D of
the Safety and Soundness Act for two years after leaving FHFA. The
commenter believes that this statutory restriction is inconsistent with
the government-wide post-employment restrictions of 18 U.S.C. 207(a)(1)
and (2) and 5 CFR 2635.601. FHFA notes that the section 1317D statutory
restriction is in addition to the government-wide post-employment
restrictions of 18 U.S.C. 207(a)(1) and (2) and 5 CFR 2635.601. Thus,
FHFA has determined that a revision to Sec. 9001.101 is not needed.
The second comment relates to Sec. Sec. 9001.104 and 9001.106.
Section 9001.104(a) prohibits FHFA employees and the employees' spouse
and minor children from owning or controlling certain financial
interests that are related to or affected by the operations of FHFA,
such as securities owned, issued, guaranteed, securitized, or
collateralized by the regulated entities. Section 9001.106 prohibits an
employee of FHFA from participating in any matter in which a regulated
entity is a party if the regulated entity employs, as an employee or
consultant, his or her spouse, child, parent, or sibling, or member of
his or her household unless the Designated Agency Ethics Official has
authorized the employee to participate in the matter using the standard
in 5 CFR 2635.502(d).
The commenter noted that the application of the two sections to
family members differs. The restriction prohibiting the ownership or
control of certain financial interests applies only to the employee's
spouse and minor children, while the restriction relating to employment
by a regulated entity has a broader application in that it applies to
the employee's spouse, child, or sibling, or a member of his or her
[[Page 52608]]
household. The commenter believes that FHFA's inclusion of family and
household members in Sec. 9001.106 but not in Sec. 9001.104 might
lead the public to question the different treatment and increase public
uncertainty and confusion and make it more difficult for employees to
distinguish between the restrictions that apply.
The different application of the two sections conforms to law and
regulation. FHFA notes that the restriction in Sec. 9001.104
prohibiting the ownership or control of certain financial interests
conforms to the scope of the government-wide conflicting financial
interests law at 18 U.S.C. 208, which applies to the employee and to
the employee's spouse and minor children, individuals whose financial
interests are by law attributed to the employee. The requirement to
receive prior approval before employment by a regulated entity of the
employee's spouse, child, sibling, or a member of his or her household
in Sec. 9001.106 is intended to determine whether the employment could
raise questions about the employee's impartiality in performing his or
her duties under the Standards.
Issuance of Final Regulation With Technical and Clarifying Revisions;
Immediate Effective Date
Section 9001.101 has been revised to add a reference to the
regulation concerning the post-employment restriction for senior
examiners at 12 CFR part 1212. Clarifying provisions have been added to
Sec. Sec. 9001.104(d) and 9001.105(b), as discussed below under the
Section-by-Section Analysis.
FHFA, with the concurrence of OGE, has determined that the
following supplemental rules that are contained in the proposed
regulation, which adds a new 5 CFR chapter LXXX, consisting of part
9001, are necessary to implement successfully the ethics program of
FHFA in light of the unique programs and operations of FHFA. Thus, FHFA
is publishing as final the regulation as proposed with the technical
revisions noted above. The final regulation has an immediate effective
date for good cause. The final regulation, which affects only FHFA
employees, is necessary to ensure the public trust in FHFA operations
and it provides employees with adequate notice and time to report
prohibited holdings and outside employment.
III. Section-by-Section Analysis
The following is a section-by-section analysis of the regulation.
Section 9001.101 General
Section 9001.101 explains that the regulation applies to all
employees of FHFA and supplements the Standards found in 5 CFR part
2635. It also requires that employees of FHFA must comply with the
Standards, this part, guidance and procedures established pursuant to
this part, the regulation concerning the post-employment restriction
for senior examiners at 12 CFR part 1212, and any additional rules of
conduct that FHFA is authorized to issue. It also notes that employees
should contact the Designated Agency Ethics Official (DAEO) if they
have questions about any provision of this regulation or other ethics-
related matters.
The section also contains cross-references to other executive
branch ethics regulations and a subsequent employment restriction of
section 1317D of the Safety and Soundness Act, 12 U.S.C. 4523,
applicable to certain highly compensated former FHFA officers and
employees, including FHFA Director, along with an annual employee
notification requirement as to that statutory restriction. Section
1317D prohibits such highly compensated former FHFA officers and
employees, and the Director, from accepting compensation from an
enterprise under section 1317D of the Safety and Soundness Act for two
years after leaving FHFA.
Section 9001.102 Definitions
Section 9001.102 defines the key terms used in the regulation.
Affiliate is defined as any entity that controls, is controlled by,
or is under common control with another entity.
Designated Agency Ethics Official, or DAEO, as also used in 5 CFR
part 2635, and ``alternate DAEO'' are defined as the individuals so
designated by the Director, FHFA. The DAEO is responsible for
designating agency ethics officials and ethics designees, as such terms
are used in 5 CFR part 2635. The alternate DAEO acts as the DAEO in the
DAEO's absence.
Director is defined to mean the Director of FHFA or his or her
designee.
Employee is defined to mean an officer or employee of FHFA,
including a special Government employee. For purposes of this part, it
also is defined as an individual on detail from another agency to FHFA
for a period of more than 30 days.
Enterprise is defined as the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation.
Federal Home Loan Bank or Bank is defined to mean a Bank
established under the Federal Home Loan Bank Act; the term ``Federal
Home Loan Banks'' means, collectively, all the Federal Home Loan Banks.
Federal Home Loan Bank System is defined to mean the Federal Home
Loan Banks under the supervision of FHFA.
Regulated entity is defined to mean the Federal National Mortgage
Association and any affiliate thereof; the Federal Home Loan Mortgage
Corporation and any affiliate thereof; or any Federal Home Loan Bank;
the term ``regulated entities'' means, collectively, the Federal
National Mortgage Association and any affiliate thereof; the Federal
Home Loan Mortgage Corporation and any affiliate thereof; and the
Federal Home Loan Banks.
Safety and Soundness Act is defined to mean the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501
et seq.), as amended by the Housing and Economic Recovery Act of 2008
(HERA), Public Law 110-289, 122 Stat. 2654 (2008).
Security is defined to mean all interests in debt or equity
instruments. The term includes, without limitation, secured and
unsecured bonds, debentures, notes, securitized assets and commercial
paper including loans securitized by mortgages or deeds of trust and
securities backed by such instruments, as well as all types of
preferred and common stock. The term encompasses current and contingent
ownership interests including any beneficial or legal interest derived
from a trust. Such interest includes any right to acquire or dispose of
any long or short position in such securities and also includes,
without limit, interests convertible into such securities, as well as
options, rights, warrants, puts, calls and straddles with respect
thereto. The term shall not, however, be construed to include deposit
accounts, such as checking, savings, or money market deposit accounts.
Section 9001.103 Waivers
Section 9001.103 authorizes the DAEO to grant employees of FHFA
written waivers of any provision of the FHFA regulation based upon a
determination that the waiver will not result in conduct inconsistent
with 5 CFR part 2635 or otherwise prohibited by law, and that
application of the provision is not be necessary to ensure public
confidence in the impartiality and objectivity with which the programs
of FHFA are administered. In granting a waiver under Sec. 9001.103,
the DAEO may require the employee to take further action, including
executing a written disqualification statement. This provision is
intended, in appropriate cases, to ease the burden that these
supplemental regulations will impose
[[Page 52609]]
on employees of FHFA while ensuring that employees do not engage in
actions or hold financial interests that may interfere with the
objective and impartial performance of their official duties.
Section 9001.104 Prohibited Financial Interests
Section 9001.104(a) prohibits FHFA employees and the employees'
spouse and minor children from owning or controlling certain financial
interests that are related to or affected by the operations of FHFA,
such as securities owned, issued, guaranteed, securitized, or
collateralized by the regulated entities. This prohibition does not
apply to special Government employees.\3\ The prohibition of Sec.
9001.104(a) is based on the view of FHFA that permitting FHFA employees
and their spouse and minor children directly or indirectly to own or
control securities owned, issued, guaranteed, securitized, or
collateralized by the regulated entities would cause a reasonable
person to question the impartiality with which FHFA programs are
administered. Specifically, FHFA believes that there is a direct and
appropriate nexus between the prohibition against owning or controlling
such securities as applied both to employees and to the spouses and
minor children of employees and the efficiency of the service.
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\3\ The term ``special Government employee'' is defined in 5 CFR
2635.102 to mean ``those executive branch officers or employees
specified in 18 U.S.C. 202(a). A special Government employee is
retained, designated, appointed, or employed to perform temporary
duties either on a full-time or intermittent basis, with or without
compensation, for a period not to exceed 130 days during any
consecutive 365-day period.''
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In addition, while Federal conflict of interest statutes and the
Standards prohibit an employee of FHFA from participating in matters in
which the employee or the employee's spouse or minor children have a
conflicting financial interest, FHFA has determined that a broader ban
is more effective in ensuring that no reasonable person could question
the impartiality and objectivity of the agency's actions. The broader
ban of Sec. 9001.104(a) establishes a clear prohibition that will be
easily understood by observers of FHFA.
Moreover, the prohibition will substantially reduce the burden on
FHFA and FHFA employees to determine the scope of the prohibition for
each employee. By promulgating a broad ban that excludes all securities
owned, issued, guaranteed, securitized, or collateralized by the
regulated entities, Sec. 9001.104(a) will substantially reduce the
need for FHFA employees, the DAEO, and other agency ethics officials or
counselors to determine the financial interests prohibited by each
employee's duties.
Section 9001.104(b) also attributes to an FHFA employee, or to the
employee's spouse and minor children, securities he or she is
prohibited from holding directly by Sec. 9001.104(a) that are held by
certain described third-party entities.
Section Sec. 9001.104(c) permits an FHFA employee and the
employee's spouse and minor children to own interests in publicly-
traded or publicly-available diversified mutual or other collective
diversified investment funds that contain within their portfolios
interests that they are prohibited from holding by Sec. 9001.104(c).
Under this provision, ownership of such investment funds are permitted
as long as the employee or the employee's spouse or minor children do
not have the ability to control the fund or its portfolio, and the fund
does not have an objective or practice of concentrating its investments
in securities of a regulated entity or the regulated entities
generally, and less than 25 percent of the total holdings of the fund
are comprised of securities owned, issued, guaranteed, securitized, or
collateralized by one or more regulated entities.
This exception to Sec. 9001.104(a) reflects the view of FHFA that
the prohibition on owning or controlling securities of the regulated
entities should not be extended to publicly-traded or publicly-
available mutual funds or other collective investment funds that are
diversified and over which employees have no control, since it would be
unreasonable to require employees to divest themselves of such mutual
funds based on investment decisions in which they played no role. FHFA
believes that allowing an FHFA employee and the employee's spouse and
minor children to own interests in publicly-traded or publicly-
available diversified mutual funds and collective investment funds will
not endanger the impartiality or objectivity of FHFA, even if these
funds held some limited interest in securities owned, issued,
securitized, guaranteed, or collateralized by one or more of the
regulated entities.
Section 9001.104(d) requires employees of FHFA, within 30 calendar
days commencement of employment, to report to the DAEO in writing all
financial interests that they acquired prior or the commencement of
their employment, and that they are prohibited from holding by Sec.
9001.104(a). Employees are required to divest such interests, within 90
calendar days of the date reported, unless they receive a written
waiver from the DAEO in accordance with Sec. 9001.103. The section
imposes a similar reporting and divestiture requirement upon employees
who acquire, without specific intent, financial interests prohibited by
Sec. 9001.104(a). Section 9001.104(d) has been clarified to provide
expressly that the reporting and divestiture requirements also apply to
prohibited financial interests acquired prior to the effective date of
this part.
Section 9001.105 Outside Employment
This section is designed to balance several important ethical
principles against an employee's right to engage in outside activities.
Paragraph (a) of the section prohibits an FHFA employee, except for a
special Government employee, from engaging in paid or unpaid employment
with (1) a person, other than a State or local government, who is a
registered lobbyist engaged in lobbying activities concerning FHFA
programs; (2) any regulated entity, or (3) the Office of Finance of the
Federal Home Loan Bank System. FHFA is of the view that such a policy
against active participation in such businesses is necessary to protect
against questions regarding the impartiality and objectivity of
employees and the administration of the programs of FHFA. FHFA believes
that it will hinder FHFA in meeting its missions if members of the
public could question whether employees are using their public
positions or connections at FHFA to advance alternate careers.
Furthermore, in accordance with 5 CFR 2635.803, FHFA is of the view
that it is necessary or desirable for the purpose of administering its
ethics program to require FHFA employees to obtain approval before
engaging in outside employment or activities. An approval requirement
helps ensure that potential ethical problems are resolved before
employees begin outside employment or activities that could involve a
violation of applicable statutes and standards of conduct.
Thus, Sec. 9001.105(b)(1) provides that an FHFA employee, other
than a special Government employee, must obtain advance written
approval from the employee's supervisor and the concurrence of the DAEO
before engaging in any outside employment.
FHFA has added clarifying language to Sec. 9001.105(b)(2)
addressing outside employment commenced by employees before the
effective date of this part. An employee who commenced engaging in any
outside employment not prohibited under Sec. 9001.105(a) before the
effective date of this part must request written approval from his or
her supervisor and
[[Page 52610]]
the concurrence of the DAEO within 30 calendar days of the effective
date. The employee may continue engaging in the outside employment
while the request is under review.
Section 9001.105(b)(2) also addresses outside employment by new
employees. An employee who before being employed by FHFA commenced
engaging in any outside employment not prohibited under Sec.
9001.105(a) must request written approval from his or her supervisor
and the concurrence of the DAEO within 30 calendar days of commencing
employment with FHFA. The new employee may continue engaging in the
outside employment while the request is under review.
Paragraph (c) to Sec. 9001.105 broadly defines outside employment
to cover any form of non-Federal employment or business relationship
involving the provision of personal services, whether or not for
compensation, other than in the discharge of official duties. It also
includes writing when done under an arrangement with another person or
entity for production or publication of the written product. It does
not, however, include participation in the activities of nonprofit
charitable, religious, professional, social, fraternal, educational,
recreational, public service, or civic organizations, unless such
activities are for (1) compensation other than reimbursement of
expenses, (2) the organization's activities are devoted substantially
to matters relating to the employee's official duties as defined in 5
CFR 2635.807(a)(2)(i)(B) through (E) and the employee will serve as
officer or director of the organization, or (3) the activities will
involve the provision of consultative or professional services.
Consultative services is defined to mean the provision of personal
services by an employee, including the rendering of advice or
consultation, which requires advanced knowledge in a field of science
or learning customarily acquired by a course of specialized instruction
and study in an institution of higher education, hospital, or similar
facility. Professional services is defined to mean the provision of
personal services by an employee, including the rendering of advice or
consultation, which involves application of the skills of a profession
as defined in 5 CFR 2636.305(b)(1) or involves a fiduciary relationship
as defined in 5 CFR 2636.305(b)(2).
A note following paragraph (c) of Sec. 9001.105 pertains to the
special approval requirement set out in both 18 U.S.C. 203(d) and
205(e), respectively, for certain representational activities otherwise
covered by the conflict of interest restrictions on compensation and
activities of employees in claims against and other matters affecting
the Government. The note explains that an employee who wishes to act as
agent or attorney for, or otherwise represent his or her parents,
spouse, children, or any person for whom, or any estate for which, he
or she is serving as guardian, executor, administrator, trustee, or
other personal fiduciary in such matters must obtain the approval
required by law of the Government official responsible for the
employee's appointment in addition to the regulatory approval that is
required in Sec. 9001.105.
Section 9001.105(d) sets out the procedures for requesting prior
approval to engage in outside employment initially, or within seven
calendar days of a significant change in the nature or scope of the
outside employment or the employee's official position. Paragraph (e)
of Sec. 9001.105 provides that the concurrence of the DAEO will be
granted only upon a determination that the outside employment is not
expected to involve conduct prohibited by statute or Federal
regulation, including 5 CFR part 2635 and this part.
Section 9001.105(f) provides that the DAEO may issue written
instructions governing the submission of requests for approval of and
concurrence with outside employment. The written instructions may
exempt categories of employment from the prior approval and concurrence
requirement based on a determination that employment within those
categories will generally be approved and will likely not involve
conduct prohibited by Federal law or regulation, including 5 CFR part
2635 and this part.
Section 9001.106 Restrictions Resulting From Employment of Family and
Household Members
Section 9001.106 prohibits an employee of FHFA from participating
in any matter in which a regulated entity is a party if the regulated
entity employs, as an employee or consultant, his or her spouse, child,
parent, or sibling, or member of his or her household unless the DAEO
has authorized the employee to participate in the matter using the
standard in 5 CFR 2635.502(d). Section 9001.106 requires such an
employee to make a written report to the DAEO within 30 calendar days
of employment by a regulated entity of the employee's spouse, child,
parent, sibling, or member of his or her household. This requirement is
intended to eliminate the potential for any appearance of preferential
treatment in those instances where employment of a family member or a
member of the employee's household would be likely to raise questions
regarding the appropriateness of actions taken by the employee or FHFA.
Section 9001.107 Other Limitations
Section Sec. 9001.107(a) references the statutory restriction on
financial interests applicable to the Director, the Deputy Director of
the Division of Enterprise Regulation, the Deputy Director of the
Division of Federal Home Loan Bank Regulation, and the Deputy Director
for Housing Mission and Goals. These individuals are subject to
additional financial interest limitations set forth in section 1312(g)
of the Safety and Soundness Act (12 U.S.C. 4512(g)). Section 1312(g)
provides that the Director and each Deputy Director may not--
(1) Have any direct or indirect financial interest in any regulated
entity or entity-affiliated party; \4\
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\4\ The term ``entity-affiliated party'' is defined in section
1301(11) of the Safety and Soundness Act (12 U.S.C. 4502(11)).
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(2) Hold any office, position, or employment in any regulated
entity or entity-affiliated party; or
(3) Have served as an executive officer or director of any
regulated entity or entity-affiliated party at any time during the
three-year period preceding the date of appointment or designation of
such individual as Director or Deputy Director, as applicable.
Paragraph (b) of Sec. 9001.107 provides that if an employee or the
spouse or minor children of the employee directly or indirectly owns a
financial interest in a member of a Bank or in a financial institution
such as a mortgage bank, mortgage broker, bank, thrift, or other
financial institution that originates, insures, or services mortgages
that are owned, issued, guaranteed, securitized, or collateralized by a
regulated entity, the employee is cautioned not to violate the
statutory prohibition against financial conflicts of interest set forth
in 18 U.S.C. 208. The language notes that the government-wide de
minimis and other exceptions set forth in 5 CFR 2640.202 are applicable
to the ownership or control of interests in such financial
institutions. Employees are encouraged to seek a determination from the
DAEO as to whether the financial interest in the member of a Bank or in
the financial institution creates a financial conflict of interest or
an appearance of a conflict of interest and whether the employee should
disqualify himself or herself from participating in an official
capacity in a particular matter involving the financial institution.
[[Page 52611]]
Section 9001.108 Prohibited Recommendations
Section 9001.108 prohibits an employee of FHFA from recommending,
suggesting, or giving advice to any person with respect to financial
transactions or investment actions involving the acquisition, sale, or
divestiture of securities of a regulated entity. The Standards at 5 CFR
2635.703 prohibit an employee from allowing the improper use of
nonpublic information to further his or her private interest or that of
another, whether through advice or recommendation or by knowing
unauthorized disclosure. The section supplements 5 CFR 2635.703 in that
it expressly prohibits FHFA employees from using or creating the
appearance of using information that is not available to the general
public to further a private interest. The prohibition is also intended
to eliminate any misunderstanding or harm that could result from such a
recommendation. For example, an investor should not be misled into
believing, pursuant to the recommendation of an FHFA employee, that the
securities of a particular regulated entity regulated by FHFA is a
sound buy because the investor believes that the employee may have
access to inside information.
Section 9001.109 Prohibited Purchase of Assets
Section 9001.109 prohibits employees, the spouses of employees, and
the minor children of employees of FHFA from purchasing real or
personal property from the regulated entities unless it is sold at
public auction or by other means that would ensure that the selling
price of the property is the asset's fair market value. This
prohibition supplements the general prohibition in 5 CFR 2635.702
against the use of public office for private gain.
Regulatory Impacts
Paperwork Reduction Act
The regulation does not contain any information collection
requirement that requires the approval of OMB under the Paperwork
Reduction Act (44 U.S.C. 3501 et seq.).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation does not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the
regulation under the Regulatory Flexibility Act. FHFA certifies that
the regulation is not likely to have a significant economic impact on a
substantial number of small business entities because the regulation is
applicable only to employees of FHFA.
List of Subjects in 5 CFR Part 9001
Administration, Conflict of interests, Ethics, Government
employees.
0
Accordingly, for the reasons stated in the preamble, FHFA, with the
concurrence of OGE, is amending title 5 of the Code of Federal
Regulations by adding a new chapter LXXX, consisting of part 9001, to
read as follows:
CHAPTER LXXX--FEDERAL HOUSING FINANCE AGENCY
PART 9001--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES
OF THE FEDERAL HOUSING FINANCE AGENCY
Sec.
9001.101 General.
9001.102 Definitions.
9001.103 Waivers.
9001.104 Prohibited financial interests.
9001.105 Outside employment.
9001.106 Restrictions resulting from employment of family and
household members.
9001.107 Other limitations.
9001.108 Prohibited recommendations.
9001.109 Prohibited purchase of assets.
Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government
Act of 1978); 12 U.S.C. 4526; E.O. 12674, 54 FR 15159; 3 CFR, 1989
Comp., p. 215, as modified by E.O. 12731, 55 FR 42547; 3 CFR, 1990
Comp., p. 306; 5 CFR 2635.105, 2635.402(c), 2635.403(a),
2635.502(e), 2635.604, 2635.702, 2635.703, 2635.802(a), 2635.803.
Sec. 9001.101 General.
(a) Purpose and scope. In accordance with 5 CFR 2635.105, the
purpose of this regulation is to supplement the Standards of Ethical
Conduct for Employees of the Executive Branch contained in 5 CFR part
2635. The regulation applies to employees of the Federal Housing
Finance Agency (FHFA). Employees are required to comply with 5 CFR part
2635, this part, guidance and procedures established pursuant to this
part, the regulation concerning the post-employment restriction for
senior examiners at 12 CFR part 1212, and any additional rules of
conduct that FHFA is authorized to issue. Employees should contact the
DAEO if they have questions about any provision of this regulation or
other ethics-related matters.
(b) Cross-references--(1) Regulations. FHFA employees are also
subject to the regulations concerning executive branch financial
disclosure contained in 5 CFR part 2634, the regulations concerning
executive branch financial interests contained in 5 CFR part 2640, and
the regulations concerning executive branch employee responsibilities
and conduct contained in 5 CFR part 735.
(2)(i) Statutory restriction. Section 1319D of the Act, 12 U.S.C.
4523, prohibits the Director or any former officer or employee of FHFA
who, while employed by FHFA, was compensated at a rate in excess of the
lowest rate for a position classified higher than GS-15 of the General
Schedule under section 5107 of title 5, United States Code, from
accepting compensation from an enterprise during the two-year period
beginning on the date of his or her separation from employment by FHFA.
(ii) Notice to employees. The DAEO shall notify employees on an
annual basis of the rate of compensation that triggers the subsequent
employment restriction.
Sec. 9001.102 Definitions.
For purposes of this part, the term:
Affiliate means any entity that controls, is controlled by, or is
under common control with another entity.
Designated Agency Ethics Official, or DAEO, as also used in 5 CFR
part 2635, and ``alternate DAEO'' mean the individuals so designated by
the Director, FHFA. The DAEO is responsible for designating agency
ethics officials and ethics designees, as such terms are used in 5 CFR
part 2635. The alternate DAEO acts as the DAEO in the DAEO's absence.
Director means the Director of FHFA or his or her designee.
Employee means an officer or employee of FHFA, including a special
Government employee. For purposes of this part, it also means an
individual on detail from another agency to FHFA for a period of more
than 30 calendar days.
Enterprise means the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation.
Federal Home Loan Bank or Bank means a Bank established under the
Federal Home Loan Bank Act; the term ``Federal Home Loan Banks'' means,
collectively, all the Federal Home Loan Banks.
Federal Home Loan Bank System means the Federal Home Loan Banks
under the supervision of the Federal Housing Finance Agency.
Regulated entity means the Federal National Mortgage Association
and any
[[Page 52612]]
affiliate thereof; the Federal Home Loan Mortgage Corporation and any
affiliate thereof; or any Federal Home Loan Bank; the term ``regulated
entities'' means, collectively, the Federal National Mortgage
Association and any affiliate thereof; the Federal Home Loan Mortgage
Corporation and any affiliate thereof; and the Federal Home Loan Banks.
Safety and Soundness Act means the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.), as
amended by the Housing and Economic Recovery Act of 2008 (HERA), Public
Law 110-289, 122 Stat. 2654 (2008).
Security means all interests in debt or equity instruments. The
term includes, without limitation, secured and unsecured bonds,
debentures, notes, securitized assets and commercial paper including
loans securitized by mortgages or deeds of trust and securities backed
by such instruments, as well as all types of preferred and common
stock. The term encompasses current and contingent ownership interests
including any beneficial or legal interest derived from a trust. Such
interest includes any right to acquire or dispose of any long or short
position in such securities and also includes, without limit, interests
convertible into such securities, as well as options, rights, warrants,
puts, calls and straddles with respect thereto. The term shall not,
however, be construed to include deposit accounts, such as checking,
savings, or money market deposit accounts.
Sec. 9001.103 Waivers.
(a) General. The DAEO may waive any provision of this part upon
finding that the waiver will not result in conduct inconsistent with 5
CFR part 2635 or otherwise prohibited by law, and that application of
the provision is not necessary to ensure public confidence in the
impartiality and objectivity with which the programs of FHFA are
administered. Each waiver shall be in writing and supported by a
statement of the facts and findings upon which it is based and may
impose appropriate conditions, including but not limited to requiring
the employee to execute a written disqualification statement or an
agreement not to acquire additional securities.
(b) Waiver of prohibitions relating to ownership or control of
securities. The DAEO may grant a waiver permitting the employee or the
employee's spouse or minor children to own or control, directly or
indirectly, any security prohibited under Sec. 9001.104, if, in
addition to the standards under paragraph (a) of this section:
(1) Extenuating circumstances exist, such as ownership or control
of the security was acquired:
(i) Prior to employment with FHFA;
(ii) Through inheritance, gift, merger, acquisition, or other
change in corporate structure, or otherwise without specific intent on
the part of the employee, or employee's spouse or minor children, to
acquire the security; or
(iii) By an employee's spouse or minor children as part of a
compensation package in connection with employment or prior to marriage
to the employee;
(2) The amount of the prohibited financial interest has a market
value of less than the de minimis amount set forth in 5 CFR
2640.202(a);
(3) The employee makes a prompt and complete written disclosure of
the interest; and
(4) If the employee is required to disqualify himself or herself
from certain assignments, the disqualification does not unduly
interfere with the full performance of the employee's duties.
Sec. 9001.104 Prohibited financial interests.
(a) General prohibition. This section applies to all employees,
except special Government employees. Except as permitted in paragraph
(c) of this section, an employee or an employee's spouse or minor
children, shall not directly or indirectly own or control securities
owned, issued, guaranteed, securitized, or collateralized by a
regulated entity.
(b) Restrictions arising from third-party relationships. If any of
the entities listed in paragraphs (b)(1) through (6) of this section
owns securities that an employee is prohibited from owning directly by
paragraph (a) of this section, the employee is deemed to hold the
securities indirectly. The entities are--
(1) A partnership in which the employee or employee's spouse or
minor children are general partners;
(2) A partnership in which the employee or employee's spouse or
minor children individually or jointly hold more than a 10 percent
limited partnership interest;
(3) A closely held corporation in which the employee or employee's
spouse or minor children individually or jointly hold more than a 10
percent equity interest;
(4) A trust in which the employee or employee's spouse or minor
children have a legal or beneficial interest;
(5) An investment club or similar informal investment arrangement
between the employee or employee's spouse or minor children and others;
or
(6) Any other entity in which the employee or employee's spouse or
minor children individually or jointly hold more than a 10 percent
equity interest.
(c) Exceptions to prohibition for certain interests.
Notwithstanding paragraphs (a) and (b) of this section, an employee or
an employee's spouse or minor children may directly or indirectly own
or control:
(1) A security for which a waiver has been granted pursuant to
Sec. 9001.103; and
(2) An interest in a publicly-traded or publicly-available
diversified mutual fund or other collective diversified investment
fund, including a widely-held pension or other retirement fund if:
(i) Neither the employee, the employee's spouse, nor the employee's
minor children exercise or have the ability to exercise control over
the financial interests held by the fund; and
(ii) The fund does not indicate in its prospectus the objective or
practice of concentrating its investments in securities of a regulated
entity or regulated entities generally, and less than 25 percent of the
total holdings of the fund are comprised of securities owned, issued,
guaranteed, securitized, or collateralized by one or more regulated
entities.
(d) Reporting and divestiture. An employee must provide, in
writing, to the DAEO any financial interest prohibited under paragraph
(a) of this section acquired prior to the effective date of this part
or the commencement of employment with FHFA or without specific intent,
as through gift, inheritance, or marriage, within 30 calendar days from
the effective date of this part, commencement of employment with FHFA,
or acquisition of such interest. Such financial interest must be
divested within 90 calendar days from the date reported unless a waiver
is granted in accordance with Sec. 9001.103.
Sec. 9001.105 Outside employment.
(a) Prohibited outside employment. Employees, except special
Government employees, shall not engage in:
(1) Employment with a person or entity, other than a State or local
government, that is registered as a lobbyist under the Lobbying
Disclosure Act of 1995 (2 U.S.C. chapter 26) and engages in lobbying
activities concerning FHFA programs; or
(2) Employment with any regulated entity or with the Office of
Finance of the Federal Home Loan Bank System.
(b) Prior approval for and concurrence with other outside
employment--(1) Except as provided in
[[Page 52613]]
paragraph (b)(2) of this section, before engaging in any outside
employment that is not prohibited under paragraph (a) of this section,
with or without compensation, an employee, other than a special
Government employee, must obtain written approval from his or her
supervisor and the concurrence of the DAEO. Nonetheless, special
Government employees remain subject to other statutory and regulatory
provisions governing their outside activities, including 18 U.S.C.
203(c) and 205(c), as well as applicable provisions of 5 CFR part 2635.
(2) An employee, other than a special Government employee, who
before the effective date of this part or commencement of employment
with FHFA commenced engaging in outside employment that is not
prohibited under paragraph (a) of this section must request written
approval from his or her supervisor and the concurrence of the DAEO
within 30 calendar days of the effective date of this part or
commencement of employment with FHFA. The employee may continue
engaging in the outside employment while the request is under review.
(c) Definition of outside employment. For purposes of paragraph (b)
of this section, outside employment means any form of non-Federal
employment or business relationship involving the provision of personal
services, whether or not for compensation. It includes, but is not
limited to, services as an officer, director, employee, agent, advisor,
attorney, consultant, contractor, general partner, trustee, teacher, or
speaker. It includes writing when done under an arrangement with
another person or entity for production or publication of the written
product. The definition does not include positions as trustee for a
family trust for which the only beneficiaries are the employee, the
employee's spouse, the employee's minor or dependent children, or any
combination thereof. The definition also does not include participation
in the activities of a nonprofit charitable, religious, professional,
social, fraternal, educational, recreational, public service or civic
organization, unless:
(1) The employee will receive compensation other than reimbursement
of expenses;
(2) The organization's activities are devoted substantially to
matters relating to the employee's official duties as defined in 5 CFR
2635.807(a)(2)(i)(B) through (E) and the employee will serve as officer
or director of the organization; or
(3) The activities will involve the provision of consultative or
professional services. Consultative services means the provision of
personal services by an employee, including the rendering of advice or
consultation, which requires advanced knowledge in a field of science
or learning customarily acquired by a course of specialized instruction
and study in an institution of higher education, hospital, or similar
facility. Professional services means the provision of personal
services by an employee, including the rendering of advice or
consultation, which involves application of the skills of a profession
as defined in 5 CFR 2636.305(b)(1) or involves a fiduciary relationship
as defined in 5 CFR 2636.305(b)(2).
Note to Sec. 9001.105(c): There is a special approval
requirement set out in both 18 U.S.C. 203(d) and 205(e),
respectively, for certain representational activities otherwise
covered by the conflict of interest restrictions on compensation and
activities of employees in claims against and other matters
affecting the Government. Thus, an employee who wishes to act as
agent or attorney for, or otherwise represent his or her parents,
spouse, children, or any person for whom, or any estate for which,
he or she is serving as guardian, executor, administrator, trustee,
or other personal fiduciary in such matters must obtain the approval
required by law of the Government official responsible for the
employee's appointment in addition to the regulatory approval
required in this section.
(d) Procedure for requesting approval and concurrence--(1) The
approval required by paragraph (b) of this section shall be requested
by e-mail or other form of written correspondence in advance of
engaging in outside employment as defined in paragraph (c) of this
section.
(2) The request for approval to engage in outside employment shall
set forth, at a minimum:
(i) The name of the employer or organization;
(ii) The nature of the activity or other work to be performed;
(iii) The title of the position; and
(iv) The estimated duration of the outside employment.
(3) Upon a significant change in the nature or scope of the outside
employment or in the employee's official position within FHFA, the
employee must, within seven calendar days of the change, submit a
revised request for approval and concurrence.
(e) Standard for concurrence. The DAEO may concur with the
supervisor's approval required by paragraph (b) of this section only
upon his or her written determination that the outside employment is
not expected to involve conduct prohibited by statute or Federal
regulation, including 5 CFR part 2635 and this part.
(f) Issuance of instructions. The DAEO may issue written
instructions governing the submission of requests for approval of and
concurrence with outside employment under paragraph (d) of this
section. The instructions may exempt categories of employment from the
prior approval and concurrence requirement of paragraph (b) of this
section based on a determination by the DAEO that employment within
those categories of employment will generally be approved and is not
likely to involve conduct prohibited by Federal law or regulation,
including 5 CFR part 2635 and this part.
Sec. 9001.106 Restrictions resulting from employment of family and
household members.
(a) Disqualification of employee. An employee may not participate
in any particular matter in which a regulated entity is a party if the
regulated entity employs as an employee or a consultant his or her
spouse, child, parent, or sibling, or member of his or her household
unless the DAEO has authorized the employee to participate in the
matter using the standard set forth in 5 CFR 2635.502(d).
(b) Reporting certain relationships. Within 30 calendar days of the
spouse, child, parent, sibling, or member of the employee's household
being employed by the regulated entity, the employee shall provide in
writing notice of such employment to the DAEO.
Sec. 9001.107 Other limitations.
(a) Director and Deputy Directors. The Director, the Deputy
Director of the Division of Enterprise Regulation, the Deputy Director
of the Division of Federal Home Loan Bank Regulation, and the Deputy
Director for Housing Mission and Goals are subject to additional
financial interest limitations as set forth in section 1312(g) of the
Safety and Soundness Act, 12 U.S.C. 4512(g).
(b) Financial interests in Bank members and other financial
institutions. If an employee or the spouse or minor children of the
employee directly or indirectly owns a financial interest in a member
of a Bank or in a financial institution such as a mortgage bank,
mortgage broker, bank, thrift, or other financial institution that
originates, insures, or services mortgages that are owned, guaranteed,
securitized, or collateralized by a regulated entity, the employee is
cautioned not to violate the statutory prohibition against financial
conflicts of interest set forth in 18 U.S.C. 208. The government-wide
de minimis and other exceptions set forth in 5 CFR 2640.202 are
applicable to the ownership or control of interests in such financial
[[Page 52614]]
institutions. Employees are encouraged to seek a determination from the
DAEO as to whether the financial interest in the member of the Bank or
in the financial institution creates a financial conflict of interest
or an appearance of a conflict of interest and whether the employee
should disqualify himself or herself from participating in an official
capacity in a particular matter involving the financial institution.
Sec. 9001.108 Prohibited recommendations.
Employees shall not make any recommendation or suggestion, directly
or indirectly, concerning the acquisition, sale, or divestiture of
securities of a regulated entity.
Sec. 9001.109 Prohibited purchase of assets.
An employee or the employee's spouse or minor children shall not
purchase, directly or indirectly, any real or personal property from a
regulated entity, unless it is sold at public auction or by other means
which would assure that the selling price is the asset's fair market
value.
Dated: August 3, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
Approved: August 13, 2010.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. 2010-21324 Filed 8-26-10; 8:45 am]
BILLING CODE 8070-01-P