[Federal Register Volume 61, Number 150 (Friday, August 2, 1996)]
[Rules and Regulations]
[Pages 40500-40504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19704]



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Part IV





Environmental Protection Agency





_______________________________________________________________________



5 CFR Ch. LIV



40 CFR Part 3



Supplemental Standards of Ethical Conduct for Employees of the 
Environmental Protection Agency; Final Rule

  Federal Register / Vol. 61, No. 150 / Friday, August 2, 1996 / Rules 
and Regulations  
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ENVIRONMENTAL PROTECTION AGENCY

5 CFR Chapter LIV

40 CFR Part 3

[FRL-5544-5]
RIN 3209-AA15


Supplemental Standards of Ethical Conduct for Employees of the 
Environmental Protection Agency

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency, with the concurrence of 
the Office of Government Ethics (OGE), is issuing regulations for the 
employees of EPA that supplement the Standards of Ethical Conduct for 
Employees of the Executive Branch (Standards) issued by OGE. This final 
rule is a necessary supplement to the executive branch-wide Standards 
because it addresses ethical issues unique to EPA. This rule prohibits 
certain financial interests, including compensated outside employment 
with certain persons, and requires prior approval to engage in certain 
categories of outside employment. The Agency is also revoking 
superseded portions of its existing standards of conduct regulation, 40 
CFR part 3, and, in their stead, inserting cross-references to the 
executive branch-wide Standards and this supplemental regulation, as 
well as to executive branch financial disclosure regulations.

EFFECTIVE DATE: These regulations are effective August 2, 1996.

FOR FURTHER INFORMATION CONTACT: Hale W. Hawbecker, Office of General 
Counsel (2379), Environmental Protection Agency, 401 M Street, SW., 
Washington, DC 20460, (202) 260-4550.

SUPPLEMENTARY INFORMATION:

I. Background

    On August 7, 1992, the Office of Government Ethics published the 
Standards of Ethical Conduct for Employees of the Executive Branch. See 
57 FR 35006-35067, as corrected at 57 FR 48557 and 57 FR 52583 with 
additional extensions for certain existing provisions at 59 FR 4779-
4780 and 60 FR 6390 - 6391. The executive branch-wide Standards are now 
codified at 5 CFR part 2635. Effective February 3, 1993, they 
established uniform ethical conduct standards applicable to all 
executive branch personnel.
    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. The 
Environmental Protection Agency, with OGE's concurrence, has determined 
that the following supplemental regulations, for codification in new 5 
CFR chapter LIV, to consist of part 6401, are necessary to implement 
EPA's ethics program successfully, in light of EPA's unique programs 
and operations. The Environmental Protection Agency is also 
simultaneously revoking the provisions of its existing standards of 
conduct regulations which have already been superseded or which are 
superseded upon issuance of this supplemental regulation and replacing 
them with a new section that provides a cross reference to these 
supplemental regulations and to 5 CFR parts 2634 and 2635.

II. Analysis of the Regulations

Section 6401.101  General

    Section 6401.101 explains that the regulations apply to all EPA 
employees and supplement the executive branch-wide Standards. Employees 
of the Environmental Protection Agency are also subject to the 
Standards of Ethical Conduct for Employees of the Executive Branch at 5 
CFR part 2635 and the executive branch financial disclosure regulations 
at 5 CFR part 2634.

Section 6401.102  Prohibited Financial Interests

    5 CFR 2635.403(a) authorizes agencies, by supplemental regulation, 
to prohibit or restrict the acquisition or holding of financial 
interests or classes of financial interests by agency employees based 
on the determination that the acquisition or holding of such interests 
would cause reasonable persons to question the impartiality and 
objectivity with which agency programs are administered. As under 5 CFR 
2635.802(a), this authority may be used to prohibit compensated outside 
employment relationships.
    In developing its supplemental regulation, EPA has determined that 
the financial holdings of employees in manufacturers and others 
impacted directly by the work of three EPA program offices would cause 
reasonable persons to question the impartiality and objectivity with 
which those program offices carry out their responsibilities. Thus, EPA 
restricts certain outside employment and financial interests of 
employees of the Office of Mobile Sources, the Office of Pesticide 
Programs, and the Office of Information Resources Management. These 
restrictions will help (1) To ensure public confidence in the 
impartiality and objectivity with which these offices administer their 
programs; (2) eliminate any reason for affected entities to be 
concerned that information they provide to the three offices might be 
used for private gain; and (3) avoid the disqualification of employees 
from official matters to an extent that might result in the offices' 
inability to administer their programs.
    Section 6401.102(a)(1) prohibits employees in the Office of Mobile 
Sources from having compensated employment relationships with or 
holding stocks or other financial interests in automobile manufacturers 
and manufacturers of mobile source pollution control equipment. Most of 
those employees participate in matters that directly affect the 
production and profitability of automobile manufacturers and 
manufacturers of mobile source pollution control equipment.
    Section 6401.102(a)(2) prohibits employees in the Office of 
Pesticide Programs from having outside employment with or holding 
stocks or other financial interests in companies that manufacture or 
provide wholesale distribution of pesticides. This office is primarily 
involved in the regulation of the pesticide industry. The prohibition 
is not limited to employment with or other financial interests in a 
company that itself engages in the manufacturing or wholesale 
distribution of pesticides, but extends to employment with or financial 
interests in any parent company of which that manufacturer or 
distributor is a subsidiary. The regulation specifies, by way of 
clarification, that the prohibition does not extend to employment with 
or financial interests in any company or other entity simply because it 
engages in the retail distribution of pesticides.
    Section 6401.102(a)(3) prohibits employees in the Office of 
Information Resources Management who are involved in contracting for 
data management or computer-related services from having employment 
with or holding stocks or other financial interests in data management, 
computer, or information processing firms.
    As reflected in 5 CFR 2635.403, certain prohibitions on outside 
employment and financial interests are statutory. Section 
6401.102(a)(4) reflects the provision of the Surface Mining Control and 
Reclamation Act (SMCRA) at 15 U.S.C. 2603(e) which prohibits a Federal 
employee who performs any function or duty under SMCRA from holding any 
``direct or indirect'' interest in underground or surface coal mining.

[[Page 40501]]

The Office of Government Ethics has no authority to interpret SMCRA and 
has concurred in Sec. 6401.102(a)(4) only to the extent of 
incorporating a reference to and information about SMCRA to provide 
affected EPA employees notice of the statutory prohibition to which 
they are subject. The Office of Government Ethics' concurrence in this 
final rule does not indicate its concurrence or other participation in 
any language of proposed Sec. 6401.102(a)(4) that may appear to involve 
interpretation or implementation of SMCRA.
    Section 6401.102(a)(5) reflects the statutory prohibition which, 
under the Toxic Substances Control Act (TSCA) at 15 U.S.C. 2603(e), 
applies to members of the Interagency Testing Committee. Committee 
members are prohibited from holding stocks, bonds, or other substantial 
pecuniary interests in any person, including any corporation, engaged 
in the manufacture, processing, or distribution in commerce of any 
substance or mixture subject to any rule or order under the Act. The 
regulation makes it clear that compensated outside employment of any 
such person is encompassed by the prohibition on substantial pecuniary 
interests. For one year after their service on the Committee has 
ceased, members are subject to an additional statutory prohibition on 
accepting employment or compensation from any person subject to any 
requirement of the TSCA. Because these restrictions are imposed by a 
statute for which OGE has no interpretative or other authority, OGE's 
concurrence in proposed Sec. 6401.102(a)(5) does not extend to any 
language which might be viewed as an interpretation of TSCA. It 
reflects only OGE's concurrence in EPA's determination that these 
employment and financial interest prohibitions should be reflected in 
EPA's supplemental regulations to provide notice to affected employees.
    Section 6401.102(b) permits the EPA Designated Agency Ethics 
Official or the employee's Deputy Ethics Official, upon making the 
appropriate determination, to waive in writing the prohibitions in 
Sec. 6401.102 (a)(1)-(a)(3) precluding certain outside employment for 
employees in the Office of Mobile Sources, employees in the Office of 
Pesticide Programs, and employees in the Office of Information 
Resources Management.

Section 6401.103  Outside Employment

    The requirement for prior written approval is made pursuant to 5 
CFR 2635.803 of the Executive Branch-wide Standards. EPA has determined 
that in order to effectively avoid conflicts arising from outside 
employment and activities, employees considering certain types of 
employment or activities outside of the EPA must obtain written 
approval before engaging in such employment or activities. Given the 
breadth of the Agency's responsibilities, requiring prior written 
approval of certain outside employment and activities provides a 
necessary control to ensure that employees do not engage in outside 
employment or activities in violation of applicable laws and 
regulations.
    Section 6401.103(a) listing the types of outside employment for 
which the written approval of the employee's Deputy Ethics Official is 
required is similar to those found in existing 40 CFR 3.508 that EPA is 
hereby revoking. Employment requiring advance approval from the 
employee's Deputy Ethics Official is listed in Sec. 6401.103(a) and 
includes (1) consulting services; (2) the practice of a profession as 
defined in 5 CFR 2636.305(b)(1); (3) holding State or local public 
office; (4) employment regarding subject matter that deals in 
significant part with EPA policies, programs, or operations to which 
the employee is assigned or has been assigned during the previous one-
year period; and (5) the provision of services to an EPA contractor, to 
a holder of an EPA assistant agreement, or to a firm regulated by the 
EPA office in which the employee serves. Prior approval is required for 
these activities because, by their nature, such activities tend to 
raise questions under the Standards of Ethical Conduct. Section 
6401.103(b) prescribes the content of the request for approval. Section 
6401.103(c) makes clear that section 6401 is not itself authority to 
deny permission to engage in any outside employment activity; that 
approval for outside employment will be granted unless the prospective 
outside employment is likely to involve conduct prohibited by statute 
or Federal regulations, including 5 CFR part 2635 and this supplemental 
regulation. To assure the integrity of the approval process, 
Sec. 6401.103(d) requires that requests for approval be updated if 
there is a change in the outside duties, or services performed, or the 
nature of the employee's business. New approval also must be requested 
when the employee transfers to an organization within the Agency for 
which a different Deputy Ethics Official has responsibility and unless 
the employee's Deputy Ethics Official specifies a longer period after 
five years. Section 6401.103(e) broadly defines ``employment'' to cover 
any form of non-Federal employment or business relationship involving 
the provision of personal services, whether or not for compensation, 
including personal services and writing when done under an arrangement 
with another person for production or publication of the written 
product. It does not, however, include participation in the activities 
of a nonprofit charitable, religious, professional, social, fraternal, 
educational, recreational, public service, or civic organization unless 
such activities are for compensation other than reimbursement for 
expenses.

III. Revocation of Superseded Portions of the EPA's Responsibilities 
and Conduct Regulations

    This final rule revokes those portions of EPA's employee 
responsibility and conduct regulations at 40 CFR 3.100 through 3.605 
now superseded. Some of those regulations were superseded when the 
confidential financial disclosure provisions of the Executive Branch-
wide financial disclosure regulations at 5 CFR part 2634 took effect on 
October 5, 1992 and many others were superseded when the Standards of 
Ethical Conduct for Employees of the Executive Branch at 5 CFR part 
2635 became effective on February 3, 1993. Those regulations at 40 CFR 
2.304 and 3.305 which reflect statutory prohibitions on financial 
interests are also superseded by this supplemental regulation, as is 
EPA's requirement at 40 CFR 3.508 for prior approval of outside 
employment which, as extended by 59 FR 4779-4780 and 60 FR 6390-6391, 
remains in effect until no later than January 3, 1996.
    Of its responsibilities and conduct regulations in 40 CFR 3.100-
3.508, the rule at new Sec. 3.101 retains only EPA's regulatory 
conflict of interest waivers at existing 40 CFR 3.301(b), which remain 
in effect under 5 CFR 2635.402(d)(1) until OGE has issued superseding 
regulatory waivers under 18 U.S.C. 208(b)(2). In that regard, see OGE's 
recent issuances at 60 FR 44706-44709 (August 29, 1995) and 60 FR 
47208-47233 (September 11, 1995). This EPA residual standards rule also 
replaces EPA's revoked regulations with a cross-reference at new 
Sec. 3.100 to 5 CFR parts 2634, 2635, and 6401.

IV. Matters of Regulatory Procedure

Executive Order 12866

    In issuing this rule, EPA has adhered to the regulatory philosophy 
and the applicable principles of regulation set forth in Section 1 of 
Executive Order 12866, Regulatory Planning and Review. This regulation 
has not been reviewed by the Office of Management and

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Budget under that Executive Order, as it deals with agency 
organization, management, and personnel matters and is not, in any 
event, deemed ``significant'' thereunder.

Paperwork Reduction Act

    EPA has determined that the Paperwork Reduction Act (44 U.S.C. 
chapter 35) does not apply because the proposed regulation does not 
contain any information collection requirements that require the 
approval of the Office of Management and Budget.

Administrative Procedure Act

    EPA has found that good cause exists under 5 U.S.C. 553(b)(3) (A), 
(B) and (d)(3) for waiving, as unnecessary and contrary to the public 
interest, the general notice of proposed rulemaking and the 30-day 
delay in effectiveness as to these rules and revocations. This 
rulemaking is related solely to EPA's organization, procedure, and 
practice. Further, the supplemental regulations are essentially a 
restatement of rules previously contained in EPA's employee 
responsibilities and conduct regulations, and EPA believes that it is 
important to a smooth transition from EPA's regulations to the 
executive branch standards that these rules become effective 
immediately.

Regulatory Flexibility Act

    EPA hereby certifies 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.

List of Subjects

5 CFR Part 6401

    Conflict of interests, Government employees.

40 CFR Part 3

    Conflict of interests, Government employees.

    Dated: June 13, 1996.
Carol M. Browner,
Administrator, Environmental Protection Agency.
    Approved: July 19, 1996.
Stephen D. Potts,
Director, Office of Government Ethics.Q
    For the reasons set forth in the preamble, the Environmental 
Protection Agency, with the concurrence of the Office of Government 
Ethics, amends title 5 of the Code of Federal Regulations and Title 40, 
chapter I, part 3 of the Code of Federal Regulations as follows:

TITLE 5--[AMENDED]

    1. A new chapter LIV, consisting of part 6401, is added to title 5 
of the Code of Federal Regulations to read as follows:

CHAPTER LIV--ENVIRONMENTAL PROTECTION AGENCY

PART 6401--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES 
OF THE ENVIRONMENTAL PROTECTION AGENCY

Sec.
6401.101  General.
6401.102  Prohibited financial interests.
6401.103  Prior approval for outside employment.

    Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government 
Act of 1978); 42 U.S.C. 203(c)(1); 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, 2635.403(a), 2635.802(a), 
2635.803.


Sec. 6401.101  General.

    In accordance with 5 CFR 2635.105, the regulations in this part 
apply to employees of the Environmental Protection Agency and 
supplement the Standards of Ethical Conduct for Employees of the 
Executive Branch contained in 5 CFR part 2635.


Sec. 6401.102  Prohibited financial interests.

    (a) The following employees are prohibited from holding the types 
of financial interests described in this section:
    (1) Employees in the Office of Mobile Sources are prohibited from 
having outside employment with or holding stock or any other financial 
interest in manufacturers of automobiles and mobile source pollution 
control equipment.
    (2) Employees in the Office of Pesticide Programs are prohibited 
from having outside employment with or holding stock or any other 
financial interest in companies that manufacture or provide wholesale 
distribution of pesticide products registered by the EPA. These 
restrictions apply to companies with subsidiaries in these areas but do 
not include retail distributors to the general public.
    (3) Employees in the Office of Information Resources Management 
involved with data management contracting or computer contracting are 
prohibited from having outside employment with or holding stock or any 
other financial interest in data management, computer, or information 
processing firms.
    (4) Employees who perform functions or duties under the Surface 
Mining Control and Reclamation Act (such as reviewing Environmental 
Impact Statements of the Office of Surface Mining in the Department of 
Interior) are prohibited by 30 U.S.C. 1211(f) from holding direct or 
indirect interests in underground or surface coal mining operations.
    (i) Implementing regulations of the Office of Surface Mining at 30 
CFR 706.3 define the terms ``direct financial interest'' and ``indirect 
financial interest'' as follows:
    (A) Direct financial interest means ownership or part ownership by 
an employee of land, stocks, bonds, debentures, warrants, a 
partnership, shares, or other holding and also means any other 
arrangement where the employee may benefit from his or her holding in 
or salary from coal mining operations. Direct financial interests 
include employment, pensions, creditor, real property and other 
financial relationships.
    (B) Indirect financial interest means the same financial 
relationships as for direct ownership but where the employee reaps the 
benefits of such interests, including interests held by the employee's 
spouse, minor child or other relatives, including in-laws, residing in 
the employee's home. The employee will not be deemed to have an 
indirect financial interest if there is no relationship between the 
employee's functions or duties and the coal mining operation in which 
the spouse, minor child or other resident relative holds a financial 
interest.
    (ii) Violation of the restrictions in this section is punishable by 
a fine of up to $2,500 or imprisonment for not more that one year, or 
both.
    (iii) Employees who perform functions or duties under the Surface 
Mining Control and Reclamation Act are not prohibited thereunder from 
holding interests in excepted investment funds as defined at 5 CFR 
2634.310(c)(2) provided that such funds are widely diversified, that 
is, hold no more than 5% of the value of their portfolios in the 
securities of any one issuer (other than the United States Government) 
and no more than 20% in any particular economic or geographic sector.
    (5) Members of the Interagency Testing Committee established under 
section 4(e) of the Toxic Substances Control Act (15 U.S.C. 2603(e)) 
are prohibited thereunder from holding any stocks or bonds, or having 
any substantial pecuniary interest, in any person engaged in the 
manufacture, processing, or distribution in commerce of any substance 
or mixture subject to any requirement of the Act or any rule or order 
issued under the Act and, for a period of twelve months after their 
committee service has ceased, are prohibited thereunder from accepting

[[Page 40503]]

employment or compensation from any person subject to any requirement 
of the Act or to any rule or order issued under the Act.
    (i) The statutory prohibitions in this section are enforceable by 
an action for a court order to restrain violations.
    (ii) Members of the Interagency Testing Committee are not 
prohibited thereunder from holding interests in excepted investment 
funds as defined at 5 CFR 2634.310(c)(2) provided that such fund are 
widely diversified, that is, hold no more than 5% of the value of their 
portfolios in the securities of any one issuer (other than the United 
States Government) and no more than 20% in any particular economic 
sector.
    (b) The Designated Agency Ethics Official or the cognizant Deputy 
Ethics Official may grant a written waiver from the prohibitions in 
paragraph (a)(1) through (a)(3) of this section based on a 
determination that the waiver is not inconsistent with part 2635 of 
this title or otherwise prohibited by law and that, under the 
particular circumstances, application of the prohibition is not 
necessary to avoid the appearance of misuse of position or loss of 
impartiality, or otherwise to ensure confidence in the impartiality and 
objectivity with which agency programs are administered. A waiver under 
this paragraph may impose appropriate conditions, such as requiring 
execution of a written disqualification.


Sec. 6401.103  Prior approval for outside employment.

    (a) Requirement for approval. An employee shall obtain approval 
from his or her Deputy Ethics Official before engaging in outside 
employment, with or without compensation, that involves:
    (1) Consulting services;
    (2) The practice of a profession as defined in 5 CFR 
2636.305(b)(1);
    (3) Holding State or local public office;
    (4) Subject matter that deals in significant part with the 
policies, programs or operations of EPA or any matter to which the 
employee presently is assigned or to which the employee has been 
assigned during the previous one-year period; or
    (5) The provision of services to or for:
    (i) An EPA contractor or subcontractor;
    (ii) The holder of an EPA assistance agreement or subagreement; or
    (iii) A firm regulated by the EPA office or Region in which the 
employee serves.
    (b) Form and content of request. The employee's request for 
approval of outside employment shall be submitted in writing to his or 
her Deputy Ethics Official. The request shall be sent through the 
employee's immediate supervisor (for the supervisor's information) and 
shall include:
    (1) Employee's name, title and grade;
    (2) Nature of the outside activity, including a full description of 
the services to be performed and the amount of compensation expected;
    (3) The name and business of the person or organization for which 
the work will be done (in cases of self-employment, indicate the type 
of services to be rendered and estimate the number of clients or 
customers anticipated during the next 6 months);
    (4) The estimated time to be devoted to the activity;
    (5) Whether the service will be performed entirely outside of 
normal duty hours (if not, estimate the number of hours of absence from 
work required);
    (6) The employee's statement that no official duty time or 
Government property, resources, or facilities not available to the 
general public will be used in connection with the outside employment;
    (7) The basis for compensation (e.g., fee, per diem, per annum, 
etc.);
    (8) The employee's statement that he or she has read, is familiar 
with, and will abide by the restrictions described in 5 CFR part 2635 
and Sec. 6401.102; and
    (9) An identification of any EPA assistance agreements or contracts 
held by a person to or for whom services would be provided.
    (c) Standard for approval. Approval shall 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 Sec. 6401.102. The decision must be in writing.
    (d) Keeping the record up-to-date. If there is a change in the 
nature or scope of the duties or services performed or the nature of 
the employee's business, the employee must submit a revised request for 
approval. Where an employee transfers to an organization for which a 
different Deputy Ethics Official has responsibility, the employee must 
obtain approval from the new Deputy Ethics Official. In addition, each 
approved request is valid only for five years unless the employee's 
Deputy Ethics Official specifies a longer time period.
    (e) Definition of employment. For purposes of this section, 
``employment'' means any form of non-Federal employment, business 
relationship, or activity involving the provision of personal services 
by the employee, whether or not for compensation. 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. 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 compensation other than reimbursement 
for expenses.

TITLE 40--PROTECTION OF ENVIRONMENT

CHAPTER I--ENVIRONMENTAL PROTECTION AGENCY

    Part 3 of 40 CFR chapter I is revised to read as follows:

PART 3--EMPLOYEE RESPONSIBILITIES AND CONDUCT

Sec.
3.100  Cross-reference to employee ethical conduct standards and 
financial disclosure regulations.
3.101  Waiver of certain financial interests.

    Authority: 5 U.S.C. 7301 and 18 U.S.C. 208(b)(2).


Sec. 3.100  Cross-reference to employee ethical conduct standards and 
financial disclosure regulations.

    Employees of the Environmental Protection Agency (EPA) should refer 
to the Standards of Ethical Conduct for Employees of the Executive 
Branch at 5 CFR part 2635, the EPA regulations at 5 CFR part 6401 that 
supplement those standards, and the Executive Branch financial 
disclosure regulations at 5 CFR part 2634.


Sec. 3.101  Waiver of certain financial interests.

    (a) The prohibition of 18 U.S.C. 208(a) may be waived by general 
regulation. Financial interests derived from the following have been 
determined to be too remote or too inconsequential to affect the 
integrity of employee's services, and employees may participate in 
matters affecting them:
    (1) Mutual funds (including tax-exempt bond funds), except those 
which concentrate their investments in particular industries;
    (2) Life insurance, variable annuity, or guaranteed investment 
contracts issued by insurance companies;
    (3) Deposits in a bank, savings and loan association, credit union, 
or similar financial institution;
    (4) Real property used solely as the personal residence of an 
employee;
    (5) Bonds or other securities issued by the U.S. Government or its 
agencies.

[[Page 40504]]

    (b) This provision will be superseded when the Office of Government 
Ethics publishes its Executive Branch-wide exemptions and EPA will 
publish a document in the Federal Register revoking it at that time.

[FR Doc. 96-19704 Filed 8-1-96; 8:45 am]
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