[Federal Register Volume 61, Number 132 (Tuesday, July 9, 1996)]
[Rules and Regulations]
[Pages 36246-36251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17450]
[[Page 36245]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
5 CFR Chapter LXV
24 CFR Part 0
Supplemental Standards of Ethical Conduct for Employees of the
Department of Housing and Urban Development; Final Rule
Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules
and Regulations
[[Page 36246]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
5 CFR Chapter LXV
24 CFR Part 0
[Docket No. FR-3331-F-01]
RIN 2501-AB55, 3209-AA15
Supplemental Standards of Ethical Conduct for Employees of the
Department of Housing and Urban Development
AGENCY: Office of the Secretary, Department of Housing and Urban
Development (HUD or Department).
ACTION: Final rule.
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SUMMARY: The Department of Housing and Urban Development, with the
concurrence of the Office of Government Ethics (OGE), is issuing a
final rule establishing uniform standards of ethical conduct for
employees of the Department to supplement the Standards of Ethical
Conduct for Employees of the Executive Branch issued by OGE. The final
rule is a necessary supplement to the executive branch-wide Standards
because it addresses ethical issues unique to the Department. The final
rule will become effective 30 days after the date of publication, and
will establish regulations prohibiting certain financial interests and
restricting certain outside employment.
EFFECTIVE DATE: This rule is effective on August 8, 1996.
FOR FURTHER INFORMATION CONTACT: Aaron Santa Anna, Assistant General
Counsel, Ethics Law Division, 202-708-3815; or Sam E. Hutchinson,
Associate General Counsel, Office of Human Resources Law, 202-708-0888.
Hearing or speech-impaired individuals may call HUD's TDD number 202-
708-3259. (Telephone numbers are not toll-free.)
SUPPLEMENTARY INFORMATION:
I. Background
On June 30, 1995, the Department, with OGE's concurrence, published
for comment a proposed rule to establish supplemental standards of
ethical conduct for HUD employees (60 FR 34420-34426). The proposed
rule was intended to supplement the Standards of Ethical Conduct for
Employees of the Executive Branch (Standards) published by OGE on
August 7, 1992, and effective February 3, 1993 (57 FR 35006-35067, as
corrected at 57 FR 48557, 57 FR 52583, and 60 FR 51667, with additional
grace period extensions for certain exisiting agency standards of
conduct at 59 FR 4779-4780, 60 FR 6390-6391, and 60 FR 66857-66858).
The executive branch-wide Standards, codified at 5 CFR part 2635,
establish uniform standards of ethical conduct for executive branch
employees. The proposed rule was issued pursuant to 5 CFR 2635.105,
which authorizes executive branch agencies to publish agency-specific
supplemental regulations necessary to implement their respective ethics
programs. The Department, with OGE's concurrence, determined that the
supplemental regulations contained in the proposed rule were necessary
to implement the Department's ethics program successfully, in light of
the Department's unique programs and operations.
The proposed rule prescribed a 60-day comment period and invited
comments from all interested parties. The Department received one
public comment, and after careful consideration of it, has made
appropriate modifications to the rule. In addition, the Department has
made appropriate modifications to the rule based on various intra-
departmental comments. The Department, with OGE's concurrence, is now
publishing as a final rule the Supplemental Standards of Ethical
Conduct for Employees of the Department of Housing and Urban
Development, to be codified in a new chapter LXV of 5 CFR, consisting
of part 7501.
II. Summary of the Comments
The Department received one public comment; it was from the Federal
Home Loan Mortgage Corporation (``Freddie Mac''). The Department also
received six intra-departmental comments. Freddie Mac's comments
focused primarily on three distinct areas under the proposed rule:
scope of coverage, ownership interests, and outside employment. The
intra-departmental comments contained both requests for substantive
changes and for additional clarification regarding the application of
the rule in general or specific sections.
III. Analysis of the Comments
Section 7501.102 Definitions
One commenter within the Department recommended that one portion of
the definition of ``security'' be modified to read that the term
``includes'' any right to acquire or dispose of any long or short term
position in securites. The Department agrees that the suggested
language is more reflective of the Department's intent than the
originally proposed language and has, therefore, implemented this
revision to the definition of ``security'' in Sec. 7501.102 of the
final rule.
Freddie Mac suggested that the Department include definitions for
``employee'' and ``special Government employee.'' The Department has
not adopted this recommendation because the definitions of those terms
in the executive branch-wide Standards, at 5 CFR 2635.102 (h) and (l),
apply to supplemental regulations unless otherwise specified.
Section 7501.104 Prohibited Financial Interests
One commenter within the Department recommended that special
Government employees assigned to work in one of the program offices
listed in Sec. 7501.106(b)(1) not be excluded from the coverage of the
financial interest prohibitions in Sec. 7501.104 of the rule, since
such employees would have access to the same types of confidential
information as would other employees in those officies. The Department
has adopted this recommendation to protect against the appearance that
any HUD employee is using confidential information for private gain.
The proposed exclusion of special Government employees from the
coverage of this section has been eliminated.
Another commenter within the Department recommended that the first
sentence of the description of prohibited financial interests in real
estate, at Sec. 7501.104(a)(4), be amended to read: ``Stock or another
financial interest in a multifamily project or single family dwelling,
cooperative unit or condominium unit, which is owned or subsidized by
the Department, or which is subject to a note and mortgage or other
security instrument insured by the Secretary, except to the extent that
the stock or other interest represents the employee's principal
residence.'' The Department has decided to adopt this language as a
better characterization of the Department's interest in various real
estate interests covered by the final rule.
Section 7501.105 Outside Employment
One commenter within the Department recommended that the Department
include a provision regarding an employee's service on the board of a
non-Federal organization in an official capacity, similar to prior 24
CFR 0.735-210 of HUD's old departmental standards of conduct. In
response, a Note has been added to this section to clarify that while
service in an official capacity on the Board of a non-Federal
organization is not outside employment or other activity subject to
[[Page 36247]]
this section, employees need to be aware that such service is subject
to other applicable laws.
While generally supportive of the outside employment provisions in
this section, Freddie Mac wanted the requirements in the section to
extend to any type of writing by employees. The Department has included
within the coverage of this section those types of outside employment
which the Department believes pose the greatest potential for employees
to engage in conduct which might violate applicable laws or
regulations, and is not convinced that the suggested extension of
coverage is warranted.
In addition, Freddie Mac suggested that the public impact of an
outside activity in relation to the employee's official position be
taken into consideration when deciding whether to grant a waiver, under
Sec. 7501.103 of the rule, from the prohibitions in this section. The
specific inclusion of the suggested factors in the final rule is
uncalled for, because the factors are largely covered by the terms of
the waiver standard at Sec. 7501.103, i.e., that application of the
prohibition is not necessary to ensure public confidence in the
impartiality and objectivity with which the Department's programs are
administered.
Section 7501.106 Additional Rules for Certain Department Employees
Involved in the Regulation or Oversight of Government Sponsored
Enterprises
Freddie Mac noted that the supplemental regulation is not
specifically applicable to individuals who serve pursuant to a
consulting agreement with the Department. The Department has decided
not to make the regulation specifically applicable to consultants,
since the generic term ``consultants'' may include individuals who are
independent contractors as well as those who are deemed employees of
the Department. Whether a consultant will be deemed an employee of the
Department for these purposes depends on various factors, including the
type of functions or activities being performed by the consultant for
the Department, and the extent of the consultant's supervision by an
officer or employee of the Department. A consultant deemed an employee
of the Department would be subject to the executive branch-wide
Standards and these rules.
Freddie Mac also recommended that the description of prohibited
financial interests in Sec. 7501.106(c)(ii) be amended to parallel the
description of prohibited financial interests in Sec. 7501.104(a), by
adding the terms ``issued'' and ``collateralized'' in the description
of prohibited securities in a mortgage institution, a certain
percentage of whose originated mortgages involve the Federal National
Mortgage Association or Freddie Mac in various specified capacities.
This recommendation was adopted to attain uniformity.
A commenter within the Department suggested that employees of the
Office of Inspector General and all employees of the Office of Federal
Housing Enterprise Oversight be included in the list at
Sec. 7501.106(b)(1) of employees covered by the prohibition in this
section. The Department has adopted this recommendation to make the
prohibitions contained in Sec. 7501.106 uniformly applicable to all
employees whose official duties require that they have access to
information regarding a Government sponsored enterprise (GSE).
Similarly, another commenter within the Department recommended that the
Department's Office of Lead-Based Paint and Poisoning Prevention be
excluded from coverage under Sec. 7501.106(b)(1), since it is not
involved in the regulation or oversight of GSEs. This recommendation
was adopted for the reason asserted by the commenter.
This same commenter also recommended that the definition of
mortgage institution be amended to include entities that insure
mortgages. The Department has adopted this recommendation as a more
specific reflection of its intent. In addition, the Department has
adopted this commenter's recommendation that an institution's most
recent annual financial statement be used to determine whether it
exceeds the thresholds contained in Sec. 7501.106(c)(1).
This same commenter also expressed concern that the definition of
covered employee in Sec. 7501.106(b)(1), which encompasses only
employees who are required to file financial disclosure reports,
excludes many employees whose primary job responsibilities
significantly include the regulation or oversight of GSEs. To address
this concern, the Department has modified proposed
Sec. 7501.106(b)(1)(viii) to include the DAEO in the list of those
individuals who may designate an employee as a ``covered employee'' to
ensure compliance with the principles set forth in 5 CFR 2635.403. To
ensure that the prohibition in this section is not unnecessarily
burdensome, the Department has also added a new Sec. 7501.106(b)(2)
(the prior proposed paragraph (b)(2) has been redesignated paragraph
(b)(3)), which permits the DAEO, upon recommendation of the appropriate
individual of Assistant Secretary rank, to exclude in writing an
employee otherwise designated as a ``covered employee'' if the
employee's official duties do not substantially involve the regulation
or oversight of GSEs and ownership of the interests prohibited by
Sec. 7501.106(c) would not cause a reasonable person to question the
impartiality and objectivity with which the Department's programs are
administered.
In response to another comment from within the Department, the
Department has specifically included the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation under
Sec. 7501.106(e) to make clear that special Government employees who
are covered employees under Sec. 7501.106(b)(1) cannot be employed by
any of these organizations or their affiliates. This modification is
required to ensure compliance with 5 CFR 2635.403 and because special
Government employees are not otherwise subject to the outside
employment and other activities provisions of Sec. 7501.105.
IV. Other Changes
An exception is being added to the prohibition in
Sec. 7501.104(a)(5) against an employee receiving any Department
subsidy provided pursuant to Section 8 of the United States Housing Act
of 1937, as amended (42 U.S.C. 1437f). Under new
Sec. 7501.104(a)(5)(iii), an employee may receive such a subsidy if the
tenant of the subsidized unit is the parent, child, grandchild, or
sibling of the employee, but only if there is no increase in that
tenant's rent upon the commencement of subsidy payments other than
normal annual adjustments. This change from the proposed rule reflects
current Departmental practice.
In addition, the Department has decided to exclude special
Government employees (SGEs) from the prior approval requirement at
Sec. 7501.105(c) of the final rule. Proposed Sec. 7501.105(c)(1) would
have required all employees of the Department to obtain approval before
engaging in certain types of outside employment or activities. Special
Government Employees have been subject to this requirement because they
are included within the meaning of ``employee,'' as used in the
supplemental regulation. However, SGEs were not required to obtain
prior approval for outside employment under the Department's old
Standards of Conduct. Moreover, SGEs are excluded from the outside
employment prohibitions at Sec. 7501.105(a) of the final rule.
Accordingly, the Department has concluded that it would be unreasonable
to apply the prior approval requirement to SGEs, and is providing in
Sec. 7501.103(c)(1) of the final
[[Page 36248]]
rule that the prior approval requirement therein applies to employees
of the Department, ``except special Government employees.''
Finally, the Department has decided not to exclude employees who
file public or confidential financial disclosure reports in the Office
of Housing's Office of Deputy Assistant Secretary for Operations from
the list of ``covered employees'' in Sec. 7501.106(b)(1). Section
7501.106 sets forth additional rules for certain employees involved in
the regulation or oversight of the Government sponsored enterprises.
The reason for this change is that the Office of Housing has been
reorganized since the publication of the proposed rule to give the
Deputy Assistant Secretary for Operations programmatic responsibility
over matters that affect the Government sponsored enterprises.
Accordingly, the exclusionary clause ``with the exception of the Office
of Deputy Assistant Secretary for Operations'' has been deleted from
paragraph (b)(1)(ii) containing the definition of ``covered employee''
for purposes of Sec. 7501.106.
V. Removal of Old Department Standards of Conduct Regulations and
Revision of the Residual Cross-Reference Provision
On April 5, 1996, the Department published a final rule that
provided for removal of all of the then existing provisions in the
Department's old Standards of Conduct regulation at 24 CFR part 0, and
their replacement with a single section that provides a cross-reference
to 5 CFR parts 2634 and 2635, effective May 6, 1996 (61 FR 15350). To
prevent an untimely lapse in enforcement authority for the two sections
of 24 CFR part 0 that had temporarily remained in effect pursuant to
the extended grace periods in the Standards--Sec. 0.735-203 regarding
outside employment and other activities, and Sec. 0.735-204 regarding
financial interests--the Department published a correction to the final
rule on May 1, 1996, effective May 6, 1996, preserving those two
sections at 24 CFR 0.2 and 0.3. (61 FR 19187-19188). Upon the effective
date of the Department's supplemental standards of ethical conduct as a
final rule, the Department is amending 24 CFR part 0 to remove the
temporarily preserved sections regarding outside employment and
financial interests, and to include in the residual cross-reference
provision a notation of the Department's newly issued supplemental
standards of ethical conduct at 5 CFR part 7501.
VI. Matters of Regulatory Procedure
Regulatory Flexibility Act
It is hereby certified that this rule will not have significant
economic impact on a substantial number of small entities. This rule
affects only Federal employees and their immediate families.
Environmental Impact
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20(k) of the HUD regulations,
the policies and procedures contained in this rule relate only to
internal administrative procedures whose content does not constitute a
development decision nor affect the physical condition of project areas
or building sites, and therefore, are categorically excluded from the
requirements of the National Environmental Policy Act.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule will not have substantial direct effects on
States or their political subdivisions, or the relationship between the
Federal Government and the States, or on the distribution of power and
responsibilities among the various levels of government. Specifically,
this rule is only directed toward Federal employees and would not alter
the established roles of HUD and the States and local governments. As a
result, the rule is not subject to review under the order.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule does not have
potential for significant impact on family formation, maintenance, and
general well-being, and, thus, is not subject to review under the
order. No significant change in existing HUD policies or programs would
result from promulgation of this rule, as those policies and programs
relate to family concerns.
List of Subjects
5 CFR Part 7501
Conflict of interests, Government employees.
24 CFR Part 0
Administrative practice and procedure, Conflict of interests.
Dated: July 2, 1996.
Henry G. Cisneros,
Secretary of the Department of Housing and Urban Development.
Approved: July 2, 1996.
Stephen D. Potts,
Director, Office of Government Ethics.
For the reasons set forth in the preamble, the Department of
Housing and Urban Development, with the concurrence of the Office of
Government Ethics, is amending title 5 and title 24, subtitle A, of the
Code of Federal Regulations as follows:
TITLE 5--[AMENDED]
1. A new chapter LXV, consisting of part 7501, is added to 5 CFR to
read as follows:
CHAPTER LXV--DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
PART 7501--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES
OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Sec.
7501.101 Purpose.
7501.102 Definitions.
7501.103 Waivers.
7501.104 Prohibited financial interests.
7501.105 Outside employment.
7501.106 Additional rules for certain Department employees involved
in the regulation or oversight of Government sponsored enterprises.
Authority: 5 U.S.C. 301, 7301, 7351, 7353; 5 U.S.C. App. (Ethics
in Government Act of 1978); 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, 2635.203(a), 2635.403(a), 2635.803,
2635.807.
Sec. 7501.101 Purpose.
In accordance with 5 CFR 2635.105, the regulations in this part
apply to employees of the Department of Housing and Urban Development
(HUD or Department) and supplement the Standards of Ethical Conduct for
Employees of the Executive Branch contained in 5 CFR part 2635.
Employees are required to comply with 5 CFR part 2635, this part, and
any additional rules of conduct that the Department is authorized to
issue.
Sec. 7501.102 Definitions.
For purposes of this part, and otherwise as indicated, the
following definitions shall apply:
Affiliate means any entity that controls, is controlled by, or is
under common control with another entity.
Agency designee, as used also in 5 CFR part 2635, means the
Associate General Counsel for Human Resources Law, the Assistant
General Counsel,
[[Page 36249]]
Ethics Law Division, and the HUD Field Office Assistant General
Counsels; the Inspector General, for employees assigned to the Office
of the Inspector General; and the General Counsel, Office of Federal
Housing Enterprise Oversight, for employees assigned to the Office of
Federal Housing Enterprise Oversight.
Agency ethics official, as used also in 5 CFR part 2635, means the
agency designees as specified above.
Assistance means any contract, grant, loan, subsidy, guarantee,
cooperative agreement or other financial assistance under a program
administered by the HUD Secretary, and includes ``assistance'' awarded
by the Department that is competitively redistributed to a second tier
of applicants or awardees. The term does not include single family
mortgage insurance provided under a program administered by the
Secretary.
Designated Agency Ethics Official (DAEO) means the General Counsel
of HUD or the Deputy General Counsel (Operations) in the absence of the
General Counsel.
Employment means any compensated or uncompensated form of non-
Federal employment or business relationship, including self employment,
involving the provision of personal services by the employee. It
includes, but is not limited to, personal services as an officer,
director, employee, agent, attorney, consultant, contractor, general
partner, trustee, teacher or speaker. It includes writing when done
under an arrangement with another person for production or publication
of the written product.
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.
Sec. 7501.103 Waivers.
The Designated Agency Ethics Official 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
Department's programs 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, such as requiring the
employee's execution of a written disqualification statement.
Sec. 7501.104 Prohibited financial interests.
(a) General requirement. This section applies to all HUD employees
except special Government employees who are not ``covered employees''
as defined in Sec. 7501.106(b)(1) of this part. Except as provided in
paragraph (b) of this section, an employee, or an employee's spouse or
minor child, shall not directly or indirectly receive, acquire or own:
(1) Securities issued by the Federal National Mortgage Association
(FNMA) or securities collateralized by FNMA securities;
(2) Securities issued by the Federal Home Loan Mortgage Corporation
(FHLMC) or securities collateralized by FHLMC securities;
(3) Federal Housing Administration debentures or certificates of
claim;
(4) Stock or another financial interest in a multifamily project or
single family dwelling, cooperative unit, or condominium unit, which is
owned or subsidized by the Department, or which is subject to a note or
mortgage or other security interest insured by the Department, except
to the extent that the stock or other interest represents the
employee's principal residence. Employees who wish to purchase a
Department-held property as a principal residence must adhere to the
procedures established by the Assistant Secretary for Housing for the
administration of the property disposition program set forth in HUD
Handbook 4310.5;
(5) Any Department subsidy provided pursuant to Section 8 of the
United States Housing Act of 1937, as amended, (42 U.S.C. 1437f) to or
on behalf of a tenant of property owned by the employee. However, an
employee may receive such a subsidy when:
(i) The employee acquires without specific intent, as through gift
or inheritance, a property which at the time of acquisition has a
tenant receiving such a subsidy, but only as long as that tenant
continues to reside in the property;
(ii) An incumbent tenant who has not previously received such a
subsidy becomes the beneficiary thereof, but only if there is no
increase in that tenant's rent upon the commencement of subsidy
payments other than normal annual adjustments; or
(iii) The tenant is the parent, child, grandchild, or sibling of
the employee, but only if there is no increase in that tenant's rent
upon the commencement of subsidy payments other than normal annual
adjustments; or
(6) Any direct creditor interest in a mortgage insured by the
Department.
(b) Exception to prohibition for certain interests. Nothing in this
section prohibits an employee, or the spouse or minor child of an
employee, from acquiring, owning, or controlling:
(1) An interest in a publicly traded or publicly available
investment fund which, in its prospectus, does not indicate the
objective or practice of concentrating its investments in resi dential
mortgages or securities backed by residential mortgages, except those
of the Government National Mortgage Association (GNMA), and the
employee neither exercises control nor has the ability to exercise
control over the financial interests held in the fund;
(2) A limited partnership interest in a partnership which has at
least 5,000 partnership interests, and no more than 25% of the gross
value of the partnership interest constitutes projects subject to HUD
held or insured mortgages or projects currently receiving the benefit
of HUD subsidies; or
(3) Mortgage insurance provided pursuant to section 203 of the
National Housing Act (12 U.S.C. 1709) on the employee's principal
residence and any one other single family residence.
(c) Reporting and divestiture. An employee must report, in writing,
to the appropriate agency ethics official, any interest prohibited
under paragraph (a) of this section acquired prior to the commencement
of employment with the Department or without specific intent, as
through gift, inheritance, or marriage, within 30 days from the start
of employment or acquisition of such interest. Such interest must be
divested within 90 days from the date reported unless waived by the
Designated Agency Ethics Official in accordance with Sec. 7501.103.
Sec. 7501.105 Outside employment.
(a) Prohibited outside employment. Subject to the exceptions set
forth in paragraph (b) of this section, HUD employees, except special
Government employees, shall not engage in:
(1) Employment involving active participation in a business dealing
with or related to real estate or manufactured
[[Page 36250]]
housing including but not limited to real estate brokerage, management
and sales, architecture, engineering, mortgage lending, property
insurance, appraisal services, construction, construction financing,
land planning, or real estate development;
(2) Employment with a person, other than a State or local
government, who engages in lobbying activities concerning Department
programs or who is required to report expenditures for lobbying
activities or register as a lobbyist under 42 U.S.C. 3537b or similar
statutes which require the registration of persons who attempt to
influence the decisions of officers or employees of the Department;
(3) Employment as an officer or director of a person who is a
Department-approved mortgagee, a lending institution or an organization
which services securities for the Department; or
(4) Employment with the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, the Federal Home Loan Bank
System or any affiliate thereof.
(b) Exceptions to employment prohibitions. The prohibitions set
forth in paragraph (a) of this section do not apply to serving as an
officer or a member of the Board of Directors of:
(1) A Federal Credit Union;
(2) A cooperative or condominium association for a housing project
which is not subject to regulation by the Department or, if so
regulated, in which the employee personally resides; or
(3) An entity designated in writing by the Designated Agency Ethics
Official.
(c) Prior approval requirement. (1) Employees, except special
Government employees, shall obtain the prior written approval of an
Agency Ethics Official before accepting compensated or uncompensated
employment:
(i) As an officer, director, trustee, or general partner of, or in
any other position of authority with, either a for-profit or non profit
organization which directly or indirectly receives assistance from the
Department.
(ii) With a State or local government; or
(iii) In the same professional field as that of the employee's
official position.
(2) Approval shall be granted unless the conduct is inconsisent
with 5 CFR part 2635 or this part.
(d) Voluntary services. Subject to the restrictions and
requirements contained in the conflict of interest laws, 5 CFR part
2635, and this part, employees are encouraged to volunteer their
personal time to nonprofit organizations.
Note to Sec. 75.105: An employee assigned to serve in an
official capacity as the Department's liaison representative to an
outside organization is not engaged in an outside activity to which
this section applies. Notwithstanding, an employee may be assigned
to serve as the Department's liaison representative only as
authorized by law, and as approved by the Department under
applicable procedures.
Sec. 7501.106 Additional rules for certain Department employees
involved in the regulation or oversight of Government sponsored
enterprises.
(a) The following rules apply to certain Department employees whose
duties involve the regulation or oversight of Government Sponsored
Enterprises, specifically the Federal National Mortgage Association
(FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). This
section is in addition to Secs. 7501.101 to 7501.105.
(b) Definitions. For purposes of this section, the following
definitions are applicable:
(1) Except as provided in paragraph (b)(2) of this section,
``covered employee'' means all employees in the Office of Federal
Housing Enterprise Oversight and employees required to file a public or
confidential financial disclosure report under 5 CFR part 2634 in:
(i) The Office of the HUD Secretary, with the exception of the
Office of Lead-Based Paint Abatement and Poisoning Prevention;
(ii) The Office of the Assistant Secretary for Housing--Federal
Housing Commissioner;
(iii) The Office of Financial Institutions Regulation in the Office
of the Assistant Secretary for Policy Development and Research;
(iv) The Offices of Investigation, Program Standards and
Evaluation, and Regulatory Initiatives and Federal Coordination within
the Office of the Assistant Secretary for Fair Housing and Equal
Opportunity;
(v) The Office of General Counsel's Offices of Insured Housing,
Government Sponsored Enterprises/Real Estate Settlement and Procedures
Act Division in Finance and Regulatory Enforcement, Legislation and
Regulations, and the Fair Housing Enforcement Division;
(vi) The Office of Inspector General;
(vii) The official superiors of the employees listed in paragraphs
(b)(1)(iii), (b)(1)(iv) and (b)(1)(v) of this section;
(viii) Any other employee who is designated in writing by the
Secretary, the Designated Agency Ethics Official, or the appropriate
individual of Assistant Secretary rank, or his or her designee, to
ensure compliance with the principles set forth in 5 CFR 2635.403 and
who receives notice of such designation.
(2) The DAEO, upon recommendation of the appropriate individual of
Assistant Secretary rank, may exclude in writing an employee otherwise
designated as a ``covered employee'' under Sec. 7501.106(b)(1)(i)-(vii)
of this part if the employee's official duties do not substantially
involve the regulation or oversight of Government sponsored enterprises
and ownership of interests prohibited by Sec. 7501.106(c) would not
cause a reasonable person to question the impartiality and objectivity
with which the Department's programs are administered.
(3) Mortgage institution means mortgage bankers, mortgage brokers,
banks, savings and loans, and other institutions or entities that
originate, insure, or service mortgages that are owned or guaranteed by
the Federal National Mortgage Association (FNMA) or the Federal Home
Loan Mortgage Corporation (FHLMC).
(c) Prohibited financial interests. (1) Except as provided in
paragraph (c)(2) of this section, a covered employee, or a spouse or
minor child of a covered employee, shall not receive, acquire, or own
securities of:
(i) A mortgage institution if more than 20 percent of the
institution's assets consist of mortgages;
(ii) A mortgage institution in which 20 percent or less of the
institution's assets consist of mortgages and more than 40 percent of
the mortgages originated by the institution are issued, collateralized,
sold or guaranteed by FNMA and/or FHLMC; or
(iii) A mortgage institution which services or insures mortgages if
more than 20 percent of the gross income of such institution is derived
from either or both of these activities.
(2) The prohibitions in paragraph (c)(1) of this section do not
apply to ownership of securities held in a publicly traded or publicly
available investment fund, or profit-sharing, retirement, or similar
plan which in its prospectus or governing documents does not indicate
the objective or practice of concentrating its investments in the
financial services sector, and the employee neither exercises control
nor has the ability to exercise control over the financial interests
held in the fund.
(3) The mortgage institution's most recent annual financial
statement shall be used in determining the applicability of the
prohibitions in paragraph (c)(1) of this section.
(d) Restrictions arising from third party relationships. If any of
the entities listed below has securities that a covered employee would
be prohibited from owning by paragraph (c) of this section, the
employee shall report such
[[Page 36251]]
interest to the appropriate Agency Ethics Official. The Agency Ethics
Official may require the employee to terminate the third party
relationship, undertake an appropriate disqualification, or take other
appropriate action determined to be necessary consistent with 5 CFR
part 2635 and this part. This paragraph applies to a:
(1) Partnership in which the covered employee, or a spouse or minor
child of the employee is a general partner;
(2) Partnership in which the covered employee, or spouse or minor
child of the employee, individually or jointly holds more than a 10
percent limited partnership interest;
(3) Closely held corporation in which the covered employee, or
spouse or minor child of the employee, individually or jointly holds
more than a 10 percent equity interest;
(4) Trust in which the covered employee, or spouse or minor child
of the employee, has a legal or beneficial interest;
(5) Investment club or similar informal investment arrangement
between the covered employee, or spouse or minor child of the employee,
and others; or
(6) Other entity in which the covered employee, or spouse or minor
child of the employee, individually or jointly holds more than a 10
percent equity interest.
(e) Prohibited outside employment. Covered employees shall not
engage in employment with or on behalf of the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, a mortgage
institution, or any of their affiliates.
(f) Prohibited recommendations. Covered employees shall not make
any recommendation or suggestion, directly or indirectly, concerning
the acquisition, sale, or divestiture of securities of FHLMC or FNMA.
(g) Prohibited purchase of assets. Covered employees, their spouses
or minor children shall not purchase, directly or indirectly, any real
or personal property from FHLMC or FNMA, 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.
(h) Pre-existing interests. Covered employees must report, in
writing, to the appropriate Agency Ethics Official, any interest
prohibited under paragraph (c) of this section acquired prior to either
the commencement of employment as a covered employee or the effective
date of this part, or acquired without specific intent, as through
gift, inheritance, or marriage, within 30 days from the start of
covered employment or acquisition of such interest. Such interest must
be divested within 90 days from the date it is reported unless waived
by the Designated Agency Ethics Official in accordance with
Sec. 7501.103.
TITLE 24--[AMENDED]
SUBTITLE A--OFFICE OF THE SECRETARY, DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
PART O--STANDARDS OF CONDUCT
2. In Part 0 of 24 CFR subtitle A, Sec. 0.1 is revised to read as
follows:
Sec. 0.1 Cross-reference to employees ethical conduct standards and
financial disclosure regulations.
Employees of the Department of Housing and Urban Development
(Department) are subject to the executive branch-wide standards of
ethical conduct at 5 CFR part 2635, the Department's regulation at 5
CFR part 7501 which supplements the executive branch-wide standards,
and the executive branch-wide financial disclosure regulation at 5 CFR
part 2634.
Authority: 5 U.S.C. 301, 7301; 42 U.S.C. 3535(d).
[FR Doc. 96-17450 Filed 7-8-96; 8:45 am]
BILLING CODE 4210-32-P