[Federal Register Volume 71, Number 94 (Tuesday, May 16, 2006)]
[Rules and Regulations]
[Pages 28229-28239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-4529]



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  Federal Register / Vol. 71, No. 94 / Tuesday, May 16, 2006 / Rules 
and Regulations  

[[Page 28229]]



OFFICE OF GOVERNMENT ETHICS

5 CFR Parts 2634 and 2640

RINs 3209-AA00 and 3209-AA09


Revisions to the Executive Branch Confidential Financial 
Disclosure Reporting Regulation

AGENCY: Office of Government Ethics (OGE).

ACTION: Final rule.

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

SUMMARY: The Office of Government Ethics is issuing a final rule 
amending the executive branch regulation regarding confidential 
financial disclosure. The amendments, once effective January 1, 2007, 
will change the dates of the annual reporting period; change the annual 
filing date; clarify the criteria for designating confidential filers; 
narrow the information required to be reported; create a separate 
``report contents'' section for confidential reports; and highlight an 
existing provision regarding alternative financial conflict of interest 
review systems. In addition, the final rule includes new examples to 
illustrate these changes, and some technical amendments. This rule also 
makes one minor conforming amendment to the OGE branchwide financial 
interests regulation.

DATES: Effective Date: January 1, 2007.

FOR FURTHER INFORMATION CONTACT: Ira S. Kaye, Associate General 
Counsel, or Amy E. Braud, Attorney-Advisor, Office of Government 
Ethics; Telephone: 202-482-9300; TDD: 202-482-9293; Fax: 202-482-9237.

SUPPLEMENTARY INFORMATION:

I. Analysis of Amendments

    OGE received comments from 13 executive branch agencies and one 
individual Federal employee about the proposed amendments that were 
published at 70 FR 47138-47147 (August 12, 2005). As discussed below, 
we have incorporated some of these comments into this final rule.
    A. Reporting Period: We have decided to finalize our proposal to 
change the annual confidential financial disclosure reporting period, 
specified in 5 CFR 2634.903(a) and 2634.908(a), from a fiscal year to a 
calendar year cycle.
    One agency suggested that OGE allow each agency to establish its 
own reporting period for its employees. We have not adopted this 
suggestion because we believe that it is important to maintain 
consistency in the application of the executive branchwide confidential 
financial disclosure system.
    Two agencies expressed concern about the burden of having to review 
both incumbent OGE Form 450 Confidential Financial Disclosure Reports 
and incumbent SF 278 Executive Branch Personnel Public Financial 
Disclosure Reports during the first half of the calendar year. Although 
we are sensitive to this concern, we also believe that adopting a 
calendar year reporting period for annual confidential reports would 
make filing more convenient for filers because they would be able to 
rely on their year-end financial statements to gather the required 
data. A calendar year reporting period also is more consistent with the 
public financial disclosure reporting system. Thus, we believe that, on 
balance, adopting a calendar year confidential annual reporting period 
is warranted.
    In order to transition to a calendar year reporting period, we 
expect to waive the forthcoming fiscal year 2005 (10/01/05-09/30/06) 
annual confidential financial disclosure report filing season, with 
reports normally due at the end of October 2006. Instead, OGE will 
require confidential filers to submit their next annual reports, using 
the forthcoming new reporting format, by February 15, 2007. This first 
annual confidential financial disclosure report filing under the new 
system will cover the 15-month period from October 1, 2005 to December 
31, 2006 to avoid a gap in reporting period coverage. Subsequent annual 
reports will cover only the preceding calendar year. New entrant 
confidential filers will continue to file the current OGE Form 450 
reports for the remainder of 2006, but starting January 1, 2007, new 
entrants will start using the new reporting format with the modified 
450 report form.
    B. Filing Date: Our proposal to change the annual filing date for 
incumbent filers from October 31 to February 15 engendered a wide range 
of comments. Four agencies believed that a filing deadline later than 
February 15 would be more appropriate, in order to allow filers more 
time to collect and compile their year-end tax forms (e.g., Form 
1099s), which typically are not received until about February 1. 
Conversely, two agencies expressed a preference for an earlier filing 
date in order to permit their reviewers more time to review the annual 
incumbent OGE Form 450 confidential reports before having to collect 
their employees' annual incumbent SF 278 public reports on May 15. One 
agency, at which the OGE Form 450s and the SF 278s are reviewed by 
separate ethics officials, suggested adopting May 15 as the filing 
deadline for both reports. Another suggested that OGE allow each agency 
to establish its own filing deadline for its employees.
    We have decided to adopt our proposal to set February 15 as the 
annual incumbent report filing date because we believe that it best 
strikes the balance between affording filers time to compile their 
year-end financial data and giving reviewers adequate time to finish 
reviewing their agencies' OGE Form 450s before the SF 278 annual report 
due date of May 15. Although we understand that year-end tax documents 
are not typically received until the beginning of February, filers 
generally do not need these tax documents in order to complete their 
OGE Form 450s. Unlike the SF 278 public financial disclosure report, 
the OGE Form 450 confidential report (for both the current and new 
form) does not require the filers to report any dollar values. 
Therefore, filers' year-end statements from banks, brokers, and 
investment managers, which typically are received in early January, 
generally will provide all of the information necessary to acquire a 
``snapshot'' of their holdings on December 31, and to complete their 
OGE Form 450s by February 15.
    We have not adopted the suggestion that we allow each agency to 
establish its own filing deadline because, as stated above, we believe 
that it is important to maintain consistency in the application of the 
executive branchwide confidential financial disclosure system. We also 
have not adopted the suggestion to set May 15 as

[[Page 28230]]

the filing deadline because we believe that this would cause 
difficulties for most agencies which process the SF 278s, and because 
we believe that OGE Form 450 filers generally do not need more than 45 
days to complete their reports after the close of the reporting period.
    C. Termination Reports Not Required: We are adding new paragraph 
(e) to Sec.  2634.903 to make clear that, unlike a public filer, a 
confidential filer leaving his filing position is not required to file 
a termination report. We received no substantive comments on this 
proposal.
    D. Confidential Filer Definition: We received five comments 
supporting our proposal to amend Sec.  2634.904, the provision that 
defines a confidential filer, by incorporating into it the filing 
exclusion provisions currently found at Sec.  2634.905(a) and (b). All 
of these commenters agreed with our belief that, because the exclusion 
provision helps to determine who is required to file, it would be 
better to incorporate it into the definition of a confidential filer.
    One agency suggested that we retain the provision, currently found 
at Sec.  2634.905(b)(2), that allows an agency to exclude from the 
filing requirement an individual the duties of whose position involve 
such a low level of responsibility that any potential conflict would 
have an ``inconsequential effect'' on the Government's integrity. We 
declined to incorporate the precise language of this provision into 
proposed Sec.  2634.904 because we believe that its concept is 
adequately expressed elsewhere in the section.
    It is difficult to imagine a situation in which an employee whose 
duties involve a very low level of responsibility would be required to 
file an OGE Form 450. The definition of ``filer'' at new Sec.  
2634.904(a)(1)(i) (and current Sec. Sec.  2634.904(a)(1) and 
2634.905(b)(1)) states clearly that an employee should only be 
designated a filer if the agency determines that the duties and 
responsibilities of his position require him to exercise ``significant 
judgment,'' and to do so without ``substantial supervision and 
review.'' Even if, hypothetically, an agency could determine that an 
employee with a very low level of responsibility exercises significant 
judgment, and does so without substantial supervision and review, new 
Sec.  2634.904(b) retains the agency ethics official's authority to 
exclude that individual from the filing requirement on the ground that 
the duties of his position ``make remote the possibility that [he] will 
be involved in a real or apparent conflict of interest.'' Thus, we 
continue to believe that the language contained in current Sec.  
2634.905(b)(2) does not meaningfully contribute to an agency's 
determination whether a particular employee should file a confidential 
report.
    Another agency suggested that we require each agency to publish the 
position titles that it designates as filing positions, and to state 
the criteria upon which this determination was made. We have not 
adopted this suggestion because we believe that this requirement would 
be unduly burdensome on agency ethics officials, and because we have 
not identified any policy reason for requiring that this determination 
be made publicly.
    One agency suggested that we add an example to illustrate new Sec.  
2634.904(a)(1)(ii), regarding requiring an employee to file an OGE Form 
450 in order ``to carry out the purposes behind any statute, Executive 
order, rule, or regulation applicable to or administered by the 
employee.'' We have not adopted this suggestion because this provision, 
which is identical to current Sec.  2634.904(a)(2), itself contains an 
example (``Positions which might be subject to a reporting requirement 
under this subparagraph include those with duties which involve 
investigating or prosecuting violations of criminal or civil law.'').
    E. Alternative Procedures: By renaming Sec.  2634.905 ``Use of 
Alternative Procedures'', OGE hopes to highlight this provision, which 
permits an agency to seek OGE approval to use an alternative system in 
lieu of requiring employees to file an OGE Form 450 or an OGE Optional 
Form 450-A Confidential Certificate of No New Interests (Executive 
Branch). One agency suggested that we clarify that any alternative 
procedure established under this provision would apply only to those 
employees who meet the definition of a ``confidential filer'' in Sec.  
2634.904. We have not adopted this suggestion because we do not believe 
that it is necessary. We remind agency ethics officials that any 
procedure used as an alternative to filing would apply only to 
designated filers.
    F. Report Contents:
    a. Diversified Mutual Funds: We have decided to adopt as final our 
proposal to eliminate the requirement for confidential filers to report 
diversified mutual funds because 5 CFR 2640.201(a) exempts these 
financial interests from the conflict of interest law on personal 
financial interests (18 U.S.C. 208). Also as proposed, the regulation 
will continue to require filers to report all sector mutual funds which 
they, their spouses, or their dependent children own.
    Three agencies expressed concern that these provisions will cause 
confusion and lead to underreporting on the part of filers, who often 
have difficulty distinguishing between diversified funds and sector 
funds. Similarly, one agency suggested that we incorporate or cross-
reference the definition of ``diversified'' at 5 CFR 2640.102(a) in 
order to help filers better distinguish between diversified funds and 
sector funds.
    We are aware that some filers may need assistance to determine 
whether a particular mutual fund is diversified. We continue to 
believe, however, that the burden of providing such assistance to 
filers is outweighed by the benefit to filers of not having to report 
most of their mutual fund holdings. To the extent that agencies are 
concerned about underreporting, we suggest that they encourage their 
filers to report or seek advice about any funds that they are not 
certain are ``diversified.'' In this final rule, we have also accepted 
the suggestion that we incorporate the definition of ``diversified'' 
into Sec.  2634.907(c)(3)(vii), and we have cross-referenced, in Sec.  
2634.907(c)(2)(viii), the definition of ``sector mutual fund'' at 5 CFR 
2640.102(q). Finally, we plan to issue updated advice to reviewing 
officials about how to determine whether a particular mutual fund is 
``diversified.''
    One agency suggested that, instead of exempting diversified mutual 
funds from the reporting requirement, we simply require the reporting 
of any mutual fund holding valued at over $50,000. Because one 
regulatory exemption, 5 CFR 2640.201(a), exempts diversified mutual 
funds regardless of value, and a second, Sec.  2640.201(b)(2)(i), 
exempts sector mutual funds valued at $50,000 or less, this agency 
argues that there is no reason to report any mutual fund valued at 
$50,000 or less. Adopting a $50,000 reporting threshold for all mutual 
funds would eliminate the need for filers to distinguish between 
diversified funds and sector funds while still dramatically reducing 
the number of mutual funds that would be reportable.
    We have not adopted this recommendation in this final rule. Because 
the regulatory exemption for interests in sector funds applies only 
when the aggregate market value of an employee's interests in sector 
funds affected by the particular matter is $50,000 or less, an employee 
who owns interests in more than one fund concentrating in the same 
sector may have a disqualifying financial interest that would not be 
required to be reported on the OGE Form 450 under

[[Page 28231]]

this suggestion. Accordingly, we believe that it would be unwise to 
establish a $50,000 reporting threshold for all mutual fund interests.
    One agency also expressed concern that the second example after 
proposed Sec.  2634.907(c)(3) describes a mutual fund as ``widely 
diversified,'' rather than ``diversified.'' We agree that the term 
``widely diversified'' should not appear in this example. The term 
``widely diversified'' is used to determine whether a particular asset 
is an excepted investment fund (EIF), rather than to determine whether 
an asset is a diversified mutual fund. Thus, we have modified the 
wording of this example in the final rule by deleting the word 
``widely.''
    b. Liabilities: We are adopting as final our proposal to eliminate 
the requirement to report student loans, credit card debts, and loans 
from financial institutions which are based on terms generally 
available to the public because these types of loans do not present 
conflicts of interest for most confidential filers.
    One agency commented that these liabilities should not be excepted 
from the filing requirement because they can raise significant 
conflicts of interest for the employees of some agencies. We note that, 
to the extent that an agency needs additional information in order to 
perform a conflict of interest review, that agency can request the 
authority to collect this information supplementally, in accordance 
with Sec.  2634.901(b).
    c. Type of Income: We are also finalizing our proposal to eliminate 
the requirement to report the type of income earned on reportable 
assets. The two agencies that commented on this proposal both agreed 
with our determination, based on experience with the confidential 
disclosure system over the years, that this information does not add 
sufficient value to the conflict of interest review process, executive 
branchwide, to justify continuation of the resulting burden on filers 
and their agencies.
    d. Dates of Agreements and Arrangements: We also are adopting our 
proposal to eliminate the requirement to report the dates on which 
agreements and arrangements, other than for future employment, were 
entered. One agency commented that we should continue to require filers 
to report these dates because this information can help agency ethics 
officials determine whether the employee was in a particular ``covered 
relationship'' at a particular point in time. We are sensitive to this 
concern, but our understanding is that this information does not 
contribute to the conflict of interest analysis conducted by most 
reviewing officials.
    Many filers do not remember, and have difficulty acquiring 
information about, the dates on which they entered into long-term 
arrangements such as pension plans sponsored by former employers. In 
contrast, a reviewing official who needs this information in a 
particular case simply can seek it from the filer. Alternatively, 
agencies that have a need for this information in all or most cases can 
request the authority to collect this information from their employees 
supplementally, in accordance with Sec.  2634.901(b). Thus, we continue 
to believe based on our experience with the confidential system that 
the burden of reporting this information outweighs its usefulness on an 
executive branchwide basis in determining conflicts of interest.
    Another agency suggested that we add an example to this subsection 
illustrating the reporting of an employee's continued participation in 
a Teachers Insurance and Annuity Association--College Retirement 
Equities Fund (TIAA/CREF) pension plan. We have not accepted this 
suggestion because there is no special method for reporting a 
continuing agreement regarding a TIAA/CREF pension. It should be 
reported in the same manner as any other continuing participation in a 
pension plan.
    e. Report Form: OGE also will publish in the Federal Register a 
second round paperwork notice of the proposed modified version of the 
OGE Form 450 Executive Branch Confidential Financial Disclosure Report. 
The new proposed report form will reflect pertinent regulatory changes 
being made in this final rule. It also has been modified in large 
measure based on the significant comments received in response to the 
original first round paperwork notice OGE published at 70 FR 47204-
47206 (August 12, 2005), the same day OGE published the proposed rule 
amendments on confidential disclosure (see 70 FR 47138-47147). Based on 
the paperwork comments, OGE decided to publish an additional first 
round paperwork notice (see 71 FR 13848-13850 (March 17, 2006)), in 
which OGE announced important changes to the proposed modified 
reporting format in response to the comments on the original notice and 
provided another 75-day comment period for the public and the agencies. 
As noted, OGE will separately publish a second round paperwork notice 
reflecting the comments received in response to both first round 
notices, once the additional comment period closes. At that time, OGE 
will also seek three-year clearance from the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act approval for the OGE 
Form 450 form as proposed for modification. OGE plans to make effective 
on January 1, 2007 both the final regulatory amendments in this 
rulemaking and the mandatory use of the new modified OGE Form 450, once 
approved by OMB. OGE already has requested from OMB a one-year 
extension of the Paperwork Reduction Act clearance for the current 
version of the 450 form to allow its continued use by new entrant 
confidential filers for the remainder of 2006. See 71 FR 16158-16160 
(March 30, 2006). In the future, OGE will make available an 
electronically fillable version of the new form. We also will allow 
employees to sign the form digitally, and to file it electronically.
    G. Other Amendments Considered:
    a. Special Government Employees: One commenter expressed the view 
that proposed Sec.  2634.904 was unclear as to whether agency ethics 
officials would continue to have the authority to exclude special 
Government employees (SGEs) from the confidential filing requirements. 
This is because current Sec.  2634.905 provides that any individual or 
class of individuals ``including special Government employees'' may be 
excluded from the filing requirement, while new Sec.  2634.904(b) as 
proposed did not include this specific reference to SGEs. We have 
revised the wording of that provision in this final rule to add 
specific reference to SGEs.
    Two agencies also expressed confusion about the filing requirements 
for SGEs. Section 2634.903(b) requires SGEs to file new entrant 
reports, but Sec.  2634.903(a) excludes them from the requirement to 
file incumbent reports. Thus, these commenters ask whether an SGE who 
serves on an appointment of over one year (without being reappointed) 
is required to file a second nominee OGE Form 450 at any point in time.
    As we stated in DAEOgram DO-03-021 of October 23, 2003 (at p. 3 
thereof), which is posted on OGE's Web site (http://www.usoge.gov), 
``[a]n SGE confidential filer is never required to file an annual OGE 
Form 450. Instead, the SGE confidential filer will file a new entrant 
report either upon his reappointment or redesignation as an SGE or upon 
the anniversary of his initial appointment.'' In order to avoid the 
administrative burden of managing these potentially numerous due dates, 
OGE recommended in that DAEOgram that agencies use May 15 for their SGE 
report filing anniversary date. Choosing this date gives confidential 
OGE Form

[[Page 28232]]

450 SGE filers the same reporting deadline as public SF 278 SGE filers. 
It also places all SGE reporting deadlines on the same date as all non-
SGE annual public report filers. If an agency chooses not to implement 
this recommendation, then it will collect new entrant OGE Form 450s 
from its SGEs on the variously occurring anniversary/reappointment 
dates throughout each year.
    Thus, in this final rule we have not modified Sec.  2634.903 in 
this regard.
    b. Reporting Underlying Holdings of Investment Vehicles: The 
proposed rule included a note to Sec.  2634.907(c)(1) and (c)(2) 
clarifying that the underlying holdings of certain investment vehicles 
must be reported separately. Although we intended to duplicate in this 
note a provision that currently appears within the text of Sec.  
2634.301(a), we had proposed slightly revising its language in the 
proposed rule amendment. Because one agency noted that the language as 
proposed might make this note's meaning less clear, we have modified 
the note to reflect the exact language contained in Sec.  2634.301(a).
    c. Gift waiver: Pursuant to Sec.  2634.304(f) of 5 CFR, OGE has the 
authority to issue to a public filer a waiver from the requirement to 
report certain gifts. One agency has suggested that we also apply this 
provision to confidential filers. We have not accepted this 
recommendation because we do not believe that such an amendment is 
needed. The waiver provision was promulgated in order to safeguard the 
personal privacy of individuals who present personal gifts to public 
filers in particular circumstances (such as upon the occasion of the 
filer's marriage). Because the OGE Form 450 is not publicly available, 
this provision is not needed for confidential filers.
    d. Exception to Requirement to Report Spouse's or Dependent Child's 
Assets and Income: Section 2634.907(h)(2) as proposed, which is now 
being adopted as final, provides an exception to the general 
requirement that a filer report his or her spouse's and dependent 
child's assets and investment income. One commenter suggested that we 
add an example to illustrate a scenario in which this exception 
properly would be applied. We have not accepted this suggestion because 
this provision is used so infrequently that we do not believe that it 
justifies the addition of a specific example.
    e. Discussing Assets and Investment Income Separately From 
Noninvestment Income: New Sec.  2634.907(b), both as proposed and as 
being adopted as final in this rulemaking, lists the kinds of 
``noninvestment'' (i.e., ``earned'') income that must be reported on 
the confidential OGE Form 450. New Sec.  2634.907(c), also both as 
proposed and as final, lists the kinds of ``assets and investment 
income'' that must be reported on the confidential report. This 
reflects a change from current Sec.  2634.301(b), which will now just 
apply for public reports, that lists the ``types of property 
reportable'' in a single paragraph. We believe that separating this 
provision into two paragraphs for confidential reporting makes it 
clearer, whether or not we ultimately decide that investment and 
noninvestment income should be reported in separate sections of the 
amended OGE Form 450. Thus, we have not accepted one agency's 
recommendation that we recombine these provisions into a single 
paragraph and instead are adopting them as final as proposed.
    Finally, as referenced in the proposed rule preamble, OGE is making 
in this final rule a couple of additional conforming cross-references 
amendments, one in part 2634 and one in part 2640 (personal financial 
interests) of this chapter, in order to reflect the renumbering of 
certain sections in part 2634. Moreover, in this final rule, OGE has 
corrected a few minor errors in amendatory paragraphs of the proposed 
rule and the regulatory text as proposed to reflect the correct 
revisions that OGE intended.

II. Matters of Regulatory Procedure

Regulatory Flexibility Act

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

Paperwork Reduction Act

    As noted above, OGE will separately publish in the Federal Register 
a new second round notice under the Paperwork Reduction Act (44 U.S.C. 
chapter 35) for the information collection requirements in this 
regulation--a proposed modified OGE Form 450 Executive Branch 
Confidential Financial Disclosure Report form (OMB control 
3209-0006) to reflect the pertinent changes made in this final 
rule. At that time, OGE will also seek three-year paperwork clearance 
from OMB for the modified form, which would be used starting in 2007. 
As explained in the preamble above, OGE has previously published two 
first round notices for the proposed modified version of the OGE Form 
450 and has considered, and is continuing to consider, the public 
comments received on the proposed new version of the form. See 70 FR 
47204-47206 (August 12, 2005) and 71 FR 13848-13850 (March 17, 2006). 
In addition, as also noted above, OGE has already requested from OMB a 
one-year extension of the paperwork clearance for the current version 
of the OGE Form 450, to allow its continued use by new entrant filers 
(including SGEs filing upon their reappointment/redesignation or 
appointment anniversary dates) for the remainder of 2006. See 71 FR 
16158-16160 (March 30, 2006). OGE plans to dispense with the annual 
fiscal year (FY06) incumbent report filing using the current version of 
the OGE Form 450 that is otherwise due on October 31, 2006. Instead, we 
will require annual filers to file the new form by the new filing 
deadline of February 15, 2007. This first annual filing using the new 
OGE Form 450 will reflect a 15-month reporting period (October 2005-
December 2006). Thereafter, the new annual confidential reports due 
each February will just cover the prior calendar year.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
chapter 25, subchapter II), this amendatory rule will not significantly 
or uniquely affect small governments and will not result in increased 
expenditures by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more (as adjusted for 
inflation) in any one year.

Congressional Review Act

    The Office of Government Ethics has determined that this rulemaking 
involves a nonmajor rule under the Congressional Review Act (5 U.S.C. 
chapter 8) and submitted a report thereon to the U.S. Senate, House of 
Representatives and Government Accountability Office in accordance with 
that law at the same time this rulemaking document was sent to the 
Office of the Federal Register for publication in the Federal Register.

Executive Order 12866

    In promulgating these final rule amendments, 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 Review and Planning. In

[[Page 28233]]

addition, these amendments have been reviewed by the Office of 
Management and Budget under that Executive order. Moreover, in 
accordance with section 6(a)(3)(B) of E.O. 12866, the preamble to these 
final revisions, which are being codified in a revised 5 CFR part 2634, 
notes the legal basis and benefits of, as well as the need for, the 
regulatory action. There should be no appreciable increase in costs to 
OGE or the executive branch of the Federal Government in administering 
this amended regulation, since the revisions only clarify and improve 
the confidential financial disclosure system. Finally, this rulemaking 
is not economically significant under the Executive order and will not 
interfere with State, local or tribal governments.

Executive Order 12988

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

List of Subjects

5 CFR Part 2634

    Certificates of divestiture, Conflict of interests, Financial 
disclosure, Government employees, Penalties, Privacy, Reporting and 
recordkeeping requirements, Trusts and trustees.

5 CFR Part 2640

    Conflict of interests, Government employees.

    Approved: May 5, 2006.
Marilyn L. Glynn,
Acting Director, Office of Government Ethics.

0
Accordingly, for the reasons set forth in the preamble, the Office of 
Government Ethics is amending 5 CFR parts 2634 and 2640 as follows:

PART 2634--EXECUTIVE BRANCH FINANCIAL DISCLOSURE, QUALIFIED TRUSTS, 
AND CERTIFICATES OF DIVESTITURE

0
1. The authority citation for part 2634 continues to read as follows:

    Authority: 5 U.S.C. App. (Ethics in Government Act of 1978); 26 
U.S.C. 1043; Pub. L. 101-410, 104 Stat. 890, 28 U.S.C. 2461 note 
(Federal Civil Penalties Inflation Adjustment Act of 1990), as 
amended by Sec. 31001, Pub. L. 104-134, 110 Stat. 1321 (Debt 
Collection Improvement Act of 1996); 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

0
2. Section 2634.102 is amended by revising paragraph (b) to read as 
follows:


Sec.  2634.102  Purpose and overview.

* * * * *
    (b) The rules in this part govern both public and confidential 
(nonpublic) financial disclosure systems. Subpart I of this part 
contains the rules applicable to the confidential disclosure system.

Subpart B--Persons Required To File Public Financial Disclosure 
Reports


Sec.  2634.203  [Amended]

0
3. Section 2634.203 is amended by removing the citation ``Sec.  
2634.904(d)'' in the last sentence of paragraph (b) and adding in its 
place the citation ``Sec.  2634.904(a)(4)''.


Sec.  2634.204  [Amended]

0
4. Section 2634.204 is amended by removing the citation ``Sec.  
2634.904(b)'' at the end of the last sentence of paragraph (b) and 
adding in its place the citation ``Sec.  2634.904(a)(2)''.

Subpart C--Contents of Reports

0
5. The heading for Subpart C is revised to read as follows:

Subpart C--Contents of Public Reports


Sec.  2634.301  [Amended]

0
6. Section 2634.301 is amended by:
0
a. Removing the phrase ``part, whether public or confidential,'' in the 
first sentence of paragraph (a) and adding in its place the word 
``subpart'';
0
b. Removing the beginning phrase ``In the case of public financial 
disclosure reports, the'' in the second sentence of paragraph (a) and 
adding in its place the word ``The'';
0
c. Removing the phrase ``on public financial disclosure reports'' in 
the introductory text of paragraph (d);
0
d. Removing the phrase ``, and if he is a public filer the amount,'' in 
the fourth sentence of Example 1 following paragraph (e)(7) and adding 
in its place the phrase ``and the amount''; and
0
e. Removing the word ``also'' and the ending phrase ``if she is a 
public filer'' in the second sentence of Example 3 following paragraph 
(e)(7).


Sec.  2634.302  [Amended]

0
7. Section 2634.302 is amended by:
0
a. Removing the phrase ``part, whether public or confidential,'' in the 
introductory text of paragraph (a)(1) and adding in its place the word 
``subpart'';
0
b. Removing the phrase ``in the case of public financial disclosure 
reports'' in the introductory text of paragraph (a)(1);
0
c. Removing the phrase ``if he is a public filer'' in the third 
sentence of Example 2 following paragraph (a)(1)(iv);
0
d. Removing the phrase ``part, whether public or confidential,'' in the 
introductory text of paragraph (b) and adding in its place the word 
``subpart'';
0
e. Removing the beginning phrase ``For public financial disclosure 
reports, the'' in the fourth sentence of paragraph (b)(1) and adding in 
its place the word ``The'';
0
f. Removing the phrase ``in the case of public financial disclosure 
reports'' and the comma between the words ``value'' and ``of'' in 
paragraph (b)(2);
0
g. Removing the phrase ``if he is a public filer'' in the third 
sentence of Example 1 following paragraph (b)(2);
0
h. Removing the phrase ``if he is a public filer,'' in the fifth 
sentence of Example 2 following paragraph (b)(2); and
0
i. Removing the phrase ``if she is a public filer'' in the second 
sentence of Example 3 following paragraph (b)(2).


Sec.  2634.303  [Amended]

0
8. Section 2634.303 is amended by removing the word ``public'' and the 
phrase ``subpart B of this part'' and adding the phrase ``this 
subpart'' in its place in the introductory text of paragraph (a).


Sec.  2634.304  [Amended]

0
9. Section 2634.304 is amended by:
0
a. Removing the citation ``Sec. Sec.  2634.308(b) and 2634.907(a)'' in 
the first sentence of paragraph (a) and adding in its place the 
citation ``Sec.  2634.308(b)'';
0
b. Removing the phrase ``part, whether public or confidential,'' in the 
first sentence of paragraph (a) and adding in its place the word 
``subpart''
0
c. Removing the phrase ``in the case of public financial disclosure 
reports'' and the comma between the words ``value'' and ``of'' in the 
first sentence of paragraph (a);
0
d. Removing the citation ``Sec. Sec.  2634.308(b) and 2634.907(a)'' in 
paragraph (b) and adding in its place the citation ``Sec.  
2634.308(b)'';
0
e. Removing the phrase ``part, whether public or confidential,'' in 
paragraph (b) and adding in its place the word ``subpart'';
0
f. Removing the phrase ``in the case of public financial disclosure 
reports'' and the comma between the words ``value'' and ``of'' in 
paragraph (b); and
0
g. Removing the phrase ``by public filers'' in the introductory text of 
paragraph (f)(1).


Sec.  2634.305  [Amended]

0
10. Section 2634.305 is amended by:

[[Page 28234]]

0
a. Removing the phrase ``part, whether public or confidential,'' in the 
first sentence of paragraph (a) and adding in its place the word 
``subpart'';
0
b. Removing the beginning phrase ``For public financial disclosure 
reports, the'' in the second sentence of paragraph (a) and adding in 
its place the word ``The''; and
0
c. Adding the word ``also'' between the words ``report'' and ``shall'' 
in the second sentence of paragraph (a).


Sec.  2634.306  [Amended]

0
11. In Sec.  2634.306, the undesignated introductory text is amended by 
removing the phrase ``part, whether public or confidential,'' and 
adding in its place the word ``subpart'';


Sec.  2634.307  [Amended]

0
12. In Sec.  2634.307, the text of paragraph (a) is amended by removing 
the phrase ``part, whether public or confidential,'' and adding in its 
place the word ``subpart''.


Sec.  2634.308  [Amended]

0
13. Section 2634.308 is amended by:
0
a. Removing the word ``public'' in paragraph (a);
0
b. Removing the word ``public'' in the first sentence of the 
introductory text of paragraph (b);
0
c. Removing the word ``public'' between the words ``Each'' and 
``financial'' in paragraph (c); and
0
d. Removing the word ``public'' between the words ``recent'' and 
``financial'' in paragraph (c).


Sec.  2634.309  [Amended]

0
14. Section 2634.309 is amended by:
0
a. Removing the word ``either'' and the phrase ``or subpart I'' from 
the introductory text of paragraph (a);
0
b. Removing the comma between the words ``source'' and ``and'', the 
phrase ``for a public financial disclosure report'', and the comma 
between the words ``value'' and ``of'' in paragraph (a)(1)(ii);
0
c. Removing the phrase ``for a public financial disclosure report'' in 
paragraph (a)(1)(iii);
0
d. Removing the ending phrase ``, either on a public or confidential 
financial disclosure report'' in the third sentence of Example 1 
following paragraph (a)(1)(iii);
0
e. Removing the ending phrase ``, either on a public or confidential 
financial disclosure report'' in the second sentence of Example 2 
following paragraph (a)(1)(iii);
0
f. Removing the parenthetical phrase ``(applicable only to public 
filers)'' in the introductory text of paragraph (a)(3); and
0
g. Removing the phrase ``or as a new entrant under Sec.  2634.908(b),'' 
in paragraph (b).


Sec.  2634.310  [Amended]

0
15. Section 2634.310 is amended by:
0
a. Removing the phrase ``or subpart I of this part'' in paragraph 
(a)(1); and
0
b. Removing the beginning phrase ``Public financial disclosure 
reports'' in the second sentence of paragraph (c)(1) and adding in its 
place the word ``Filers''.


Sec.  2634.311  [Amended]

0
16. Section 2634.311 is amended by:
0
a. Removing the phrase ``public financial disclosure'' in the first 
sentence of paragraph (b);
0
b. Removing the word ``part'' in the first sentence of paragraph (b) 
and adding in its place the word ``subpart'';
0
c. Removing the phrase ``public financial disclosure'' in paragraph 
(c)(2); and
0
d. Removing the word ``part'' in paragraph (c)(2) and adding in its 
place the word ``subpart''.

Subpart F--Procedure


Sec.  2634.601  [Amended]

0
17. Section 2634.601 is amended by:
0
a. Removing the citation ``Sec.  2634.905(d)'' in the second sentence 
of paragraph (a) and adding in its place the citation ``Sec.  
2634.905(b)''; and
0
b. Removing the last sentence (in parentheses) in paragraph (a).

Subpart I--Confidential Financial Disclosure Reports

0
18. Section 2634.903 is amended by:
0
a. Removing the citation ``Sec.  2634.904'' in the first sentence of 
paragraph (a) and adding in its place the citation ``Sec.  
2634.904(a)'';
0
b. Removing the phrase ``twelve-month period ending September 30'' in 
the first sentence of paragraph (a) and adding in its place the phrase 
``calendar year'';
0
c. Removing the phrase ``October 31 immediately following that period'' 
in the first sentence of paragraph (a) and adding in its place the 
phrase ``February 15 of the following year'';
0
d. Removing the citation ``Sec.  2634.904(b)'' in the third sentence of 
paragraph (a) and adding in its place the citation ``Sec.  
2634.904(a)(2)'';
0
e. Removing the citation ``Sec.  2634.904(c)'' in the fourth sentence 
of paragraph (a) and adding in its place the citation ``Sec.  
2634.904(a)(3)'';
0
f. Removing the citation ``Sec.  2634.904'' in the first sentence of 
paragraph (b)(1) and adding in its place the citation ``Sec.  
2634.904(a)'';
0
g. Removing the citation ``Sec.  2634.904(c)'' in the second sentence 
of paragraph (b)(1) and adding in its place the citation ``Sec.  
2634.904(a)(3)'';
0
h. Removing the citation ``Sec.  2634.904'' in paragraph (b)(2)(i) and 
adding in its place the citation ``Sec.  2634.904(a)'';
0
i. Removing the citation ``Sec.  2634.904'' in the first sentence of 
paragraph (b)(2)(iii) and adding in its place the citation ``Sec.  
2634.904(a)'';
0
j. Removing the citation ``Sec.  2634.904(a)'' in the second sentence 
of paragraph (b)(2)(iii) and adding in its place the citation ``Sec.  
2634.904(a)(1)'';
0
k. Removing the citation ``Sec.  2634.904(b)'' in the fourth sentence 
of paragraph (b)(2)(iii) and adding in its place the citation ``Sec.  
2634.904(a)(2)'';
0
l. Removing the citation ``Sec.  2634.904'' in the first sentence of 
paragraph (b)(3) and adding in its place the citation ``Sec.  
2634.904(a)''; and
0
m. Adding a new paragraph (e) at the end of the section to read as 
follows:


Sec.  2634.903  General requirements, filing dates, and extensions.

* * * * *
    (e) Termination reports not required. An employee who is required 
to file a confidential financial disclosure report is not required to 
file a termination report upon leaving the filing position.

0
19. Section 2634.904 is revised to read as follows:


Sec.  2634.904  Confidential filer defined.

    (a) The term confidential filer includes:
    (1) Each officer or employee in the executive branch whose position 
is classified at GS-15 or below of the General Schedule prescribed by 5 
U.S.C. 5332, or the rate of basic pay for which is fixed, other than 
under the General Schedule, at a rate which is less than 120% of the 
minimum rate of basic pay for GS-15 of the General Schedule; each 
officer or employee of the United States Postal Service or Postal Rate 
Commission whose basic rate of pay is less than 120% of the minimum 
rate of basic pay for GS-15 of the General Schedule; each member of a 
uniformed service whose pay grade is less than 0-7 under 37 U.S.C. 201; 
and each officer or employee in any other position determined by the 
designated agency ethics official to be of equal classification; if:
    (i) The agency concludes that the duties and responsibilities of 
the employee's position require that employee to participate personally 
and substantially (as defined in Sec. Sec.  2635.402(b)(4) and 
2640.103(a)(2) of this chapter) through decision or the exercise of 
significant judgment, and

[[Page 28235]]

without substantial supervision and review, in taking a Government 
action regarding:
    (A) Contracting or procurement;
    (B) Administering or monitoring grants, subsidies, licenses, or 
other federally conferred financial or operational benefits;
    (C) Regulating or auditing any non-Federal entity; or
    (D) Other activities in which the final decision or action will 
have a direct and substantial economic effect on the interests of any 
non-Federal entity; or
    (ii) The agency concludes that the duties and responsibilities of 
the employee's position require the employee to file such a report to 
avoid involvement in a real or apparent conflict of interest, and to 
carry out the purposes behind any statute, Executive order, rule, or 
regulation applicable to or administered by the employee. Positions 
which might be subject to a reporting requirement under this 
subparagraph include those with duties which involve investigating or 
prosecuting violations of criminal or civil law.

    Example 1 to paragraph (a)(1). A contracting officer develops 
the requests for proposals for data processing equipment of 
significant value which is to be purchased by his agency. He works 
with substantial independence of action and exercises significant 
judgment in developing the requests. By engaging in this activity, 
he is participating personally and substantially in the contracting 
process. The contracting officer should be required to file a 
confidential financial disclosure report.
    Example 2 to paragraph (a)(1). An agency environmental engineer 
inspects a manufacturing plant to ascertain whether the plant 
complies with permits to release a certain effluent into a nearby 
stream. Any violation of the permit standards may result in civil 
penalties for the plant, and in criminal penalties for the plant's 
management based upon any action which they took to create the 
violation. If the agency engineer determines that the plant does not 
meet the permit requirements, he can require the plant to terminate 
release of the effluent until the plant satisfies the permit 
standards. Because the engineer exercises substantial discretion in 
regulating the plant's activities, and because his final decisions 
will have a substantial economic effect on the plant's interests, 
the engineer should be required to file a confidential financial 
disclosure report.
    Example 3 to paragraph (a)(1). A GS-13 employee at an 
independent grant making agency conducts the initial agency review 
of grant applications from nonprofit organizations and advises the 
Deputy Assistant Chairman for Grants and Awards about the merits of 
each application. Although the process of reviewing the grant 
applications entails significant judgment, the employee's analysis 
and recommendations are reviewed by the Deputy Assistant Chairman, 
and the Assistant Chairman, before the Chairman decides what grants 
to award. Because his work is subject to ``substantial supervision 
and review,'' the employee is not required to file a confidential 
financial disclosure report unless the agency determines that filing 
is necessary under Sec.  2634.904(a)(1)(ii).
    Example 4 to paragraph (a)(1). As a senior investigator for a 
criminal law enforcement agency, an employee often leads 
investigations, with substantial independence, of suspected 
felonies. The investigator usually decides what information will be 
contained in the agency's report of the suspected misconduct. 
Because he participates personally and substantially through the 
exercise of significant judgment in investigating violations of 
criminal law, and because his work is not substantially supervised, 
the investigator should be required to file a confidential financial 
disclosure report.
    Example 5 to paragraph (a)(1). An investigator is principally 
assigned as the field agent to investigate alleged violations of 
conflict of interest laws. The investigator works under the direct 
supervision of an agent-in-charge. The agent-in-charge reviews all 
of the investigator's work product and then uses those materials to 
prepare the agency's report which is submitted under his own name. 
Because of the degree of supervision involved in the investigator's 
duties, the investigator is not required to file a confidential 
disclosure report unless the agency determines that filing is 
necessary under Sec.  2634.904(a)(1)(ii).

    (2) Unless required to file public financial disclosure reports by 
subpart B of this part, all executive branch special Government 
employees.

    Example 1 to paragraph (a)(2). A consultant to an agency 
periodically advises the agency regarding important foreign policy 
matters. The consultant must file a confidential report if he is 
retained as a special Government employee and not an independent 
contractor.
    Example 2 to paragraph (a)(2). A special Government employee 
serving as a member of an advisory committee (who is not a private 
group representative) attends four committee meetings every year to 
provide advice to an agency about pharmaceutical matters. No 
compensation is received by the committee member, other than travel 
expenses. The advisory committee member must file a confidential 
disclosure report because she is a special Government employee.

    (3) Each public filer referred to in Sec.  2634.202 on public 
disclosure who is required by agency regulations and forms issued in 
accordance with Sec. Sec.  2634.103 and 2634.601(b) to file a 
supplemental confidential financial disclosure report which contains 
information that is more extensive than the information required in the 
reporting individual's public financial disclosure report under this 
part.
    (4) Any employee who, notwithstanding his exclusion from the public 
financial reporting requirements of this part by virtue of a 
determination under Sec.  2634.203, is covered by the criteria of 
paragraph (a)(1) of this section.
    (b) Any individual or class of individuals described in paragraph 
(a) of this section, including special Government employees unless 
otherwise noted, may be excluded from all or a portion of the 
confidential reporting requirements of this subpart, when the agency 
head or designee determines that the duties of a position make remote 
the possibility that the incumbent will be involved in a real or 
apparent conflict of interest.

    Example 1 to paragraph (b). A special Government employee who is 
a draftsman prepares the drawings to be used by an agency in 
soliciting bids for construction work on a bridge. Because he is not 
involved in the contracting process associated with the 
construction, the likelihood that this action will create a conflict 
of interest is remote. As a result, the special Government employee 
is not required to file a confidential financial disclosure report.
    Example 2 to paragraph (b). An agency has just hired a GS-5 
Procurement Assistant who is responsible for typing and processing 
procurement documents, answering status inquiries from the public, 
performing office support duties such as filing and copying, and 
maintaining an on-line contract database. The Assistant is not 
involved in contracting and has no other actual procurement 
responsibilities. Thus, the possibility that the Assistant will be 
involved in a real or apparent conflict of interest is remote, and 
the Assistant is not required to file.


0
20. Section 2634.905 is amended by:
0
a. Revising the section heading;
0
b. Removing the undesignated introductory text of the section, 
paragraphs (a), (b) and (c), and Examples 1, 2 and 3 following 
paragraph (d);
0
c. Adding a new paragraph (a) and a new example following paragraph 
(a);
0
d. Redesignating paragraph (d) as paragraph (b), including 
redesignating paragraphs (d)(1) through (d)(6) as paragraphs (b)(1) 
through (b)(6), respectively;
0
e. Revising the first sentence of newly redesignated paragraph (b) 
introductory text;
0
f. Removing the two references to ``paragraph (d)(5)'' in the first and 
second sentences of newly redesignated paragraph (b)(4) and adding in 
their place in each instance references to ``paragraph (b)(5)''; and
0
g. Removing the reference to ``paragraph (d)(4)'' in newly redesignated 
paragraph (b)(5) and adding in its place a reference to ``paragraph 
(b)(4)''.
    The addition and revisions read as follows:

[[Page 28236]]

Sec.  2634.905  Use of alternative procedures.

    (a) With the prior written approval of OGE, an agency may use an 
alternative procedure in lieu of filing the OGE Form 450 or OGE 
Optional Form 450-A. The alternative procedure may be an agency-
specific form to be filed in place thereof. An agency must submit for 
approval a description of its proposed alternative procedure to OGE.

    Example to paragraph (a). A nonsupervisory auditor at an agency 
is regularly assigned to cases involving possible loan improprieties 
by financial institutions. Prior to undertaking each enforcement 
review, the auditor reviews the file to determine if she, her 
spouse, minor or dependent child, or any general partner, 
organization in which she serves as an officer, director, trustee, 
employee, or general partner, or organization with which she is 
negotiating or has an agreement or an arrangement for future 
employment, or a close friend or relative is a subject of the 
investigation, or will be in any way affected by the investigation. 
Once she determines that there is no such relationship, she signs 
and dates a certification which verifies that she has reviewed the 
file and has determined that no conflict of interest exists. She 
then files the certification with the head of her auditing division 
at the agency. On the other hand, if she cannot execute the 
certification, she informs the head of her auditing division. In 
response, the division will either reassign the case or review the 
conflicting interest to determine whether a waiver would be 
appropriate. This alternative procedure, if approved by the Office 
of Government Ethics in writing, may be used in lieu of requiring 
the auditor to file a confidential financial disclosure report.

    (b) An agency may use the OGE Optional Form 450-A (Confidential 
Certificate of No New Interests) in place of the OGE Form 450 if the 
agency head or designee determines it is adequate to prevent possible 
conflicts of interest. * * *
* * * * *

0
21. Section 2634.907 is revised to read as follows:


Sec.  2634.907  Report contents.

    (a) Other than the reports described in Sec.  2634.904(a)(3) of 
this subpart, each confidential financial disclosure report shall 
comply with instructions issued by the Office of Government Ethics and 
include on the standardized form prescribed by OGE (see Sec.  2634.601 
of subpart F of this part) the information described in paragraphs (b) 
through (g) of this section for the filer. Each report shall also 
include the information described in paragraph (h) of this section for 
the filer's spouse and dependent children.
    (b) Noninvestment income. Each financial disclosure report shall 
disclose the source of earned or other noninvestment income in excess 
of $200 received by the filer from any one source or which has accrued 
to the filer's benefit during the reporting period, including:
    (1) Salaries, fees, commissions, wages and any other compensation 
for personal services (other than from United States Government 
employment);
    (2) Any honoraria, including payments made or to be made to 
charitable organizations on behalf of the filer in lieu of honoraria; 
and


    Note to paragraph (b)(2): In determining whether an honorarium 
exceeds the $200 threshold, subtract any actual and necessary travel 
expenses incurred by the filer and one relative, if the expenses are 
paid or reimbursed by the filer. If such expenses are paid or 
reimbursed by the honorarium source, they shall not be counted as 
part of the honorarium payment.


    (3) Any other noninvestment income, such as prizes, scholarships, 
awards, gambling income or discharge of indebtedness.

    Example to paragraphs (b)(1) and (b)(3). A filer teaches a 
course at a local community college, for which she receives a salary 
of $1,000 per year. She also received, during the previous reporting 
period, a $250 award for outstanding local community service. She 
must disclose both.

    (c) Assets and investment income. Each financial disclosure report 
shall disclose separately:
    (1) Each item of real and personal property having a fair market 
value in excess of $1,000 held by the filer at the end of the reporting 
period in a trade or business, or for investment or the production of 
income, including but not limited to:
    (i) Real estate;
    (ii) Stocks, bonds, securities, and futures contracts;
    (iii) Livestock owned for commercial purposes;
    (iv) Commercial crops, either standing or held in storage;
    (v) Antiques or art held for resale or investment;
    (vi) Vested beneficial interests in trusts and estates;
    (vii) Pensions and annuities;
    (viii) Sector mutual funds (see definition at Sec.  2640.102(q) of 
this chapter);
    (ix) Accounts or other funds receivable; and
    (x) Capital accounts or other asset ownership in businesses.
    (2) The source of investment income (dividends, rents, interest, 
capital gains, or the income from qualified or excepted trusts or 
excepted investment funds (see paragraph (i) of this section)), which 
is received by the filer or accrued to his benefit during the reporting 
period, and which exceeds $200 in amount or value from any one source, 
including but not limited to income derived from:
    (i) Real estate;
    (ii) Collectible items;
    (iii) Stocks, bonds, and notes;
    (iv) Copyrights;
    (v) Vested beneficial interests in trusts and estates;
    (vi) Pensions;
    (vii) Sector mutual funds (see definition at Sec.  2640.102(q) of 
this chapter);
    (viii) The investment portion of life insurance contracts;
    (ix) Loans;
    (x) Gross income from a business;
    (xi) Distributive share of a partnership;
    (xii) Joint business venture income; and
    (xiii) Payments from an estate or an annuity or endowment contract.


    Note to paragraphs (c)(1) and (c)(2): For Individual Retirement 
Accounts (IRAs), brokerage accounts, trusts, mutual or pension 
funds, and other entities with portfolio holdings, each underlying 
asset must be separately disclosed, unless the entity qualifies for 
special treatment under paragraph (i) of this section.


    (3) Exemptions. The following assets and investment income are 
exempt from the reporting requirements of paragraphs (c)(1) and (c)(2) 
of this section:
    (i) A personal residence, as defined in Sec.  2634.105(l), of the 
filer or spouse;
    (ii) Accounts (including both demand and time deposits) in 
depository institutions, including banks, savings and loan 
associations, credit unions, and similar depository financial 
institutions;
    (iii) Money market mutual funds and accounts;
    (iv) U.S. Government obligations, including Treasury bonds, bills, 
notes, and savings bonds;
    (v) Government securities issued by U.S. Government agencies;
    (vi) Financial interests in any retirement system of the United 
States (including the Thrift Savings Plan) or under the Social Security 
Act; and
    (vii) Diversified mutual funds. (``Diversified'' means that the 
fund does not have a stated policy of concentrating its investments in 
any industry, business, single country other than the United States, or 
bonds of a single State within the United States and, in the case of an 
employee benefit plan, means that the plan's trustee has a written 
policy of varying plan investments. Whether a

[[Page 28237]]

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.)

    Example 1 to paragraph (c). A filer owns a beach house which he 
rents out for several weeks each summer, receiving annual rental 
income of approximately $5,000. He must report the rental property, 
as well as the city and state in which it is located.
    Example 2 to paragraph (c). A filer's investment portfolio 
consists of several stocks, U.S. Treasury bonds, several cash bank 
deposit accounts, an account in the Government's Thrift Savings 
Plan, and shares in sector mutual funds and diversified mutual 
funds. He must report the name of each sector mutual fund in which 
he owns shares, and the name of each company in which he owns stock, 
valued at over $1,000 at the end of the reporting period or from 
which he received income of more than $200 during the reporting 
period. He need not report his diversified mutual funds, U.S. 
Treasury bonds, bank deposit accounts, or Thrift Savings Plan 
holdings.

    (d) Liabilities. Each financial disclosure report filed pursuant to 
this subpart shall identify liabilities in excess of $10,000 owed by 
the filer at any time during the reporting period, and the name and 
location of the creditors to whom such liabilities are owed, except:
    (1) Personal liabilities owed to a spouse or to the parent, 
brother, sister, or child of the filer, spouse, or dependent child;
    (2) Any mortgage secured by a personal residence of the filer or 
his spouse;
    (3) Any loan secured by a personal motor vehicle, household 
furniture, or appliances, provided that the loan does not exceed the 
purchase price of the item which secures it;
    (4) Any revolving charge account;
    (5) Any student loan; and
    (6) Any loan from a bank or other financial institution on terms 
generally available to the public.

    Example to paragraph (d). A filer owes $2,500 to his mother-in-
law and $12,000 to his best friend. He also has a $15,000 balance on 
his credit card, a $200,000 mortgage on his personal residence, and 
a car loan. Under the financial disclosure reporting requirements, 
he need not report the debt to his mother-in-law, his credit card 
balance, his mortgage, or his car loan. He must, however, report the 
debt of over $10,000 to his best friend.

    (e) Positions with non-Federal organizations--(1) In general. Each 
financial disclosure report filed pursuant to this subpart shall 
identify all positions held at any time by the filer during the 
reporting period, other than with the United States, as an officer, 
director, trustee, general partner, proprietor, representative, 
executor, employee, or consultant of any corporation, company, firm, 
partnership, trust, or other business enterprise, any nonprofit 
organization, any labor organization, or any educational or other 
institution.
    (2) Exemptions. The following positions are exempt from the 
reporting requirements of paragraph (e)(1) of this section:
    (i) Positions held in religious, social, fraternal, or political 
entities; and
    (ii) Positions solely of an honorary nature, such as those with an 
emeritus designation.

    Example to paragraph (e). A filer holds outside positions as the 
trustee of his family trust, the secretary of a local political 
party committee, and the ``Chairman emeritus'' of his town's Lions 
Club. He also is a principal of a tutoring school on weekends. The 
individual must report his outside positions as trustee of the 
family trust and as principal of the school. He does not need to 
report his positions as secretary of the local political party 
committee or ``Chairman emeritus'' because each of these positions 
is exempt.

    (f) Agreements and arrangements. Each financial disclosure report 
filed pursuant to this subpart shall identify the parties to, and shall 
briefly describe the terms of, any agreement or arrangement of the 
filer in existence at any time during the reporting period with respect 
to:
    (1) Future employment (including the date on which the filer 
entered into the agreement for future employment);
    (2) A leave of absence from employment during the period of the 
filer's Government service;
    (3) Continuation of payments by a former employer other than the 
United States Government; and
    (4) Continuing participation in an employee welfare or benefit plan 
maintained by a former employer.

    Example 1 to paragraph (f). A filer plans to retire from 
Government service in eight months. She has negotiated an 
arrangement for part-time employment with a private-sector company, 
to commence upon her retirement. On her financial disclosure report, 
she must identify the future employer, and briefly describe the 
terms of, this agreement and disclose the date on which she entered 
into the agreement.
    Example 2 to paragraph (f). A new employee who has entered a 
position which requires the filing of a confidential form is on a 
leave of absence from his private-sector employment. During his 
Government tenure, he will continue to receive deferred compensation 
from this employer, and will continue to participate in its pension 
plan. He must report and briefly describe his arrangements for a 
leave of absence, for the receipt of deferred compensation, and for 
participation in the pension plan.

    (g) Gifts and travel reimbursements--(1) Gifts. Each annual 
financial disclosure report filed pursuant to this subpart shall 
contain a brief description of all gifts aggregating more than $305 in 
value which are received by the filer during the reporting period from 
any one source, as well as the identity of the source. For in-kind 
travel-related gifts, the report shall include a travel itinerary, the 
dates, and the nature of expenses provided.
    (2) Travel reimbursements. Each annual financial disclosure report 
filed pursuant to this subpart shall contain a brief description 
(including a travel itinerary, dates, and the nature of expenses 
provided) of any travel-related reimbursements aggregating more than 
$305 in value which are received by the filer during the reporting 
period from any one source, as well as the identity of the source.
    (3) Aggregation exception. Any gift or travel reimbursement with a 
fair market value of $122 or less need not be aggregated for purposes 
of the reporting rules of this section. However, the acceptance of 
gifts, whether or not reportable, is subject to the restrictions 
imposed by Executive Order 12674, as modified by Executive Order 12731, 
and the implementing regulations on standards of ethical conduct.
    (4) Valuation of gifts and travel reimbursements. The value to be 
assigned to a gift or travel reimbursement is its fair market value. 
For most reimbursements, this will be the amount actually received. For 
gifts, the value should be determined in one of the following manners:
    (i) If the gift has been newly purchased or is readily available in 
the market, the value shall be its retail price. The filer need not 
contact the donor, but may contact a retail establishment selling 
similar items to determine the present cost in the market.
    (ii) If the item is not readily available in the market, such as a 
piece of art, a handmade item, or an antique, the filer may make a good 
faith estimate of the value of the item.
    (iii) The term ``readily available in the market'' means that an 
item generally is available for retail purchase in the metropolitan 
area nearest to the filer's residence.
    (5) New entrants, as described in Sec.  2634.903(b) of this 
subpart, need not report any information on gifts and travel 
reimbursements.
    (6) Exemptions. Reports need not contain any information about 
gifts and travel reimbursements received from relatives (see Sec.  
2634.105(o)) or during a period in which the filer was not an

[[Page 28238]]

officer or employee of the Federal Government. Additionally, any food, 
lodging, or entertainment received as ``personal hospitality of any 
individual'', as defined in Sec.  2634.105(k), need not be reported. 
See also exclusions specified in the definitions of ``gift'' and 
``reimbursement'' at Sec.  2634.105(h) and (n).

    Example to paragraph (g). A filer accepts a briefcase, a pen and 
pencil set, a paperweight, and a palm pilot from a community service 
organization he has worked with solely in his private capacity. He 
determines that the value of these gifts is:
    Gift 1--Briefcase: $200
    Gift 2--Pen and Pencil Set: $35
    Gift 3--Paperweight: $5
    Gift 4--Palm Pilot: $275
    The filer must disclose gifts 1 and 4 since, together, they 
aggregate more than $305 in value from the same source. He need not 
aggregate or report gifts 2 and 3 because each gift's value does not 
exceed $122.

    (h) Disclosure rules for spouses and dependent children--(1) 
Noninvestment income. (i) Each financial disclosure report required by 
the provisions of this subpart shall disclose the source of earned 
income in excess of $1,000 from any one source, which is received by 
the filer's spouse or which has accrued to the spouse's benefit during 
the reporting period. If earned income is derived from a spouse's self-
employment in a business or profession, the report shall also disclose 
the nature of the business or profession. The filer is not required to 
report other noninvestment income received by the spouse such as 
prizes, scholarships, awards, gambling income, or a discharge of 
indebtedness.
    (ii) Each report shall disclose the source of any honoraria 
received by or accrued to the spouse (or payments made or to be made to 
charity on the spouse's behalf in lieu of honoraria) in excess of $200 
from any one source during the reporting period.

    Example to paragraph (h)(1). A filer's husband has a seasonal 
part-time job as a sales clerk at a department store, for which he 
receives a salary of $1,000 per year. He also received, during the 
previous reporting period, a $250 award for outstanding local 
community service, and an honorarium of $250 from the state 
university. The filer need not report either her husband's outside 
earned income or award because neither exceeded $1,000. She must, 
however, report the source of the honorarium because it exceeded 
$200.

    (2) Assets and investment income. Each confidential financial 
disclosure report shall disclose the assets and investment income 
described in paragraph (c) of this section and held by the spouse or 
dependent child of the filer, unless the following three conditions are 
satisfied:
    (i) The filer certifies that the item represents the spouse's or 
dependent child's sole financial interest, and that the filer has no 
specific knowledge regarding that item;
    (ii) The item is not in any way, past or present, derived from the 
income, assets or activities of the filer; and
    (iii) The filer neither derives, nor expects to derive, any 
financial or economic benefit from the item.


    Note to paragraph (h)(2): One who prepares a joint tax return 
with his spouse will normally derive a financial or economic benefit 
from assets held by the spouse, and will also be charged with 
knowledge of such items; therefore, he could not avail himself of 
this exception. Likewise, a trust for the education of one's minor 
child normally will convey a financial benefit to the parent. If so, 
the assets of the trust would be reportable on a financial 
disclosure report.


    (3) Liabilities. Each confidential financial disclosure report 
shall disclose all information concerning liabilities described in 
paragraph (d) of this section and owed by a spouse or dependent child, 
unless the following three conditions are satisfied:
    (i) The filer certifies that the item represents the spouse's or 
dependent child's sole financial responsibility, and that the filer has 
no specific knowledge regarding that item;
    (ii) The item is not in any way, past or present, derived from the 
activities of the filer; and
    (iii) The filer neither derives, nor expects to derive, any 
financial or economic benefit from the item.
    (4) Gifts and travel reimbursements. (i) Each annual confidential 
financial disclosure report shall disclose gifts and reimbursements 
described in paragraph (g) of this section and received by a spouse or 
dependent child which are not received totally independently of their 
relationship to the filer.
    (ii) A filer who is a new entrant as described in Sec.  2634.903(b) 
of this subpart is not required to report information regarding gifts 
and reimbursements received by a spouse or dependent child.
    (5) Divorce and separation. A filer need not report any information 
about:
    (i) A spouse living separate and apart from the filer with the 
intention of terminating the marriage or providing for permanent 
separation;
    (ii) A former spouse or a spouse from whom the filer is permanently 
separated; or
    (iii) Any income or obligations of the filer arising from 
dissolution of the filer's marriage or permanent separation from a 
spouse.

    Example to paragraph (h)(5). A filer and her husband are living 
apart in anticipation of divorcing. The filer need not report any 
information about her spouse's sole assets and liabilities, but she 
must continue to report their joint assets and liabilities.

    (i) Trusts, estates, and investment funds--(1) In general. (i) 
Except as otherwise provided in this section, each confidential 
financial disclosure report shall include the information required by 
this subpart about the holdings of any trust, estate, investment fund 
or other financial arrangement from which income is received by, or 
with respect to which a beneficial interest in principal or income is 
held by, the filer, his spouse, or dependent child.
    (ii) No information, however, is required about a nonvested 
beneficial interest in the principal or income of an estate or trust. A 
vested interest is a present right or title to property, which carries 
with it an existing right of alienation, even though the right to 
possession or enjoyment may be postponed to some uncertain time in the 
future. This includes a future interest when one has a right, 
defeasible or indefeasible, to the immediate possession or enjoyment of 
the property, upon the ceasing of another's interest. Accordingly, it 
is not the uncertainty of the time of enjoyment in the future, but the 
uncertainty of the right of enjoyment (title and alienation), which 
differentiates a ``vested'' and a ``nonvested'' interest.


    Note to paragraph (i)(1): Nothing in this section requires the 
reporting of the holdings of a revocable inter vivos trust (also 
known as a ``living trust'') with respect to which the filer, his 
spouse or dependent child has only a remainder interest, whether or 
not vested, provided that the grantor of the trust is neither the 
filer, the filer's spouse, nor the filer's dependent child. 
Furthermore, nothing in this section requires the reporting of the 
holdings of a revocable inter vivos trust from which the filer, his 
spouse or dependent child receives any discretionary distribution, 
provided that the grantor of the trust is neither the filer, the 
filer's spouse, nor the filer's dependent child.


    (2) Qualified trusts and excepted trusts. (i) A filer should not 
report information about the holdings of any qualified blind trust (as 
defined in Sec.  2634.403) or any qualified diversified trust (as 
defined in Sec.  2634.404).
    (ii) In the case of an excepted trust, a filer should indicate the 
general nature of its holdings, to the extent known, but does not 
otherwise need to report information about the trust's holdings. For 
purposes of this part, the term ``excepted trust'' means a trust:
    (A) Which was not created directly by the filer, spouse, or 
dependent child; and

[[Page 28239]]

    (B) The holdings or sources of income of which the filer, spouse, 
or dependent child have no specific knowledge through a report, 
disclosure, or constructive receipt, whether intended or inadvertent.
    (3) Excepted investment funds. (i) No information is required under 
paragraph (i)(1) of this section about the underlying holdings of an 
excepted investment fund as defined in paragraph (i)(3)(ii) of this 
section, except that the fund itself shall be identified as an interest 
in property and/or a source of income.
    (ii) For purposes of financial disclosure reports filed under the 
provisions of this subpart, an ``excepted investment fund'' means a 
widely held investment fund (whether a mutual fund, regulated 
investment company, common trust fund maintained by a bank or similar 
financial institution, pension or deferred compensation plan, or any 
other investment fund), if:
    (A)(1) The fund is publicly traded or available; or
    (2) The assets of the fund are widely diversified; and
    (B) The filer neither exercises control over nor has the ability to 
exercise control over the financial interests held by the fund.
    (iii) A fund is widely diversified if it holds no more than 5% of 
the value of its portfolio 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.
    (j) Special rules. (1) Political campaign funds, including campaign 
receipts and expenditures, need not be included in any report filed 
under this subpart. However, if the individual has authority to 
exercise control over the fund's assets for personal use rather than 
campaign or political purposes, that portion of the fund over which 
such authority exists must be reported.
    (2) In lieu of entering data on a part of the report form 
designated by the Office of Government Ethics, a filer may attach to 
the reporting form a copy of a brokerage report, bank statement, or 
other material, which, in a clear and concise fashion, readily 
discloses all information which the filer would otherwise have been 
required to enter on the concerned part of the report form.
    (k) For reports of confidential filers described in Sec.  
2634.904(a)(3) of this subpart, each supplemental confidential 
financial disclosure report shall include only the supplemental 
information:
    (1) Which is more extensive than that required in the reporting 
individual's public financial disclosure report under this part; and
    (2) Which has been approved by the Office of Government Ethics for 
collection by the agency concerned, as set forth in supplemental agency 
regulations and forms, issued under Sec. Sec.  2634.103 and 2634.601(b) 
(see Sec.  2634.901(b) and (c) of this subpart).


Sec.  2634.908  [Amended]

0
22. Section 2634.908 is amended by removing the phrase ``twelve months 
ending September 30,'' in paragraph (a) and adding in its place the 
phrase ``calendar year,''.

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

0
23. 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


Sec.  2640.102  [Amended]

0
24. Section 2640.102 is amended by adding the phrase ``and 
2634.907(i)(3)'' after the citation ``5 CFR 2634.310(c)'' at the end of 
the fifth sentence in the note to paragraph (a).

[FR Doc. 06-4529 Filed 5-15-06; 8:45 am]
BILLING CODE 6345-02-P