[Federal Register Volume 75, Number 166 (Friday, August 27, 2010)]
[Rules and Regulations]
[Pages 52607-52614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21324]



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  Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules 
and Regulations  

[[Page 52607]]



FEDERAL HOUSING FINANCE AGENCY

5 CFR Chapter LXXX

RIN 2590-AA02, 3209-AA15


Supplemental Standards of Ethical Conduct for Employees of the 
Federal Housing Finance Agency

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is publishing a 
final regulation, with the concurrence of the Office of Government 
Ethics, which supplements the Standards of Ethical Conduct for 
Employees of the Executive Branch. To ensure a comprehensive and 
effective ethics program at FHFA and to address ethical issues unique 
to FHFA, the final regulation establishes prohibitions on the ownership 
of certain financial interests and restrictions on outside employment 
and business activities.

DATES: This regulation is effective August 27, 2010.

FOR FURTHER INFORMATION CONTACT: Sean Dent, Associate General Counsel, 
(202) 414-3099 (not a toll-free number), Federal Housing Finance 
Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The 
telephone number for the Telecommunications Device for the Deaf is 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The Housing and Economic Recovery Act of 2008 (HERA), Public Law 
110-289, 122 Stat. 2654, amended the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) 
(Safety and Soundness Act), and the Federal Home Loan Bank Act (12 
U.S.C. 1421-1449) to establish FHFA as an independent agency of the 
Federal Government.\1\ FHFA was established to oversee the prudential 
operations of the Federal National Mortgage Association, the Federal 
Home Loan Mortgage Corporation (collectively, enterprises), and the 
Federal Home Loan Banks (Banks) (collectively, regulated entities) and 
to ensure that they operate in a safe and sound manner including being 
capitalized adequately; foster liquid, efficient, competitive and 
resilient national housing finance markets; comply with the Safety and 
Soundness Act and rules, regulations, guidelines and orders issued by 
the Director of FHFA, and the respective authorizing statutes of the 
regulated entities; and carry out their missions through activities 
authorized and consistent with the Safety and Soundness Act and their 
authorizing statutes; and, that the activities and operations of the 
regulated entities are consistent with the public interest.
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    \1\ See Division A, titled the ``Federal Housing Finance 
Regulatory Reform Act of 2008,'' Title I, Sec.  1101 of HERA.
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II. Proposed Regulation; Comments Received; Technical Revisions

Proposed Regulation

    Executive Order 12674, as amended by Executive Order 12731, 
authorized the United States Office of Government Ethics (OGE) to 
establish a single, comprehensive and clear set of executive-branch 
standards of conduct. On August 7, 1992, OGE published the Standards of 
Ethical Conduct for Employees of the Executive Branch (Standards).\2\ 
Codified at 5 CFR part 2635, the Standards took effect on February 3, 
1993, and established uniform standards of ethical conduct for all 
executive branch employees.
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    \2\ See 57 FR 35006-35067, as corrected at 57 FR 48557 and 57 FR 
52583, with additional grace period extensions at 59 FR 4779-4780, 
60 FR 6390-6391, 60 FR 66857-66858, and 61 FR 40950-40952.
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    With the concurrence of OGE, 5 CFR 2635.105 authorizes executive 
branch agencies to publish agency-specific supplemental regulations 
necessary to implement their respective ethics programs. With such 
concurrence, FHFA published proposed supplemental rules for comment on 
April 16, 2010 (75 FR 19909).

Comments Received

    FHFA received and considered two comments from one member of the 
public. The first comment relates to Sec.  9001.101. That section, as 
proposed, contains cross-references to other executive branch ethics 
regulations and a subsequent employment restriction of section 1317D of 
the Safety and Soundness Act, 12 U.S.C. 4523, applicable to certain 
highly compensated former FHFA officers and employees. Section 1317D 
prohibits such highly compensated former FHFA officers and employees 
from accepting compensation from an enterprise under section 1317D of 
the Safety and Soundness Act for two years after leaving FHFA. The 
commenter believes that this statutory restriction is inconsistent with 
the government-wide post-employment restrictions of 18 U.S.C. 207(a)(1) 
and (2) and 5 CFR 2635.601. FHFA notes that the section 1317D statutory 
restriction is in addition to the government-wide post-employment 
restrictions of 18 U.S.C. 207(a)(1) and (2) and 5 CFR 2635.601. Thus, 
FHFA has determined that a revision to Sec.  9001.101 is not needed.
    The second comment relates to Sec. Sec.  9001.104 and 9001.106. 
Section 9001.104(a) prohibits FHFA employees and the employees' spouse 
and minor children from owning or controlling certain financial 
interests that are related to or affected by the operations of FHFA, 
such as securities owned, issued, guaranteed, securitized, or 
collateralized by the regulated entities. Section 9001.106 prohibits an 
employee of FHFA from participating in any matter in which a regulated 
entity is a party if the regulated entity employs, as an employee or 
consultant, his or her spouse, child, parent, or sibling, or member of 
his or her household unless the Designated Agency Ethics Official has 
authorized the employee to participate in the matter using the standard 
in 5 CFR 2635.502(d).
    The commenter noted that the application of the two sections to 
family members differs. The restriction prohibiting the ownership or 
control of certain financial interests applies only to the employee's 
spouse and minor children, while the restriction relating to employment 
by a regulated entity has a broader application in that it applies to 
the employee's spouse, child, or sibling, or a member of his or her

[[Page 52608]]

household. The commenter believes that FHFA's inclusion of family and 
household members in Sec.  9001.106 but not in Sec.  9001.104 might 
lead the public to question the different treatment and increase public 
uncertainty and confusion and make it more difficult for employees to 
distinguish between the restrictions that apply.
    The different application of the two sections conforms to law and 
regulation. FHFA notes that the restriction in Sec.  9001.104 
prohibiting the ownership or control of certain financial interests 
conforms to the scope of the government-wide conflicting financial 
interests law at 18 U.S.C. 208, which applies to the employee and to 
the employee's spouse and minor children, individuals whose financial 
interests are by law attributed to the employee. The requirement to 
receive prior approval before employment by a regulated entity of the 
employee's spouse, child, sibling, or a member of his or her household 
in Sec.  9001.106 is intended to determine whether the employment could 
raise questions about the employee's impartiality in performing his or 
her duties under the Standards.

Issuance of Final Regulation With Technical and Clarifying Revisions; 
Immediate Effective Date

    Section 9001.101 has been revised to add a reference to the 
regulation concerning the post-employment restriction for senior 
examiners at 12 CFR part 1212. Clarifying provisions have been added to 
Sec. Sec.  9001.104(d) and 9001.105(b), as discussed below under the 
Section-by-Section Analysis.
    FHFA, with the concurrence of OGE, has determined that the 
following supplemental rules that are contained in the proposed 
regulation, which adds a new 5 CFR chapter LXXX, consisting of part 
9001, are necessary to implement successfully the ethics program of 
FHFA in light of the unique programs and operations of FHFA. Thus, FHFA 
is publishing as final the regulation as proposed with the technical 
revisions noted above. The final regulation has an immediate effective 
date for good cause. The final regulation, which affects only FHFA 
employees, is necessary to ensure the public trust in FHFA operations 
and it provides employees with adequate notice and time to report 
prohibited holdings and outside employment.

III. Section-by-Section Analysis

    The following is a section-by-section analysis of the regulation.

Section 9001.101 General

    Section 9001.101 explains that the regulation applies to all 
employees of FHFA and supplements the Standards found in 5 CFR part 
2635. It also requires that employees of FHFA must comply with the 
Standards, this part, guidance and procedures established pursuant to 
this part, the regulation concerning the post-employment restriction 
for senior examiners at 12 CFR part 1212, and any additional rules of 
conduct that FHFA is authorized to issue. It also notes that employees 
should contact the Designated Agency Ethics Official (DAEO) if they 
have questions about any provision of this regulation or other ethics-
related matters.
    The section also contains cross-references to other executive 
branch ethics regulations and a subsequent employment restriction of 
section 1317D of the Safety and Soundness Act, 12 U.S.C. 4523, 
applicable to certain highly compensated former FHFA officers and 
employees, including FHFA Director, along with an annual employee 
notification requirement as to that statutory restriction. Section 
1317D prohibits such highly compensated former FHFA officers and 
employees, and the Director, from accepting compensation from an 
enterprise under section 1317D of the Safety and Soundness Act for two 
years after leaving FHFA.

Section 9001.102 Definitions

    Section 9001.102 defines the key terms used in the regulation.
    Affiliate is defined as any entity that controls, is controlled by, 
or is under common control with another entity.
    Designated Agency Ethics Official, or DAEO, as also used in 5 CFR 
part 2635, and ``alternate DAEO'' are defined as the individuals so 
designated by the Director, FHFA. The DAEO is responsible for 
designating agency ethics officials and ethics designees, as such terms 
are used in 5 CFR part 2635. The alternate DAEO acts as the DAEO in the 
DAEO's absence.
    Director is defined to mean the Director of FHFA or his or her 
designee.
    Employee is defined to mean an officer or employee of FHFA, 
including a special Government employee. For purposes of this part, it 
also is defined as an individual on detail from another agency to FHFA 
for a period of more than 30 days.
    Enterprise is defined as the Federal National Mortgage Association 
or the Federal Home Loan Mortgage Corporation.
    Federal Home Loan Bank or Bank is defined to mean a Bank 
established under the Federal Home Loan Bank Act; the term ``Federal 
Home Loan Banks'' means, collectively, all the Federal Home Loan Banks.
    Federal Home Loan Bank System is defined to mean the Federal Home 
Loan Banks under the supervision of FHFA.
    Regulated entity is defined to mean the Federal National Mortgage 
Association and any affiliate thereof; the Federal Home Loan Mortgage 
Corporation and any affiliate thereof; or any Federal Home Loan Bank; 
the term ``regulated entities'' means, collectively, the Federal 
National Mortgage Association and any affiliate thereof; the Federal 
Home Loan Mortgage Corporation and any affiliate thereof; and the 
Federal Home Loan Banks.
    Safety and Soundness Act is defined to mean the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 
et seq.), as amended by the Housing and Economic Recovery Act of 2008 
(HERA), Public Law 110-289, 122 Stat. 2654 (2008).
    Security is defined to mean all interests in debt or equity 
instruments. The term includes, without limitation, secured and 
unsecured bonds, debentures, notes, securitized assets and commercial 
paper including loans securitized by mortgages or deeds of trust and 
securities backed by such instruments, as well as all types of 
preferred and common stock. The term encompasses current and contingent 
ownership interests including any beneficial or legal interest derived 
from a trust. Such interest includes any right to acquire or dispose of 
any long or short position in such securities and also includes, 
without limit, interests convertible into such securities, as well as 
options, rights, warrants, puts, calls and straddles with respect 
thereto. The term shall not, however, be construed to include deposit 
accounts, such as checking, savings, or money market deposit accounts.

Section 9001.103 Waivers

    Section 9001.103 authorizes the DAEO to grant employees of FHFA 
written waivers of any provision of the FHFA regulation based upon a 
determination that the waiver will not result in conduct inconsistent 
with 5 CFR part 2635 or otherwise prohibited by law, and that 
application of the provision is not be necessary to ensure public 
confidence in the impartiality and objectivity with which the programs 
of FHFA are administered. In granting a waiver under Sec.  9001.103, 
the DAEO may require the employee to take further action, including 
executing a written disqualification statement. This provision is 
intended, in appropriate cases, to ease the burden that these 
supplemental regulations will impose

[[Page 52609]]

on employees of FHFA while ensuring that employees do not engage in 
actions or hold financial interests that may interfere with the 
objective and impartial performance of their official duties.

Section 9001.104 Prohibited Financial Interests

    Section 9001.104(a) prohibits FHFA employees and the employees' 
spouse and minor children from owning or controlling certain financial 
interests that are related to or affected by the operations of FHFA, 
such as securities owned, issued, guaranteed, securitized, or 
collateralized by the regulated entities. This prohibition does not 
apply to special Government employees.\3\ The prohibition of Sec.  
9001.104(a) is based on the view of FHFA that permitting FHFA employees 
and their spouse and minor children directly or indirectly to own or 
control securities owned, issued, guaranteed, securitized, or 
collateralized by the regulated entities would cause a reasonable 
person to question the impartiality with which FHFA programs are 
administered. Specifically, FHFA believes that there is a direct and 
appropriate nexus between the prohibition against owning or controlling 
such securities as applied both to employees and to the spouses and 
minor children of employees and the efficiency of the service.
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    \3\ The term ``special Government employee'' is defined in 5 CFR 
2635.102 to mean ``those executive branch officers or employees 
specified in 18 U.S.C. 202(a). A special Government employee is 
retained, designated, appointed, or employed to perform temporary 
duties either on a full-time or intermittent basis, with or without 
compensation, for a period not to exceed 130 days during any 
consecutive 365-day period.''
---------------------------------------------------------------------------

    In addition, while Federal conflict of interest statutes and the 
Standards prohibit an employee of FHFA from participating in matters in 
which the employee or the employee's spouse or minor children have a 
conflicting financial interest, FHFA has determined that a broader ban 
is more effective in ensuring that no reasonable person could question 
the impartiality and objectivity of the agency's actions. The broader 
ban of Sec.  9001.104(a) establishes a clear prohibition that will be 
easily understood by observers of FHFA.
    Moreover, the prohibition will substantially reduce the burden on 
FHFA and FHFA employees to determine the scope of the prohibition for 
each employee. By promulgating a broad ban that excludes all securities 
owned, issued, guaranteed, securitized, or collateralized by the 
regulated entities, Sec.  9001.104(a) will substantially reduce the 
need for FHFA employees, the DAEO, and other agency ethics officials or 
counselors to determine the financial interests prohibited by each 
employee's duties.
    Section 9001.104(b) also attributes to an FHFA employee, or to the 
employee's spouse and minor children, securities he or she is 
prohibited from holding directly by Sec.  9001.104(a) that are held by 
certain described third-party entities.
    Section Sec.  9001.104(c) permits an FHFA employee and the 
employee's spouse and minor children to own interests in publicly-
traded or publicly-available diversified mutual or other collective 
diversified investment funds that contain within their portfolios 
interests that they are prohibited from holding by Sec.  9001.104(c). 
Under this provision, ownership of such investment funds are permitted 
as long as the employee or the employee's spouse or minor children do 
not have the ability to control the fund or its portfolio, and the fund 
does not have an objective or practice of concentrating its investments 
in securities of a regulated entity or the regulated entities 
generally, and less than 25 percent of the total holdings of the fund 
are comprised of securities owned, issued, guaranteed, securitized, or 
collateralized by one or more regulated entities.
    This exception to Sec.  9001.104(a) reflects the view of FHFA that 
the prohibition on owning or controlling securities of the regulated 
entities should not be extended to publicly-traded or publicly-
available mutual funds or other collective investment funds that are 
diversified and over which employees have no control, since it would be 
unreasonable to require employees to divest themselves of such mutual 
funds based on investment decisions in which they played no role. FHFA 
believes that allowing an FHFA employee and the employee's spouse and 
minor children to own interests in publicly-traded or publicly-
available diversified mutual funds and collective investment funds will 
not endanger the impartiality or objectivity of FHFA, even if these 
funds held some limited interest in securities owned, issued, 
securitized, guaranteed, or collateralized by one or more of the 
regulated entities.
    Section 9001.104(d) requires employees of FHFA, within 30 calendar 
days commencement of employment, to report to the DAEO in writing all 
financial interests that they acquired prior or the commencement of 
their employment, and that they are prohibited from holding by Sec.  
9001.104(a). Employees are required to divest such interests, within 90 
calendar days of the date reported, unless they receive a written 
waiver from the DAEO in accordance with Sec.  9001.103. The section 
imposes a similar reporting and divestiture requirement upon employees 
who acquire, without specific intent, financial interests prohibited by 
Sec.  9001.104(a). Section 9001.104(d) has been clarified to provide 
expressly that the reporting and divestiture requirements also apply to 
prohibited financial interests acquired prior to the effective date of 
this part.

Section 9001.105 Outside Employment

    This section is designed to balance several important ethical 
principles against an employee's right to engage in outside activities. 
Paragraph (a) of the section prohibits an FHFA employee, except for a 
special Government employee, from engaging in paid or unpaid employment 
with (1) a person, other than a State or local government, who is a 
registered lobbyist engaged in lobbying activities concerning FHFA 
programs; (2) any regulated entity, or (3) the Office of Finance of the 
Federal Home Loan Bank System. FHFA is of the view that such a policy 
against active participation in such businesses is necessary to protect 
against questions regarding the impartiality and objectivity of 
employees and the administration of the programs of FHFA. FHFA believes 
that it will hinder FHFA in meeting its missions if members of the 
public could question whether employees are using their public 
positions or connections at FHFA to advance alternate careers.
    Furthermore, in accordance with 5 CFR 2635.803, FHFA is of the view 
that it is necessary or desirable for the purpose of administering its 
ethics program to require FHFA employees to obtain approval before 
engaging in outside employment or activities. An approval requirement 
helps ensure that potential ethical problems are resolved before 
employees begin outside employment or activities that could involve a 
violation of applicable statutes and standards of conduct.
    Thus, Sec.  9001.105(b)(1) provides that an FHFA employee, other 
than a special Government employee, must obtain advance written 
approval from the employee's supervisor and the concurrence of the DAEO 
before engaging in any outside employment.
    FHFA has added clarifying language to Sec.  9001.105(b)(2) 
addressing outside employment commenced by employees before the 
effective date of this part. An employee who commenced engaging in any 
outside employment not prohibited under Sec.  9001.105(a) before the 
effective date of this part must request written approval from his or 
her supervisor and

[[Page 52610]]

the concurrence of the DAEO within 30 calendar days of the effective 
date. The employee may continue engaging in the outside employment 
while the request is under review.
    Section 9001.105(b)(2) also addresses outside employment by new 
employees. An employee who before being employed by FHFA commenced 
engaging in any outside employment not prohibited under Sec.  
9001.105(a) must request written approval from his or her supervisor 
and the concurrence of the DAEO within 30 calendar days of commencing 
employment with FHFA. The new employee may continue engaging in the 
outside employment while the request is under review.
    Paragraph (c) to Sec.  9001.105 broadly defines outside employment 
to cover any form of non-Federal employment or business relationship 
involving the provision of personal services, whether or not for 
compensation, other than in the discharge of official duties. It also 
includes writing when done under an arrangement with another person or 
entity for production or publication of the written product. It does 
not, however, include participation in the activities of nonprofit 
charitable, religious, professional, social, fraternal, educational, 
recreational, public service, or civic organizations, unless such 
activities are for (1) compensation other than reimbursement of 
expenses, (2) the organization's activities are devoted substantially 
to matters relating to the employee's official duties as defined in 5 
CFR 2635.807(a)(2)(i)(B) through (E) and the employee will serve as 
officer or director of the organization, or (3) the activities will 
involve the provision of consultative or professional services. 
Consultative services is defined to mean the provision of personal 
services by an employee, including the rendering of advice or 
consultation, which requires advanced knowledge in a field of science 
or learning customarily acquired by a course of specialized instruction 
and study in an institution of higher education, hospital, or similar 
facility. Professional services is defined to mean the provision of 
personal services by an employee, including the rendering of advice or 
consultation, which involves application of the skills of a profession 
as defined in 5 CFR 2636.305(b)(1) or involves a fiduciary relationship 
as defined in 5 CFR 2636.305(b)(2).
    A note following paragraph (c) of Sec.  9001.105 pertains to the 
special approval requirement set out in both 18 U.S.C. 203(d) and 
205(e), respectively, for certain representational activities otherwise 
covered by the conflict of interest restrictions on compensation and 
activities of employees in claims against and other matters affecting 
the Government. The note explains that an employee who wishes to act as 
agent or attorney for, or otherwise represent his or her parents, 
spouse, children, or any person for whom, or any estate for which, he 
or she is serving as guardian, executor, administrator, trustee, or 
other personal fiduciary in such matters must obtain the approval 
required by law of the Government official responsible for the 
employee's appointment in addition to the regulatory approval that is 
required in Sec.  9001.105.
    Section 9001.105(d) sets out the procedures for requesting prior 
approval to engage in outside employment initially, or within seven 
calendar days of a significant change in the nature or scope of the 
outside employment or the employee's official position. Paragraph (e) 
of Sec.  9001.105 provides that the concurrence of the DAEO will be 
granted only upon a determination that the outside employment is not 
expected to involve conduct prohibited by statute or Federal 
regulation, including 5 CFR part 2635 and this part.
    Section 9001.105(f) provides that the DAEO may issue written 
instructions governing the submission of requests for approval of and 
concurrence with outside employment. The written instructions may 
exempt categories of employment from the prior approval and concurrence 
requirement based on a determination that employment within those 
categories will generally be approved and will likely not involve 
conduct prohibited by Federal law or regulation, including 5 CFR part 
2635 and this part.

Section 9001.106 Restrictions Resulting From Employment of Family and 
Household Members

    Section 9001.106 prohibits an employee of FHFA from participating 
in any matter in which a regulated entity is a party if the regulated 
entity employs, as an employee or consultant, his or her spouse, child, 
parent, or sibling, or member of his or her household unless the DAEO 
has authorized the employee to participate in the matter using the 
standard in 5 CFR 2635.502(d). Section 9001.106 requires such an 
employee to make a written report to the DAEO within 30 calendar days 
of employment by a regulated entity of the employee's spouse, child, 
parent, sibling, or member of his or her household. This requirement is 
intended to eliminate the potential for any appearance of preferential 
treatment in those instances where employment of a family member or a 
member of the employee's household would be likely to raise questions 
regarding the appropriateness of actions taken by the employee or FHFA.

Section 9001.107 Other Limitations

    Section Sec.  9001.107(a) references the statutory restriction on 
financial interests applicable to the Director, the Deputy Director of 
the Division of Enterprise Regulation, the Deputy Director of the 
Division of Federal Home Loan Bank Regulation, and the Deputy Director 
for Housing Mission and Goals. These individuals are subject to 
additional financial interest limitations set forth in section 1312(g) 
of the Safety and Soundness Act (12 U.S.C. 4512(g)). Section 1312(g) 
provides that the Director and each Deputy Director may not--
    (1) Have any direct or indirect financial interest in any regulated 
entity or entity-affiliated party; \4\
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    \4\ The term ``entity-affiliated party'' is defined in section 
1301(11) of the Safety and Soundness Act (12 U.S.C. 4502(11)).
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    (2) Hold any office, position, or employment in any regulated 
entity or entity-affiliated party; or
    (3) Have served as an executive officer or director of any 
regulated entity or entity-affiliated party at any time during the 
three-year period preceding the date of appointment or designation of 
such individual as Director or Deputy Director, as applicable.
    Paragraph (b) of Sec.  9001.107 provides that if an employee or the 
spouse or minor children of the employee directly or indirectly owns a 
financial interest in a member of a Bank or in a financial institution 
such as a mortgage bank, mortgage broker, bank, thrift, or other 
financial institution that originates, insures, or services mortgages 
that are owned, issued, guaranteed, securitized, or collateralized by a 
regulated entity, the employee is cautioned not to violate the 
statutory prohibition against financial conflicts of interest set forth 
in 18 U.S.C. 208. The language notes that the government-wide de 
minimis and other exceptions set forth in 5 CFR 2640.202 are applicable 
to the ownership or control of interests in such financial 
institutions. Employees are encouraged to seek a determination from the 
DAEO as to whether the financial interest in the member of a Bank or in 
the financial institution creates a financial conflict of interest or 
an appearance of a conflict of interest and whether the employee should 
disqualify himself or herself from participating in an official 
capacity in a particular matter involving the financial institution.

[[Page 52611]]

Section 9001.108 Prohibited Recommendations

    Section 9001.108 prohibits an employee of FHFA from recommending, 
suggesting, or giving advice to any person with respect to financial 
transactions or investment actions involving the acquisition, sale, or 
divestiture of securities of a regulated entity. The Standards at 5 CFR 
2635.703 prohibit an employee from allowing the improper use of 
nonpublic information to further his or her private interest or that of 
another, whether through advice or recommendation or by knowing 
unauthorized disclosure. The section supplements 5 CFR 2635.703 in that 
it expressly prohibits FHFA employees from using or creating the 
appearance of using information that is not available to the general 
public to further a private interest. The prohibition is also intended 
to eliminate any misunderstanding or harm that could result from such a 
recommendation. For example, an investor should not be misled into 
believing, pursuant to the recommendation of an FHFA employee, that the 
securities of a particular regulated entity regulated by FHFA is a 
sound buy because the investor believes that the employee may have 
access to inside information.

Section 9001.109 Prohibited Purchase of Assets

    Section 9001.109 prohibits employees, the spouses of employees, and 
the minor children of employees of FHFA from purchasing real or 
personal property from the regulated entities unless it is sold at 
public auction or by other means that would ensure that the selling 
price of the property is the asset's fair market value. This 
prohibition supplements the general prohibition in 5 CFR 2635.702 
against the use of public office for private gain.

Regulatory Impacts

Paperwork Reduction Act

    The regulation does not contain any information collection 
requirement that requires the approval of OMB under the Paperwork 
Reduction Act (44 U.S.C. 3501 et seq.).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation does not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the 
regulation under the Regulatory Flexibility Act. FHFA certifies that 
the regulation is not likely to have a significant economic impact on a 
substantial number of small business entities because the regulation is 
applicable only to employees of FHFA.

List of Subjects in 5 CFR Part 9001

    Administration, Conflict of interests, Ethics, Government 
employees.

0
Accordingly, for the reasons stated in the preamble, FHFA, with the 
concurrence of OGE, is amending title 5 of the Code of Federal 
Regulations by adding a new chapter LXXX, consisting of part 9001, to 
read as follows:

CHAPTER LXXX--FEDERAL HOUSING FINANCE AGENCY

PART 9001--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES 
OF THE FEDERAL HOUSING FINANCE AGENCY

Sec.
9001.101 General.
9001.102 Definitions.
9001.103 Waivers.
9001.104 Prohibited financial interests.
9001.105 Outside employment.
9001.106 Restrictions resulting from employment of family and 
household members.
9001.107 Other limitations.
9001.108 Prohibited recommendations.
9001.109 Prohibited purchase of assets.

    Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government 
Act of 1978); 12 U.S.C. 4526; E.O. 12674, 54 FR 15159; 3 CFR, 1989 
Comp., p. 215, as modified by E.O. 12731, 55 FR 42547; 3 CFR, 1990 
Comp., p. 306; 5 CFR 2635.105, 2635.402(c), 2635.403(a), 
2635.502(e), 2635.604, 2635.702, 2635.703, 2635.802(a), 2635.803.


Sec.  9001.101  General.

    (a) Purpose and scope. In accordance with 5 CFR 2635.105, the 
purpose of this regulation is to supplement the Standards of Ethical 
Conduct for Employees of the Executive Branch contained in 5 CFR part 
2635. The regulation applies to employees of the Federal Housing 
Finance Agency (FHFA). Employees are required to comply with 5 CFR part 
2635, this part, guidance and procedures established pursuant to this 
part, the regulation concerning the post-employment restriction for 
senior examiners at 12 CFR part 1212, and any additional rules of 
conduct that FHFA is authorized to issue. Employees should contact the 
DAEO if they have questions about any provision of this regulation or 
other ethics-related matters.
    (b) Cross-references--(1) Regulations. FHFA employees are also 
subject to the regulations concerning executive branch financial 
disclosure contained in 5 CFR part 2634, the regulations concerning 
executive branch financial interests contained in 5 CFR part 2640, and 
the regulations concerning executive branch employee responsibilities 
and conduct contained in 5 CFR part 735.
    (2)(i) Statutory restriction. Section 1319D of the Act, 12 U.S.C. 
4523, prohibits the Director or any former officer or employee of FHFA 
who, while employed by FHFA, was compensated at a rate in excess of the 
lowest rate for a position classified higher than GS-15 of the General 
Schedule under section 5107 of title 5, United States Code, from 
accepting compensation from an enterprise during the two-year period 
beginning on the date of his or her separation from employment by FHFA.
    (ii) Notice to employees. The DAEO shall notify employees on an 
annual basis of the rate of compensation that triggers the subsequent 
employment restriction.


Sec.  9001.102  Definitions.

    For purposes of this part, the term:
    Affiliate means any entity that controls, is controlled by, or is 
under common control with another entity.
    Designated Agency Ethics Official, or DAEO, as also used in 5 CFR 
part 2635, and ``alternate DAEO'' mean the individuals so designated by 
the Director, FHFA. The DAEO is responsible for designating agency 
ethics officials and ethics designees, as such terms are used in 5 CFR 
part 2635. The alternate DAEO acts as the DAEO in the DAEO's absence.
    Director means the Director of FHFA or his or her designee.
    Employee means an officer or employee of FHFA, including a special 
Government employee. For purposes of this part, it also means an 
individual on detail from another agency to FHFA for a period of more 
than 30 calendar days.
    Enterprise means the Federal National Mortgage Association or the 
Federal Home Loan Mortgage Corporation.
    Federal Home Loan Bank or Bank means a Bank established under the 
Federal Home Loan Bank Act; the term ``Federal Home Loan Banks'' means, 
collectively, all the Federal Home Loan Banks.
    Federal Home Loan Bank System means the Federal Home Loan Banks 
under the supervision of the Federal Housing Finance Agency.
    Regulated entity means the Federal National Mortgage Association 
and any

[[Page 52612]]

affiliate thereof; the Federal Home Loan Mortgage Corporation and any 
affiliate thereof; or any Federal Home Loan Bank; the term ``regulated 
entities'' means, collectively, the Federal National Mortgage 
Association and any affiliate thereof; the Federal Home Loan Mortgage 
Corporation and any affiliate thereof; and the Federal Home Loan Banks.
    Safety and Soundness Act means the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.), as 
amended by the Housing and Economic Recovery Act of 2008 (HERA), Public 
Law 110-289, 122 Stat. 2654 (2008).
    Security means all interests in debt or equity instruments. The 
term includes, without limitation, secured and unsecured bonds, 
debentures, notes, securitized assets and commercial paper including 
loans securitized by mortgages or deeds of trust and securities backed 
by such instruments, as well as all types of preferred and common 
stock. The term encompasses current and contingent ownership interests 
including any beneficial or legal interest derived from a trust. Such 
interest includes any right to acquire or dispose of any long or short 
position in such securities and also includes, without limit, interests 
convertible into such securities, as well as options, rights, warrants, 
puts, calls and straddles with respect thereto. The term shall not, 
however, be construed to include deposit accounts, such as checking, 
savings, or money market deposit accounts.


Sec.  9001.103  Waivers.

    (a) General. The DAEO may waive any provision of this part upon 
finding that the waiver will not result in conduct inconsistent with 5 
CFR part 2635 or otherwise prohibited by law, and that application of 
the provision is not necessary to ensure public confidence in the 
impartiality and objectivity with which the programs of FHFA are 
administered. Each waiver shall be in writing and supported by a 
statement of the facts and findings upon which it is based and may 
impose appropriate conditions, including but not limited to requiring 
the employee to execute a written disqualification statement or an 
agreement not to acquire additional securities.
    (b) Waiver of prohibitions relating to ownership or control of 
securities. The DAEO may grant a waiver permitting the employee or the 
employee's spouse or minor children to own or control, directly or 
indirectly, any security prohibited under Sec.  9001.104, if, in 
addition to the standards under paragraph (a) of this section:
    (1) Extenuating circumstances exist, such as ownership or control 
of the security was acquired:
    (i) Prior to employment with FHFA;
    (ii) Through inheritance, gift, merger, acquisition, or other 
change in corporate structure, or otherwise without specific intent on 
the part of the employee, or employee's spouse or minor children, to 
acquire the security; or
    (iii) By an employee's spouse or minor children as part of a 
compensation package in connection with employment or prior to marriage 
to the employee;
    (2) The amount of the prohibited financial interest has a market 
value of less than the de minimis amount set forth in 5 CFR 
2640.202(a);
    (3) The employee makes a prompt and complete written disclosure of 
the interest; and
    (4) If the employee is required to disqualify himself or herself 
from certain assignments, the disqualification does not unduly 
interfere with the full performance of the employee's duties.


Sec.  9001.104  Prohibited financial interests.

    (a) General prohibition. This section applies to all employees, 
except special Government employees. Except as permitted in paragraph 
(c) of this section, an employee or an employee's spouse or minor 
children, shall not directly or indirectly own or control securities 
owned, issued, guaranteed, securitized, or collateralized by a 
regulated entity.
    (b) Restrictions arising from third-party relationships. If any of 
the entities listed in paragraphs (b)(1) through (6) of this section 
owns securities that an employee is prohibited from owning directly by 
paragraph (a) of this section, the employee is deemed to hold the 
securities indirectly. The entities are--
    (1) A partnership in which the employee or employee's spouse or 
minor children are general partners;
    (2) A partnership in which the employee or employee's spouse or 
minor children individually or jointly hold more than a 10 percent 
limited partnership interest;
    (3) A closely held corporation in which the employee or employee's 
spouse or minor children individually or jointly hold more than a 10 
percent equity interest;
    (4) A trust in which the employee or employee's spouse or minor 
children have a legal or beneficial interest;
    (5) An investment club or similar informal investment arrangement 
between the employee or employee's spouse or minor children and others; 
or
    (6) Any other entity in which the employee or employee's spouse or 
minor children individually or jointly hold more than a 10 percent 
equity interest.
    (c) Exceptions to prohibition for certain interests. 
Notwithstanding paragraphs (a) and (b) of this section, an employee or 
an employee's spouse or minor children may directly or indirectly own 
or control:
    (1) A security for which a waiver has been granted pursuant to 
Sec.  9001.103; and
    (2) An interest in a publicly-traded or publicly-available 
diversified mutual fund or other collective diversified investment 
fund, including a widely-held pension or other retirement fund if:
    (i) Neither the employee, the employee's spouse, nor the employee's 
minor children exercise or have the ability to exercise control over 
the financial interests held by the fund; and
    (ii) The fund does not indicate in its prospectus the objective or 
practice of concentrating its investments in securities of a regulated 
entity or regulated entities generally, and less than 25 percent of the 
total holdings of the fund are comprised of securities owned, issued, 
guaranteed, securitized, or collateralized by one or more regulated 
entities.
    (d) Reporting and divestiture. An employee must provide, in 
writing, to the DAEO any financial interest prohibited under paragraph 
(a) of this section acquired prior to the effective date of this part 
or the commencement of employment with FHFA or without specific intent, 
as through gift, inheritance, or marriage, within 30 calendar days from 
the effective date of this part, commencement of employment with FHFA, 
or acquisition of such interest. Such financial interest must be 
divested within 90 calendar days from the date reported unless a waiver 
is granted in accordance with Sec.  9001.103.


Sec.  9001.105  Outside employment.

    (a) Prohibited outside employment. Employees, except special 
Government employees, shall not engage in:
    (1) Employment with a person or entity, other than a State or local 
government, that is registered as a lobbyist under the Lobbying 
Disclosure Act of 1995 (2 U.S.C. chapter 26) and engages in lobbying 
activities concerning FHFA programs; or
    (2) Employment with any regulated entity or with the Office of 
Finance of the Federal Home Loan Bank System.
    (b) Prior approval for and concurrence with other outside 
employment--(1) Except as provided in

[[Page 52613]]

paragraph (b)(2) of this section, before engaging in any outside 
employment that is not prohibited under paragraph (a) of this section, 
with or without compensation, an employee, other than a special 
Government employee, must obtain written approval from his or her 
supervisor and the concurrence of the DAEO. Nonetheless, special 
Government employees remain subject to other statutory and regulatory 
provisions governing their outside activities, including 18 U.S.C. 
203(c) and 205(c), as well as applicable provisions of 5 CFR part 2635.
    (2) An employee, other than a special Government employee, who 
before the effective date of this part or commencement of employment 
with FHFA commenced engaging in outside employment that is not 
prohibited under paragraph (a) of this section must request written 
approval from his or her supervisor and the concurrence of the DAEO 
within 30 calendar days of the effective date of this part or 
commencement of employment with FHFA. The employee may continue 
engaging in the outside employment while the request is under review.
    (c) Definition of outside employment. For purposes of paragraph (b) 
of this section, outside employment means any form of non-Federal 
employment or business relationship involving the provision of personal 
services, whether or not for compensation. It includes, but is not 
limited to, services as an officer, director, employee, agent, advisor, 
attorney, consultant, contractor, general partner, trustee, teacher, or 
speaker. It includes writing when done under an arrangement with 
another person or entity for production or publication of the written 
product. The definition does not include positions as trustee for a 
family trust for which the only beneficiaries are the employee, the 
employee's spouse, the employee's minor or dependent children, or any 
combination thereof. The definition also does not include participation 
in the activities of a nonprofit charitable, religious, professional, 
social, fraternal, educational, recreational, public service or civic 
organization, unless:
    (1) The employee will receive compensation other than reimbursement 
of expenses;
    (2) The organization's activities are devoted substantially to 
matters relating to the employee's official duties as defined in 5 CFR 
2635.807(a)(2)(i)(B) through (E) and the employee will serve as officer 
or director of the organization; or
    (3) The activities will involve the provision of consultative or 
professional services. Consultative services means the provision of 
personal services by an employee, including the rendering of advice or 
consultation, which requires advanced knowledge in a field of science 
or learning customarily acquired by a course of specialized instruction 
and study in an institution of higher education, hospital, or similar 
facility. Professional services means the provision of personal 
services by an employee, including the rendering of advice or 
consultation, which involves application of the skills of a profession 
as defined in 5 CFR 2636.305(b)(1) or involves a fiduciary relationship 
as defined in 5 CFR 2636.305(b)(2).

    Note to Sec.  9001.105(c): There is a special approval 
requirement set out in both 18 U.S.C. 203(d) and 205(e), 
respectively, for certain representational activities otherwise 
covered by the conflict of interest restrictions on compensation and 
activities of employees in claims against and other matters 
affecting the Government. Thus, an employee who wishes to act as 
agent or attorney for, or otherwise represent his or her parents, 
spouse, children, or any person for whom, or any estate for which, 
he or she is serving as guardian, executor, administrator, trustee, 
or other personal fiduciary in such matters must obtain the approval 
required by law of the Government official responsible for the 
employee's appointment in addition to the regulatory approval 
required in this section.

    (d) Procedure for requesting approval and concurrence--(1) The 
approval required by paragraph (b) of this section shall be requested 
by e-mail or other form of written correspondence in advance of 
engaging in outside employment as defined in paragraph (c) of this 
section.
    (2) The request for approval to engage in outside employment shall 
set forth, at a minimum:
    (i) The name of the employer or organization;
    (ii) The nature of the activity or other work to be performed;
    (iii) The title of the position; and
    (iv) The estimated duration of the outside employment.
    (3) Upon a significant change in the nature or scope of the outside 
employment or in the employee's official position within FHFA, the 
employee must, within seven calendar days of the change, submit a 
revised request for approval and concurrence.
    (e) Standard for concurrence. The DAEO may concur with the 
supervisor's approval required by paragraph (b) of this section only 
upon his or her written determination that the outside employment is 
not expected to involve conduct prohibited by statute or Federal 
regulation, including 5 CFR part 2635 and this part.
    (f) Issuance of instructions. The DAEO may issue written 
instructions governing the submission of requests for approval of and 
concurrence with outside employment under paragraph (d) of this 
section. The instructions may exempt categories of employment from the 
prior approval and concurrence requirement of paragraph (b) of this 
section based on a determination by the DAEO that employment within 
those categories of employment will generally be approved and is not 
likely to involve conduct prohibited by Federal law or regulation, 
including 5 CFR part 2635 and this part.


Sec.  9001.106  Restrictions resulting from employment of family and 
household members.

    (a) Disqualification of employee. An employee may not participate 
in any particular matter in which a regulated entity is a party if the 
regulated entity employs as an employee or a consultant his or her 
spouse, child, parent, or sibling, or member of his or her household 
unless the DAEO has authorized the employee to participate in the 
matter using the standard set forth in 5 CFR 2635.502(d).
    (b) Reporting certain relationships. Within 30 calendar days of the 
spouse, child, parent, sibling, or member of the employee's household 
being employed by the regulated entity, the employee shall provide in 
writing notice of such employment to the DAEO.


Sec.  9001.107  Other limitations.

    (a) Director and Deputy Directors. The Director, the Deputy 
Director of the Division of Enterprise Regulation, the Deputy Director 
of the Division of Federal Home Loan Bank Regulation, and the Deputy 
Director for Housing Mission and Goals are subject to additional 
financial interest limitations as set forth in section 1312(g) of the 
Safety and Soundness Act, 12 U.S.C. 4512(g).
    (b) Financial interests in Bank members and other financial 
institutions. If an employee or the spouse or minor children of the 
employee directly or indirectly owns a financial interest in a member 
of a Bank or in a financial institution such as a mortgage bank, 
mortgage broker, bank, thrift, or other financial institution that 
originates, insures, or services mortgages that are owned, guaranteed, 
securitized, or collateralized by a regulated entity, the employee is 
cautioned not to violate the statutory prohibition against financial 
conflicts of interest set forth in 18 U.S.C. 208. The government-wide 
de minimis and other exceptions set forth in 5 CFR 2640.202 are 
applicable to the ownership or control of interests in such financial

[[Page 52614]]

institutions. Employees are encouraged to seek a determination from the 
DAEO as to whether the financial interest in the member of the Bank or 
in the financial institution creates a financial conflict of interest 
or an appearance of a conflict of interest and whether the employee 
should disqualify himself or herself from participating in an official 
capacity in a particular matter involving the financial institution.


Sec.  9001.108  Prohibited recommendations.

    Employees shall not make any recommendation or suggestion, directly 
or indirectly, concerning the acquisition, sale, or divestiture of 
securities of a regulated entity.


Sec.  9001.109  Prohibited purchase of assets.

    An employee or the employee's spouse or minor children shall not 
purchase, directly or indirectly, any real or personal property from a 
regulated entity, unless it is sold at public auction or by other means 
which would assure that the selling price is the asset's fair market 
value.

    Dated: August 3, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
    Approved: August 13, 2010.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. 2010-21324 Filed 8-26-10; 8:45 am]
BILLING CODE 8070-01-P