[Federal Register Volume 65, Number 173 (Wednesday, September 6, 2000)]
[Proposed Rules]
[Pages 53942-53946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22750]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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 

  Federal Register / Vol. 65, No. 173 / Wednesday, September 6, 2000 / 
Proposed Rules  

[[Page 53942]]



OFFICE OF GOVERNMENT ETHICS

5 CFR Part 2640

RIN 3209-AA09


Proposed Exemption Amendments Under 18 U.S.C. 208(b)(2) for 
Financial Interests in Sector Mutual Funds, De Minimis Securities, and 
Securities of Affected Nonparty Entities in Litigation

AGENCY: Office of Government Ethics (OGE).

ACTION: Proposed rule amendments.

-----------------------------------------------------------------------

SUMMARY: The Office of Government Ethics is proposing to amend the 
regulation that describes financial interests that are exempt from the 
prohibition in 18 U.S.C. 208(a) by revising some existing exemptions as 
well as adding new exemptions. Section 208(a) generally prohibits 
employees of the executive branch from participating in an official 
capacity in particular matters in which they or certain others 
specified in the statute have a financial interest. Section 208(b)(2) 
of title 18 permits the Office of Government Ethics to promulgate 
regulations describing financial interests that are too remote or 
inconsequential to warrant disqualification pursuant to section 208(a). 
This proposed regulation would raise the de minimis exemption for 
matters affecting interests in securities to $15,000 and would identify 
additional financial interests that would be exempt from the 
prohibition in section 208(a), including, in limited circumstances, the 
holdings of sector mutual funds, and securities issued by a nonparty 
affected by a matter in litigation.

DATES: Comments are invited and must be received on or before December 
5, 2000.

ADDRESSES: Send comments to the Office of Government Ethics, Suite 500, 
1201 New York Avenue, NW., Washington, DC 20005-3917. Attention: Judy 
H. Mann.

FOR FURTHER INFORMATION CONTACT: Judy H. Mann, Attorney-Advisor, or 
Richard M. Thomas, Associate General Counsel, Office of Government 
Ethics; telephone: 202-208-8000; TDD: 202-208-8025; FAX: 202-208-8037; 
Internet E-mail address: [email protected] (for E-mail messages, the 
subject line should include the following reference--Proposed 
Exemptions for Certain Financial Interests Prohibited in 18 U.S.C. 
208(a)).

SUPPLEMENTARY INFORMATION:

I. Background

    On December 18, 1996, the Office of Government Ethics published a 
final rule at 61 FR 66830-66851, Interpretation, Exemptions and Waiver 
Guidance Concerning 18 U.S.C. 208 (Acts Affecting a Personal Financial 
Interest), which as corrected and amended is now codified at 5 CFR part 
2640. The final rule describes a variety of financial interests that 
OGE has determined are either too remote or too inconsequential to 
affect an employee's consideration of any particular matter. Employees 
who have these financial interests are permitted, to the extent 
described in the final regulation, to participate in matters affecting 
such interests notwithstanding the general prohibition in section 
208(a). The Office of Government Ethics published the final rule after 
careful consideration of the comments made to the proposed and interim 
rules, published on September 11, 1995 and August 28, 1995 (at 60 FR 
47208-47233 and 60 FR 44706-44709), respectively, concerning the 
circumstances under which the prohibitions contained in 18 U.S.C. 
208(a) would be waived. After reevaluating the final rule to see 
whether changes to the rule might be needed, OGE has decided to publish 
this proposed rule that would amend the final rule. (OGE also recently, 
at 65 FR 16511-16513 (March 29, 2000), published a separate interim 
rule amendment issuing a new exemption for certain financial interests 
of non-Federal employers in the decennial census.) This proposed rule 
is being published after obtaining the concurrence of the Department of 
Justice pursuant to section 201(c) of Executive Order 12674, as 
modified by E.O. 12731. Also, as provided in section 402 of the Ethics 
in Government Act of 1978, as amended, 5 U.S.C. appendix, section 402, 
OGE has consulted with both the Department of Justice (as additionally 
required under 18 U.S.C. 208(d)(2)) and the Office of Personnel 
Management on this proposed rule.

II. Analysis of the Proposed Changes

    This proposed regulation would revise the existing regulation as 
well as establish additional exemptions from the prohibition in section 
208(a), permitting employees to participate in certain matters in which 
they would otherwise have a disqualifying financial interest. The 
revisions would permit an employee to act in a particular matter where 
the disqualifying financial interest arises from ownership of no more 
than $50,000 in one or more mutual funds invested in the same sector. 
The regulation would also raise the de minimis exemption for financial 
interests in securities from its current level of $5,000 to $15,000. It 
would create another new exemption for interests of up to $25,000 in 
securities issued by entities affected by a matter in litigation, where 
those entities are not parties to the litigation. To illustrate these 
new and revised exemptions, several examples would be changed.

A. Sector Mutual Funds

    Under proposed Sec. 2640.201(b)(1)(i), an employee would be free to 
act in a matter affecting the holdings of one or more mutual funds 
invested in the same sector in which the employee, his spouse or minor 
child has an interest, where the holdings are invested in the sector in 
which the fund concentrates, provided that the aggregate value of the 
family's holdings in all affected funds in the same sector does not 
exceed $50,000. A sector mutual fund is one that concentrates its 
investments in an industry, business, single country other than the 
United States, or bonds of a single State within the United States.
    The current rule contains one exemption for diversified mutual 
funds at 5 CFR 2640.201(a) and another for interests in a sector mutual 
fund where the affected holding is not in the sector in which the fund 
concentrates. See Sec. 2640.201(b). In addition, because the current 
rule at 5 CFR 2640.102(r) defines the term ``security'' to include 
mutual fund, the current de minimis exemptions at 5 CFR 2640.202 apply 
to interests in sector mutual funds. Since publication of the rule, 
however, agencies have identified a need for an additional exemption 
which allows an employee to participate in a particular

[[Page 53943]]

matter affecting the holdings of a sector mutual fund where the 
holdings are invested in the sector in which the fund concentrates.
    The Office of Government Ethics has received input from agencies in 
various forms and contexts, including responses to a survey 
specifically designed to elicit agency feedback concerning the 
effectiveness of the existing rule and the need for any modifications. 
The subject of sector funds has been one of the most commonly raised 
issues in connection with the exemptions in part 2640. A number of 
agencies have suggested either that sector funds should be exempted 
without limitation, as are diversified funds, or that at least they be 
treated as being less problematic than direct ownership of the 
securities of a particular company. Some agencies also have noted 
certain practical difficulties in determining whether a given fund is 
actually a sector fund or a diversified fund and have argued that such 
difficulties counsel treating sector funds the same way as diversified 
funds for purposes of the exemptions.
    Although OGE agrees that sector funds warrant an additional, 
limited exemption, OGE is not persuaded that an unlimited exemption 
would be justified. Employees whose duties affect companies in a given 
sector can have an appreciable conflict of interest if they invest 
heavily in mutual funds that specialize in that very sector. For 
example, an employee could participate in an important rulemaking 
proceeding that affects many or all members of a given industry, thus 
affecting not only certain underlying holdings of a sector fund, but 
even the overall economic outlook for the sector in which the fund 
specializes. Interests in sector funds, therefore, pose different and 
more significant conflict of interest concerns than interests in 
diversified mutual funds.
    Moreover, OGE does not believe that any practical difficulty some 
agencies may have encountered in distinguishing between sector and 
diversified funds justifies a complete abandonment of any effort to 
treat the two differently. The current rule states the test for 
distinguishing diversified and sector funds as follows: ``A mutual fund 
is diversified [i.e., not a sector fund] for purposes of this part if 
it does not have a policy of concentrating its investments in an 
industry, business, country other than the United States, or single 
State within the United States. Whether a mutual fund meets this 
standard may be determined by checking the fund's prospectus or by 
calling a broker or the manager of the fund.'' 5 CFR 2640.102(a) 
(Note). As a practical matter, OGE's experience is that the name of a 
given fund very often is a good indicator of whether there is any 
serious question as to the diversification of the fund; for example, 
``ABC Select Utilities Fund'' would suggest that the fund should be 
viewed as a sector fund, unless the prospectus indicates otherwise, 
whereas ``ABC Large Cap Equity Fund'' almost certainly would indicate a 
diversified fund. Any remaining doubts usually can be resolved by 
recourse to the fund prospectus, which is often readily available to 
employees and agency ethics officials through various means, including 
the Internet.
    The Office of Government Ethics does recognize that employees and 
agency ethics officials sometimes may have questions about whether a 
fund really concentrates on a given industry, business, etc. Such 
questions may arise, for example, where the prospectus suggests that 
the fund may focus on multiple industries, such as a generic ``Science 
and Technology Fund.'' To date, OGE and agency ethics officials have 
been able to resolve such questions on a case-by-case basis, usually by 
examining the degree of relatedness and overlapping interests and 
operations among the types of companies in which the fund specializes. 
OGE is not resigned to treating all sector funds the same way as 
diversified funds because of occasional difficulties in drawing the 
line between arguably discrete industries. OGE does, however, welcome 
continuing dialogue with agency ethics officials concerning any 
practical problems encountered in this area and will provide guidance 
in the future through oral advice, advisory letters and memoranda, as 
appropriate.
    The proposed rule would now provide one single $50,000 de minimis 
exemption for interests in sector mutual funds, except for purposes of 
5 CFR 2640.202(d) and (e) (which describe exemptions for interests of 
tax-exempt organizations and an employee's general partner) and 
Sec. 2640.203(a) (which describes the exemption for interests in hiring 
decisions). The definition of ``security'' at Sec. 2640.102(r) would be 
revised to include mutual funds only for purposes of these paragraphs. 
The Office of Government Ethics believes that when an employee 
participates in a particular matter affecting a holding or holdings in 
one or more mutual funds invested in the same sector, where the value 
of the ownership interests in the sector funds does not exceed $50,000, 
the interest of the employee can be considered remote and 
inconsequential. The exemption currently codified at Sec. 2640.201(b), 
allowing an employee to participate in any particular matter affecting 
one or more holdings of a sector mutual fund where the affected holding 
is not invested in the sector in which the fund concentrates, would be 
retained under the revised rule at Sec. 2640.201(b)(1)(ii). The 
proposed rule at Sec. 2640.201(b)(2) would clarify that for purposes of 
calculating the $50,000 de minimis amount in Sec. 2640.201(b)(1)(i), an 
employee must aggregate the market value of all affected funds in the 
same sector, in which he, his spouse, or minor children have an 
interest. Generally, the determination of whether two or more different 
funds concentrate on the same industry, business, etc., would be made 
by considering the degree of relatedness and overlapping interests and 
operations among the types of companies in which the funds specialize, 
as illustrated in new Example 3 following Sec. 2640.201(b) as proposed 
for revision.
    Example 2 after Sec. 2640.201(a) would be revised to reflect the 
addition of the exemption involving certain interests of up to $50,000 
in sector mutual funds in proposed Sec. 2640.201(b)(1)(i) and the 
revised definition of ``security'' under Sec. 2640.102(r). In addition, 
two new examples would be added after Sec. 2640.201(b)(2) to illustrate 
the proposed exemption under Sec. 2640.201(b)(1)(i). Finally, Example 2 
after Sec. 2640.202(b) would be deleted, as the revised definition of 
``security'' in proposed Sec. 2640.102(r) makes the example 
inapplicable.

B. De Minimis Exemption For Matters Involving Parties

    Under the existing rule at 5 CFR 2640.202(a), an employee may 
participate in a particular matter in which the disqualifying financial 
interest arises from the employee's ownership of securities issued by 
an entity affected by the matter if the securities are publicly traded, 
long-term Federal Government, or municipal securities, and the 
aggregate market value of the employee's interest in the securities of 
all entities affected by the matter does not exceed $5,000. The 
proposed rule, at 5 CFR 2634.202(a)(2), would raise the de minimis 
amount from $5,000 to $15,000.
    When OGE published 5 CFR part 2640 in December of 1996, we 
determined that an interest in securities valued at $5,000 could be 
considered remote or inconsequential. For several reasons, OGE now 
believes it would be practical to raise the de minimis amount to 
$15,000. Since the publication of the final rule, stock prices have 
risen considerably. Additionally, because the exemption applies to 
interests in

[[Page 53944]]

securities of publicly traded companies listed on the major exchanges, 
the potential for large gains or losses resulting from an employee's 
actions remains small. Raising the de minimis amount would also assist 
ethics officials in their counseling of employees who file the public 
financial disclosure form (SF 278) because the $15,000 amount would 
correspond to a reporting category on the SF 278. Both Schedules A and 
B of the SF 278 require filers to value assets held in various 
categories of value. One such category is $1,001-$15,000. Finally, many 
agencies have voiced support for an increase in the de minimis amount.
    Examples 2 and 3 after Sec. 2640.202(a)(2) would be revised to 
reflect the raise in the de minimis amount from $5,000 to $15,000 under 
proposed Sec. 2640.202(a)(2). In addition, two other examples in the 
regulation contain a reference to the de minimis amount in 
Sec. 2640.202(a)(2) and would also be revised to reflect the increased 
de minimis amount under proposed Sec. 2640.202(a)(2). These examples 
are Example 1 after Sec. 2640.103(a)(2) and Example 1 after 
Sec. 2640.204.

C. Litigation

    Under proposed Sec. 2640.203(m), an employee would be able, in 
certain circumstances, to participate in a matter in litigation 
involving specific parties in which the disqualifying financial 
interest arises from ownership by the employee, his spouse, or minor 
children of securities issued by one or more entities that are not 
parties to the litigation but are nonetheless affected by the 
litigation. The exemption would apply only if the aggregate value of 
the interest of the employee, his spouse and minor children in the 
securities of all affected entities (including securities exempted 
under Sec. 2640.202(a)) does not exceed $25,000.
    When OGE issued proposed 5 CFR part 2640 on September 11, 1995, it 
included a proposed additional exemption for employee participation in 
a particular matter in which the employee has an interest in securities 
issued by entities which are not parties to the matter but are affected 
by the matter, if the aggregate value of the interest of the employee, 
his spouse and minor children did not exceed $25,000. The Office of 
Government Ethics deleted the proposed exemption from the final rule 
published in December 1996, in response to comments received concerning 
the complexity of the regulation. OGE believed that eliminating the 
nonparty exemption would alleviate concerns that employees would have 
difficulty knowing when the exemption would apply and that agencies 
would have problems determining when an entity would become a party to 
a particular matter. After publication of the final rule, some agencies 
continued to express concern about the need for a de minimis exemption 
covering participation in litigation matters when the issuer is not a 
party to the litigation.
    After reconsideration of this issue, OGE proposes to amend the rule 
to include the nonparty exemption specifically for litigation matters. 
Because of other agencies' concerns about complexity, however, the 
proposed rule will limit the application of the exemption to particular 
matters involving litigation.
    The Office of Government Ethics believes that if the value of the 
ownership interest in securities of nonparties affected by the matter 
does not exceed $25,000, the interest is too remote and inconsequential 
to affect the integrity of the employee's Government service. In OGE's 
view, where a particular matter in litigation would also affect the 
interests of a nonparty, the nonparty's interest in the matter is 
likely to be less significant than that of a party and is also less 
likely to be affected directly.
    Current Example 2 after Sec. 2640.203(f), relating to interests in 
mutual insurance companies, would be revised to indicate that the 
$25,000 exemption in proposed Sec. 2640.203(m) for matters in 
litigation may apply in the factual situation described in the example.

III. Matters of Regulatory Procedure

Administrative Procedure Act

    Interested persons are invited to submit written comments to OGE on 
this proposed regulation, to be received on or before December 5, 2000. 
The Office of Government Ethics will review all comments received and 
consider any modifications to this rule as proposed which appear 
warranted before adopting the final rule on this matter.

Executive Order 12866

    In promulgating this proposed rule, the Office of Government Ethics 
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. These proposed amendments have also 
been reviewed by the Office of Management and Budget under that 
Executive order.

Executive Order 12988

    As Director of the Office of Government Ethics, I have reviewed 
this final amendatory regulation in light of section 3 of Executive 
Order 12988, Civil Justice Reform, and certify that it meets the 
applicable standards provided therein.

Regulatory Flexibility Act

    As Director of the Office of Government Ethics, I certify under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) that this proposed 
amendatory rule will not have a significant economic impact on a 
substantial number of small entities because it primarily affects 
Federal executive branch employees.

Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply 
to this proposed amendment because it does not contain information 
collection requirements that require approval of the Office of 
Management and Budget.

List of Subjects in 5 CFR Part 2640

    Conflict of interests, Government employees.

    Approved: June 29, 2000.
Stephen D. Potts,
Director, Office of Government Ethics.

    Accordingly, for the reasons set forth in the preamble, the Office 
of Government Ethics proposes to amend 5 CFR part 2640 as follows:

PART 2640--INTERPRETATION, EXEMPTIONS AND WAIVER GUIDANCE 
CONCERNING 18 U.S.C. 208 (ACTS AFFECTING A PERSONAL FINANCIAL 
INTEREST)

    1. The authority citation for part 2640 continues to read as 
follows:

    Authority: 5 U.S.C. App. (Ethics in Government Act of 1978); 18 
U.S.C. 208; 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.

Subpart A--General Provisions

    2. Section 2640.102 is amended by revising paragraph (r) to read as 
follows:


Sec. 2640.102  Definitions.

* * * * *
    (r) Security means common stock, preferred stock, corporate bond, 
municipal security, long-term Federal Government security, and limited 
partnership interest. The term also includes ``mutual fund'' for 
purposes of Secs. 2640.202(d) and (e) and 2640.203(a).
* * * * *
    3. Section 2640.103 is amended by revising Example 1 following 
paragraph (a)(2) to read as follows:

[[Page 53945]]

Sec. 2640.103  Prohibition.

    (a) * * *
    (2) * * *

    Example 1 to paragraph (a)(2): An agency's Office of Enforcement 
is investigating the allegedly fraudulent marketing practices of a 
major corporation. One of the agency's personnel specialists is 
asked to provide information to the Office of Enforcement about the 
agency's personnel ceiling so that the Office can determine whether 
new employees can be hired to work on the investigation. The 
employee personnel specialist owns $20,000 worth of stock in the 
corporation that is the target of the investigation. She does not 
have a disqualifying financial interest in the matter (the 
investigation and possible subsequent enforcement proceedings) 
because her involvement is on a peripheral personnel issue and her 
participation cannot be considered ``substantial'' as defined in the 
statute.
* * * * *

Subpart B--Exemptions Pursuant to 18 U.S.C. 208(b)(2)

    4. Section 2640.201 is amended by:
    a. Revising the heading of Example 1 and revising Example 2 
following paragraph (a);
    b. Revising paragraph (b); and
    c. Revising the heading of Example 1 and adding new Examples 2 and 
3 following new paragraph (b)(2)(ii).
    The revisions and additions read as follows:


Sec. 2640.201  Exemptions for interests in mutual funds, unit 
investment trusts, and employee benefit plans.

    (a) * * *

    Example 1 to paragraph (a): * * * 
    Example 2 to paragraph (a): A nonsupervisory employee of the 
Department of Energy owns shares valued at $75,000 in a mutual fund 
that expressly concentrates its holdings in the stock of utility 
companies. The employee may not rely on the exemption in paragraph 
(a) of this section to act in matters affecting a utility company 
whose stock is part of the mutual fund's portfolio because the fund 
is not a diversified fund as defined in Sec. 2640.102(a). The 
employee may, however, seek an individual waiver under 18 U.S.C. 
208(b)(1) permitting him to act.

    (b) Sector mutual funds. (1) An employee may participate in a 
particular matter affecting one or more holdings of a sector mutual 
fund where the disqualifying financial interest arises from the 
ownership by the employee, his spouse or minor children of an interest 
in the fund and:
    (i) The aggregate market value of their interests in any fund or 
funds does not exceed $50,000; or
    (ii) The affected holding is not invested in the sector in which 
the fund concentrates.
    (2) For purposes of calculating the $50,000 de minimis amount in 
paragraph (b)(1)(i) of this section, an employee must aggregate the 
market value of all sector mutual funds in which he, his spouse or 
minor children have an interest, which:
    (i) Concentrate their investments in the same industry, business, 
single country other than the United States, or bonds of a single State 
within the United States; and
    (ii) Have one or more holdings that may be affected by the 
particular matter.

    Example 1 to paragraph (b): * * *
    Example 2 to paragraph (b): A health scientist administrator 
employed in the Public Health Service at the Department of Health 
and Human Services is assigned to serve on a Departmentwide task 
force that will recommend changes in how Medicare reimbursements 
will be made to health care providers. The employee owns $35,000 
worth of shares in the XYZ Health Sciences Fund, a sector mutual 
fund invested primarily in health-related companies such as 
pharmaceuticals, developers of medical instruments and devices, 
managed care health organizations, and acute care hospitals. The 
health scientist administrator may participate in the 
recommendations.
    Example 3 to paragraph (b): The spouse of the employee in the 
previous Example owns $40,000 worth of shares in ABC Specialized 
Portfolios: Healthcare, a sector mutual fund that also concentrates 
its investments in health-related companies. The two funds focus on 
the same sector and both contain holdings that may be affected by 
the particular matter. Because the aggregated value of the two funds 
exceeds $50,000, the employee may not rely on the exemption.
* * * * *
    5. Section 2640.202 is amended by:
    a. Revising paragraph (a)(2);
    b. Revising the heading of Example 1 and revising Examples 2 and 3 
following paragraph (a)(2); and
    c. Revising the heading of Example 1 and removing Example 2 
following paragraph (b)(2).
    The revisions read as follows:


Sec. 2640.202  Exemptions for interests in securities.

    (a) * * *
    (2) The aggregate market value of the holdings of the employee, his 
spouse, and his minor children in the securities of all entities does 
not exceed $15,000.

    Example 1 to paragraph (a): * * *
    Example 2 to paragraph (a): In the preceding example, the employee 
and his spouse each own 100 shares of stock in XYZ Corporation, 
resulting in ownership of $16,000 worth of stock by the employee and 
his spouse. The exemption in paragraph (a) of this section would not 
permit the employee to participate in the evaluation of bids because 
the aggregate market value of the holdings of the employee, spouse and 
minor children in XYZ Corporation exceeds $15,000. The employee could, 
however, seek an individual waiver under 18 U.S.C. 208(b)(1) in order 
to participate in the evaluation of bids.
    Example 3 to paragraph (a): An employee is assigned to monitor XYZ 
Corporation's performance of a contract to provide computer maintenance 
services at the employee's agency. At the time the employee is first 
assigned these duties, he owns publicly traded stock in XYZ Corporation 
valued at less than $15,000. During the time the contract is being 
performed, however, the value of the employee's stock increases to 
$17,500. When the employee knows that the value of his stock exceeds 
$15,000, he must disqualify himself from any further participation in 
matters affecting XYZ Corporation or seek an individual waiver under 18 
U.S.C. 208(b)(1). Alternatively, the employee may divest the portion of 
his XYZ stock that exceeds $15,000. This can be accomplished through a 
standing order with his broker to sell when the value of the stock 
exceeds $15,000.

    (b) * * *

    Example 1 to paragraph (b): * * *
* * * * *
    6. Section 2640.203 is amended by:
    a. Revising the heading of Example 1 and revising Example 2 
following paragraph (f); and
    b. Adding a new paragraph (m).
    The revisions and addition read as follows:


Sec. 2640.203  Miscellaneous exemptions.

* * * * *
    (f) * * *

    Example 1 to paragraph (f): * * *
    Example 2 to paragraph (f): An employee of the Department of 
Justice is assigned to prosecute a case involving the fraudulent 
practices of an issuer of junk bonds. While developing the facts 
pertinent to the case, the employee learns that the mutual life 
insurance company from which he holds a life insurance policy has 
invested heavily in these junk bonds. If the Government succeeds in 
its case, the bonds will be worthless and the corresponding decline 
in the insurance company's investments will impair the company's 
ability to pay claims under the policies it has issued. The employee 
may not continue assisting in the prosecution of the case unless 
another exemption applies or he obtains an individual waiver 
pursuant to section 208(b)(1).
* * * * *

    (m) Litigation. An employee may participate in a matter in 
litigation involving specific parties in which the disqualifying 
financial interest arises from ownership by the employee, his spouse, 
or minor children of securities

[[Page 53946]]

issued by one or more entities that are not parties to the litigation 
but are affected by the litigation, if:
    (1) The securities are publicly traded or are municipal securities; 
and
    (2) The aggregate market value of the holdings of the employee, his 
spouse, and his minor children in the securities of all affected 
entities (including securities exempted under Sec. 2640.202(a)) does 
not exceed $25,000.
    7. Section 2640.204 is amended by revising Example 1 which follows 
the section to read as follows:


Sec. 2640.204  Prohibited financial interests.

* * * * *
    Example 1 to Sec. 2640.204: The Office of the Comptroller of the 
Currency (OCC), in a regulation that supplements part 2635 of this 
chapter, prohibits certain employees from owning stock in commercial 
banks. If an OCC employee purchases stock valued at $2,000 in 
contravention of the regulation, the exemption at Sec. 2640.202(a) 
for interests arising from the ownership of no more than $15,000 
worth of publicly traded stock will not apply to the employee's 
participation in matters affecting the bank.

[FR Doc. 00-22750 Filed 9-5-00; 8:45 am]
BILLING CODE 6345-01-P