[Federal Register Volume 76, Number 191 (Monday, October 3, 2011)]
[Rules and Regulations]
[Pages 61046-61052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-25443]


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DEPARTMENT OF THE TREASURY

31 CFR Part 31

RIN 1505-AC05


TARP Conflicts of Interest

AGENCY: Departmental Offices, Treasury.

ACTION: Final rule.

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SUMMARY: On January 21, 2009, the Department issued an interim rule 
that provided guidance on conflicts of interest pursuant to Section 108 
of the Emergency Economic Stabilization Act of 2008 (``EESA''), which 
was enacted on October 3, 2008. This final rule takes into account the 
public comments received and adopts revisions to the interim rule.

DATES: Effective date: November 2, 2011.

FOR FURTHER INFORMATION CONTACT: For further information regarding this 
final rule contact the Troubled Asset Relief Program Compliance Office, 
Office of Financial Stability, Department of the Treasury, 1500 
Pennsylvania Avenue, Washington, DC, 20220, (202) 622-2000, or 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Pursuant to Section 108 of EESA (Pub. L. 110-343; 122 Stat. 3765), 
which authorizes the Secretary of the Treasury to issue regulations or 
guidelines necessary to address and manage or to prohibit conflicts of 
interest that may arise in connection with the administration and 
execution of the EESA authorities, Treasury promulgated an interim 
final rule on conflicts of interest on January 21, 2009 (``Interim 
Rule'') (74 FR 3431). Treasury invited the public to submit comments on 
the Interim Rule and received requests from several commentators 
requesting that Treasury modify aspects of the Interim Rule. Treasury 
carefully considered all comments received and, in section II of this 
rule, discusses the comments received and sets out modifications in 
this final rule.
    The January 21, 2009, interim rule's provisions are available at 74 
FR 3431. The interim rule defines organizational and personal conflicts 
of interest. Further, the interim rule sets forth: (1) The requirements 
for retained entities to search for, disclose, certify to, and mitigate 
organizational or personal conflicts of interest, (2) general standards 
related to the handling of conflicts of interest, favors, gifts, 
Treasury property, and items of monetary value, (3) limits on retained 
entities' activities concurrently with providing services to Treasury, 
(4) limits on retained entities' communications with Treasury 
employees, (5) requirements with respect to the receipt and handling of 
nonpublic information, and (6) enforcement powers with respect to the 
interim rule.

II. Summary of Comments, Treasury's Resulting Changes, and Final Rule

    Treasury is promulgating this rule to finalize the Interim Rule 
issued on January 21, 2009. Interested members of the public submitted 
several comments to the Interim Rule. The comments have been carefully 
considered. Comments are described below, as are the approaches that 
Treasury has taken in addressing them.
    Commentators asked Treasury to eliminate the reference to 
``management officials'' in 31 CFR 31.201 and 31 CFR 31.212. One 
commentator took issue with what they felt was the presumption, by 
defining management official, that such officials had knowledge related 
to the Treasury arrangement by virtue of status, rather than by virtue 
of having a substantive role in the arrangement. Treasury agrees, and 
decided to limit various obligations previously required of management 
officials to those key individuals who are personally and substantially 
involved in providing services under an arrangement with Treasury. 
Management officials performing a substantive role under an arrangement 
will be subsumed in the definition of key individual, rendering the 
definition of management official unnecessary.
    Treasury received a comment that inquired whether Treasury 
considered the examples listed in the definitional provisions in 31 CFR 
31.201 to per se constitute organizational conflict of interests. The 
illustrations set forth in the definitional provisions in section 
31.201 are examples of situations that may give rise to a conflict of 
interest. They are not pronouncements that a particular set of facts 
will necessarily give rise to a conflict of interest, or that such 
conflict of interest cannot be mitigated. Treasury also received a 
comment suggesting the rule include specific mitigation plans for some 
of the conflicts examples. Treasury believes that including specific 
mitigation plans as part of the regulation would not be useful because 
the facts and circumstances of each potential or actual conflict 
determine whether a conflict of interest exists and dictate the 
appropriate mitigation controls. Treasury notes that it routinely 
interfaces directly with retained entities to formulate conflicts of 
interest mitigation plans that are dependent on the particular facts 
underlying the potential conflict.
    Treasury also received comments questioning the relationship of the 
rule to contractors versus financial agents. To clarify, this final 
rule applies to both financial agency agreements and procurement 
contracts. Of course, procurement contracts are also subject to the 
Federal Acquisition Regulation (the ``FAR'') along with other 
regulatory requirements. Treasury also notes that the TARP Chief 
Compliance Officer lacks the direct or delegated authority to waive FAR 
rules related to organizational conflicts of interests. Thus, a waiver 
issued under 31 CFR part 31 does not itself ensure compliance with the 
applicable FAR requirements.
    Treasury notes that pursuant to section 31.200(b), vendors hired 
under an arrangement to perform purely administrative services (e.g., 
parking services for Treasury) are not subject to this rule because, in 
Treasury's estimation, the providers of such services are not likely to 
exercise the discretion core to Treasury's mission under the Troubled 
Asset Relief Program (``TARP'') which would likely create conflicts of 
interest and, therefore, the burden of subjecting such vendors to the 
rule is unnecessary.
    Treasury added a specific reference to the appearance of a conflict 
of interest to sections 31.200, 31.211 and 31.212 to clarify that facts 
or situations that give rise to the appearance of a conflict of 
interest are also considered potential conflicts. This clarification is 
consistent with the overall approach of, and policy underlying, the 
regulation.
    One commentator advocated the adoption of a rule that a retained 
entity which is an SEC-registered investment

[[Page 61047]]

adviser is per se deemed to have complied with the federal securities 
laws mentioned in section 31.211(a) or that, in the alternative, the 
rule should require that the compliance programs only be ``reasonably 
designed'' to detect and prevent violations of federal securities laws 
and organizational conflicts of interest. Treasury does not agree with 
the first suggestion but agrees with the latter, and has revised 
section 31.211(a) accordingly.
    Treasury also received comments that the standards related to gifts 
in section 31.213(a)(1) should be limited to individuals deployed for 
Treasury and include reasonable scope limitations. In response, 
Treasury agreed to limit application of section 31.213(a)(1) to 
individuals performing work under the arrangement and added specific 
dollar figures to the restriction on accepting or soliciting favors, 
gifts, or other items of monetary value (above $20 per gift or $50 for 
the year) to make it consistent with the standards used by the Office 
of Government Ethics.
    Treasury clarifies that it intends to follow the same standard for 
``credible evidence'' in section 31.213 that is used in relation to FAR 
Clause 52.203-13(b) (3).
    One commentator believed that the definition of ``retained entity'' 
was overly broad, in that it included subcontractors and consultants 
hired to perform services under the arrangement, and that the reference 
to subcontractors and consultants should be removed or, in the 
alternative, limited to those providing substantive services under the 
arrangement. Treasury disagrees and notes that subcontractors and 
vendors may possess conflicts of interest that could cause a reasonable 
person with knowledge of the relevant facts to question the retained 
entity's objectivity or judgment. As stated previously, pursuant to 
section 31.200(b), administrative contracts are excluded from the rule, 
thus avoiding application of the rule to entities unlikely to possess 
organizational conflicts of interest.
    A commentator also recommended that ``related entities'' be defined 
more narrowly, to eliminate parents, subsidiaries, etc. which operate 
independently from the retained entity. It was noted that some conflict 
mitigation procedures, such as barriers to eliminate the sharing of 
information, may also inhibit the discovery of conflicts of interest 
involving related entities. Treasury understands the commentator's 
concern, but believes revising the related entity definition is 
unnecessary as the conflict mitigation measures listed in section 
31.211(c) are provided for illustrative purposes only and can be 
tailored as necessary in the actual mitigation plan agreed upon by the 
retained entity and Treasury.
    One comment maintained that the rule inappropriately places too 
much of the burden of discovering conflicts of interest, both 
organizational and personal, on the retained entity, and that the rule 
should be amended to explicitly state the burden falls on both the 
retained entity and the Treasury. Treasury does not agree. Although 
Treasury takes independent steps to identify conflicts of interest and 
determine appropriate mitigants, the rule focuses on the obligation of 
the retained entity, pursuant to section 31.211(a), to identify 
conflicts and formulate a conflicts of interest mitigation plan.
    One commentator stated the rule should specify the level of 
employee within the retained entity that must learn of an 
organizational conflict of interest before a reporting obligation is 
triggered. Treasury believes that such a limitation would be opposed to 
its policy objectives that any employee of a retained entity who knows 
of a conflict should be required to report it.
    Treasury also received a comment in favor of a materiality 
threshold in judging what constitutes an organizational conflict of 
interest. Treasury was directed to look to applicable case law 
concerning Rule 10b-5 of the Securities Exchange Act of 1934. Treasury 
has not adopted a materiality threshold because Treasury should be 
alerted to any possible conflict of interest, and post-notification 
Treasury can decide whether a conflict is material. Additionally, the 
adoption of a materiality threshold could invite abuse.
    Treasury received a comment expressing the view that, since the 
American Bar Association's (ABA) Rules of Professional Conduct already 
contain conflicts of interest provisions, that Treasury should 
disregard organizational conflicts of interest concerns when the 
retained entity is a law firm that has complied with the standards set 
forth in either these rules or applicable case law. Treasury does not 
adopt this change because this regulation is specifically related to 
the requirements of EESA and the ABA Rules of Professional Conduct may 
not adequately address all conflicts of interest.
    Treasury received comments suggesting that the continuing 
obligation to search for any potential organizational and personal 
conflicts of interest and to report new conflicts of interest within 
five business days of learning of them is unreasonable and invites 
failure. It was requested that Treasury adopt a more flexible standard, 
and one commentator even recommended eliminating the notification 
requirement altogether and relying only upon the periodic 
certifications. Treasury believes such a five day timeframe is 
appropriate and does not need to be revised or lengthened. Experience 
has shown five days is not too short of a period as the retained entity 
need only provide Treasury notification of the conflict and the initial 
proposal for mitigating the conflict. In addition, it is important for 
mitigation controls to be implemented without delay. Eliminating the 
notification requirement and relying solely upon the periodic 
certification may result in situations in which certain conflicts of 
interest have not been mitigated adequately and, thus, Treasury's 
ability to monitor such conflicts in a timely manner would be undercut.
    One comment requested the clarification that the notification 
requirement applies only to conflicts of interest not yet identified, 
and not to new conflicts that can be addressed by a previously-approved 
conflicts mitigation plan. The notification requirement applies to all 
new conflicts.
    The same comment questioned whether the five day timeframe begins 
at the time the new conflicts arises, or when the retained entity's 
TARP Compliance Officer is informed of the new conflict. For avoidance 
of doubt, the five day timeframe begins when any person at the retained 
entity becomes aware of the new conflict (not just the TARP Compliance 
Officer).
    Treasury also received comments to the effect that the section 
31.212(b) concept of identifying and monitoring close personal 
relationships was improperly subjective because the phrase ``close 
personal relationship'' is open to broad interpretation. Treasury 
agrees and revised the definition of a personal conflict of interest in 
section 31.201 and the requirements of section 31.212(b) to include 
``an individual, or any dependent child (meaning son, daughter, stepson 
or stepdaughter who is either (a) Unmarried, under age 21, and living 
in the individual's house, or (b) considered a ``dependent'' of the 
individual under the U.S. tax code),'' In making this modification, 
Treasury adopted the standards used in completing the Office of 
Government Ethics (``OGE'') Form 450.
    Treasury received many comments expressing the view that requiring 
the use of OGE Form 278 as a disclosure standard in the personal 
conflicts inquiry process (section 31.212(b))

[[Page 61048]]

presented an overly invasive, unwarranted burden, in that it took too 
long to fill out the form and that the form asked intrusive questions 
regarding personal activities. Treasury reviewed these comments in 
light of its own experience, and also in light of having received an 
official recommendation from the Government Accountability Office (GAO) 
suggesting that Form 450 would be a more appropriate model on which 
vendors should base their inquiries into the personal conflicts of 
their employees than Form 278. The GAO believed that the using Form 450 
as a model could appropriately reduce the burden of providing financial 
information as opposed to the Form 278. See TROUBLED ASSET RELIEF 
PROGRAM: March 2009 Status of Efforts to Address Transparency and 
Accountability Issues, GAO March 2009 p. 45, available at http://www.gao.gov/new.items/d09504.pdf. On these bases, Treasury agrees that 
Form 450 is more appropriate than Form 278 as a personal conflicts 
inquiry model, and has substituted Form 450 for Form 278 in the rule.
    Treasury received a comment asserting the rule did not provide 
enough detail in regard to what would constitute a personal conflict of 
interest, and what the related mitigation steps would be. Since the 
Interim Rule has been released, Treasury has found that the definition 
of ``personal conflicts of interest'' is sufficiently broad to 
encompass the wide range of personal conflicts of interest that may 
arise, but yet provides enough guidance for retained entities to 
recognize which circumstances could constitute a personal conflict of 
interest, and that the variables that would determine a sufficient 
mitigation plan are such that providing specific examples would be of 
limited value.
    Some commentators expressed concern that the ten-business day 
timeframe for submitting the personal conflicts of interest 
certification is too little time for a sound submission, contending it 
is unlikely a retained entity would be able to gather, process, and 
certify the required information in that time. Treasury disagrees 
because it has found in its experience in applying the Interim Rule 
that ten business days is sufficient time to gather the information 
required to submit the personal conflicts of interest certification, 
particularly since the retained entity can begin at least part of the 
process before the arrangement is signed. If a retained entity feels 
ten business days may not be adequate (for example, if the retained 
entity has a large number of key individuals), it may request an 
extension.
    Treasury also received a comment that the three-year document 
retention requirement in sections 31.211(h) and 31.212(h) should be 
shortened. Treasury believes the three-year document retention 
requirement is necessary in case any question should surface regarding 
a past determination or mitigation as to a particular personal conflict 
of interest.
    One commentator felt that section 31.213(c) should be revised so 
that Treasury would no longer refer all violations of 18 U.S.C. 1001 to 
the Department of Justice and to SIGTARP, but would instead refer only 
those violations relating to services under EESA and related 
certifications. Treasury sees no reason to limit which violations it 
refers to the Department of Justice or to SIGTARP, as Treasury does not 
wish for any false statements to go unreported.
    Treasury received a comment that the phrase ``impermissible 
conflicts of interest'' referred to in section 31.214 should be limited 
so that it only relates to activities in connection with buying or 
selling assets under the TARP program, and not to ``customary'' 
business activities such as managing client accounts that hold 
securities or other financial instruments issued by TARP-funded 
entities. Treasury was also urged to limit the prohibitions set forth 
in section 31.214(a) and (b) to concurrent activities involving the 
specific assets for which the retained entity has entered into an 
arrangement with Treasury, and further, to adopt a de minimis exception 
in order to permit a retained entity to engage in certain incidental 
market activities involving TARP securities without such activities 
rising to the level of an ``impermissible'' conflict of interest. 
Treasury believes that because such activities can be addressed in the 
retained entity's conflicts mitigation plan agreed upon by Treasury, 
and because section 31.214 specifically states its restrictions do not 
apply if ``Treasury agrees in writing to specific mitigation 
measures,'' including these exceptions in the rule is unnecessary.
    The same commentator argued that section 31.217(a)'s treatment of 
all information provided by Treasury to a retained entity under an 
arrangement as non-public until Treasury determines otherwise is 
overbroad. It was recommended that the confidentiality requirement 
apply only to information pertaining to a TARP beneficiary or its 
assets, or that is otherwise marked by Treasury as proprietary or 
confidential. Treasury understands the commentator's concern, but 
believes the consequences of sensitive information becoming public are 
such that maintaining a broad determination of confidentiality is 
warranted and appropriately protective of confidential information.
    Treasury also received comments recommending that only management 
officials and key personnel be subject to a duty to report violations 
of confidentiality obligations. As stated earlier, Treasury believes 
that any employee of the retained entity should be required to report a 
breach of confidentiality.
    Treasury received one comment expressing the view that the 
penalties contemplated by section 31.218(a) are overly broad and not 
reasonably calculated to address the nature and severity of the 
perceived transgression. Treasury believes that the appropriateness of 
the sanction will depend heavily on the violation, such that leaving 
the potential penalties listed in the rule broad is appropriate.
    Treasury received a comment recommending that section 31.218(b) be 
eliminated due to perceived uncertainty regarding Treasury's 
expectations regarding the times and extent of the disclosure 
requirements found in the rule. Treasury believes section 31.218(b) 
encourages prompt disclosure of violations of the rule, and thus 
rejects the recommendation.
    The definition of ``key individual'' in section 31.201 has been 
changed to clarify that the list of actions that may constitute 
personal and substantial participation in a matter provides examples 
and is not necessarily an exclusive list of such actions. This change 
is made to more closely track the language of 5 CFR 2635.402(b)(4), 
upon which the list is based. It should be stressed that while Sec.  
2635.402(b)(4), which applies to Government employees, covers 
participation in a Government matter, personal and substantial 
participation in a decision or other matter under consideration by the 
retained entity itself will satisfy the criteria for a key individual 
under this part 31. For example, an employee of the retained entity who 
provides advice to other employees of the retained entity concerning 
performance of the arrangement qualifies as a key individual if the 
other elements of the definition are satisfied.
    For consistency, Treasury replaced the previous definition of 
``troubled assets'' (in section 31.201) with a reference to the 
definition given in EESA, 12 U.S.C. 5209(9).

[[Page 61049]]

III. Procedural Requirements

Regulatory Planning and Review

    Executive Orders 13563 and 12866 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility. 
This rule has been designated a ``significant regulatory action'' 
although not economically significant, under section 3(f) of Executive 
Order 12866. Accordingly, the rule has been reviewed by the Office of 
Management and Budget.

Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required, this rule is 
not subject to the provisions of the Regulatory Flexibility Act (5 
U.S.C. chapter 6).

Paperwork Reduction Act

    The information collections contained in the rule have been 
reviewed and approved by OMB under the Paperwork Reduction Act (44 
U.S.C. chapter 35) and assigned OMB control number 1505-0209. Under the 
Paperwork Reduction Act, an agency may not conduct or sponsor and a 
person is not required to respond to, a collection of information 
unless it displays a valid OMB control number.

List of Subjects in 31 CFR Part 31

    Conflicts of interest, Contracts, Troubled assets.

    For the reasons set out in the preamble, Title 31 of the Code of 
Federal Regulations is amended as follows:

0
1. Revise part 31 to read as follows:

PART 31--TROUBLED ASSET RELIEF PROGRAM

Sec.
31.1 General.
Subpart A--[Reserved]
Subpart B--Conflicts of Interest
31.200 Purpose and scope.
31.201 Definitions.
31.211 Organizational conflicts of interest.
31.212 Personal conflicts of interest.
31.213 General standards.
31.214 Limitations on concurrent activities.
31.215 Grant of waivers.
31.216 Communications with Treasury employees.
31.217 Confidentiality of information.
31.218 Enforcement.

    Authority:  31 U.S.C. 321; Pub. L. 110-343; 122 Stat. 3765.


Sec.  31.1  General.

    This part sets forth regulations to implement and administer the 
Emergency Economic Stabilization Act of 2008 (Pub. L. 110-343; 122 
Stat. 3765).

Subpart A--[Reserved]

Subpart B--Conflicts of Interest


Sec.  31.200  Purpose and scope.

    (a) Purpose. This regulation sets forth standards to address and 
manage or to prohibit conflicts of interest that may arise in 
connection with the administration and execution of the authorities 
under the Troubled Asset Relief Program (TARP), established under 
sections 101 and 102 of the Emergency Economic Stabilization Act of 
2008 (EESA).
    (b) Scope. This regulation addresses actual and potential conflicts 
of interest, or circumstances that give rise to the appearance of a 
conflict of interest, that may arise from contracts and financial 
agency agreements between private sector entities and the Treasury for 
services under the TARP, other than administrative services identified 
by the TARP Chief Compliance Officer.


Sec.  31.201  Definitions.

    As used in this part:
    Arrangement means a contract or financial agency agreement between 
a private sector entity and the Treasury for services under the TARP, 
other than administrative services identified by the TARP Chief 
Compliance Officer.
    Dependent child means a son, daughter, stepson or stepdaughter who 
is either (a) Unmarried, under age 21, and living in the individual's 
house, or (b) considered a ``dependent'' of the individual under the 
U.S. tax code.
    EESA means the Emergency Economic Stabilization Act of 2008, as 
amended.
    Key individual means an individual providing services to a private 
sector entity who participates personally and substantially, through, 
for example, decision, approval, disapproval, recommendation, or the 
rendering of advice, in the negotiation or performance of, or 
monitoring for compliance under, the arrangement with the Treasury. For 
purposes of the definition of key individual, the words ``personally 
and substantially'' shall have the same meaning and interpretation as 
such words have in 5 CFR 2635.402(b)(4).
    Organizational conflict of interest means a situation in which the 
retained entity has an interest or relationship that could cause a 
reasonable person with knowledge of the relevant facts to question the 
retained entity's objectivity or judgment to perform under the 
arrangement, or its ability to represent the Treasury. Without limiting 
the scope of this definition, organizational conflicts of interest may 
include the following situations:
    (1) A prior or current arrangement between the Treasury and the 
retained entity that may give the retained entity an unfair competitive 
advantage in obtaining a new arrangement with Treasury.
    (2) The retained entity is, or represents, a party in litigation 
against the Treasury relating to activities under the EESA.
    (3) The retained entity provides services for Treasury relating to 
the acquisition, valuation, disposition, or management of troubled 
assets at the same time it provides those services for itself or 
others.
    (4) The retained entity gains, or stands to gain, an unfair 
competitive advantage in private business arrangements or investments 
by using information provided under an arrangement or obtained or 
developed pursuant to an arrangement with Treasury.
    (5) The retained entity is a potential candidate for relief under 
EESA, is currently participating in an EESA program, or has a financial 
interest that could be affected by its performance of the arrangement.
    (6) The retained entity maintains a business or financial 
relationship with institutions that have received funds from Treasury 
pursuant to the EESA.
    Personal conflict of interest means a personal, business, or 
financial interest of an individual, his or her spouse or any dependent 
child that could adversely affect the individual's ability to perform 
under the arrangement, his or her objectivity or judgment in such 
performance, or his or her ability to represent the interests of the 
Treasury.
    Related entity means the parent company and subsidiaries of a 
retained entity, any entity holding a controlling interest in the 
retained entity, and any entity in which the retained entity holds a 
controlling interest.
    Retained entity means the individual or entity seeking an 
arrangement with the Treasury or having such an arrangement with the 
Treasury, but does not include special government employees. A 
``retained entity'' includes the subcontractors and consultants it

[[Page 61050]]

hires to perform services under the arrangement.
    Special government employee means an officer or employee serving 
the Treasury, serving with or without compensation, for a period not to 
exceed 130 days during any 365-day period on a full-time or 
intermittent basis.
    Treasury means the United States Department of the Treasury.
    Treasury employee means an officer or employee of the Treasury, 
including a special government employee, or an employee of any other 
government agency who is properly acting on behalf of the Treasury.
    Troubled assets, for purposes of this rule, shall have the same 
meaning as set forth in 12 U.S.C. 5202(9).


Sec.  31.211  Organizational conflicts of interest.

    (a) Retained entity's responsibility. A retained entity working 
under an arrangement shall not permit an actual or potential 
organizational conflict of interest (including a situation in which the 
retained entity has an interest or relationship that could cause a 
reasonable person with knowledge of the relevant facts to question the 
retained entity's objectivity or judgment to perform under the 
arrangement or its ability to represent the Treasury), unless the 
conflict has been disclosed to Treasury under this Section and 
mitigated under a plan approved by Treasury, or Treasury has waived the 
conflict. With respect to arrangements for the acquisition, valuation, 
management, or disposition of troubled assets, the retained entity 
shall maintain a compliance program reasonably designed to detect and 
prevent violations of federal securities laws and organizational 
conflicts of interest.
    (b) Information required about the retained entity. As early as 
possible before entering an arrangement to perform services for 
Treasury under the EESA, a retained entity shall provide Treasury with 
sufficient information to evaluate any organizational conflicts of 
interest. The information shall include the following:
    (1) The retained entity's relationship to any related entities.
    (2) The categories of troubled assets owned or controlled by the 
retained entity and its related entities, if the arrangement relates to 
the acquisition, valuation, disposition, or management of troubled 
assets.
    (3) Information concerning all other business or financial 
interests of the retained entity, its proposed subcontractors, or its 
related entities, which could conflict with the retained entity's 
obligations under the arrangement with Treasury.
    (4) A description of all organizational conflicts of interest and 
potential conflicts of interest.
    (5) A written detailed plan to mitigate all organizational 
conflicts of interest, along with supporting documents.
    (6) Any other information or documentation about the retained 
entity, its proposed subcontractors, or its related entities that 
Treasury may request.
    (c) Plans to mitigate organizational conflicts of interest. The 
steps necessary to mitigate a conflict may depend on a variety of 
factors, including the type of conflict, the scope of work under the 
arrangement, and the organizational structure of the retained entity. 
Some conflicts may be so substantial and pervasive that they cannot be 
mitigated. Retained entities should consider the following measures 
when designing a mitigation plan:
    (1) Adopting, implementing, and enforcing appropriate information 
barriers to prevent unauthorized people from learning nonpublic 
information relating to the arrangement and isolate key individuals 
from learning how their performance under the arrangement could affect 
the financial interests of the retained entity, its clients, and 
related entities.
    (2) Divesting assets that give rise to conflicts of interest.
    (3) Terminating or refraining from business relationships that give 
rise to conflicts of interest.
    (4) If consistent with the terms of the arrangement and permitted 
by Treasury, refraining from performing specific types of work under 
the arrangement.
    (5) Any other steps appropriate under the circumstances.
    (d) Certification required. When the retained entity provides the 
information required by paragraph (b) of this section, the retained 
entity shall certify that the information is complete and accurate in 
all material respects.
    (e) Determination required. Prior to entering into any arrangement, 
the Treasury must conclude that no organizational conflict of interest 
exists that has not been adequately mitigated, or if a conflict cannot 
be adequately mitigated, that Treasury has expressly waived it. Once 
Treasury has approved a conflicts mitigation plan, the plan becomes an 
enforceable term under the arrangement.
    (f) Subsequent notification. The retained entity has a continuing 
obligation to search for, report, and mitigate any and all potential 
organizational conflicts of interest that have not already been 
disclosed to Treasury under a plan approved by Treasury or previously 
waived by Treasury. The retained entity shall search regularly for 
conflicts and shall, within five (5) business days after learning of a 
potential organizational conflict of interest, disclose the potential 
conflict of interest in writing to the TARP Chief Compliance Officer. 
The disclosure shall describe the steps it has taken or proposes to 
take to mitigate the potential conflict or request a waiver from 
Treasury.
    (g) Periodic Certification. No later than one year after the 
arrangement's effective date, and at least annually thereafter, the 
retained entity shall certify in writing that it has no organizational 
conflicts of interest, or explain in detail the extent to which it can 
certify, and describe the actions it has taken and plans to take to 
mitigate any conflicts. Treasury may require more frequent 
certifications, depending on the arrangement.
    (h) Retention of information. A retained entity shall retain the 
information needed to comply with this section and to support the 
certifications required by this section for three (3) years following 
termination or expiration of the arrangement, and shall make that 
information available to Treasury upon request. Such retained 
information shall include, but is not limited to, written documentation 
regarding the factors the retained entity considered in its mitigation 
plan as well as written documentation addressing the results of the 
retained entities' periodic review of the mitigation plan.


Sec.  31.212  Personal conflicts of interest.

    (a) Retained entity's responsibility. A retained entity shall 
ensure that all key individuals have no personal conflicts of interest 
(including a situation that would cause a reasonable person with 
knowledge of the relevant facts to question the individual's ability to 
perform, his or her objectivity or judgment in such performance, or his 
or her ability to represent the interests of the Treasury), unless 
mitigation measures have neutralized the conflict, or Treasury has 
waived the conflict.
    (b) Information required. Before key individuals begin work under 
an arrangement, a retained entity shall obtain information from each of 
them in writing about their personal, business, and financial 
relationships, as well as those of their spouses and dependent children 
that would cause a reasonable person with knowledge of the relevant 
facts to question the individual's ability to perform, his or her 
objectivity or judgment in such performance, or his or her ability to 
represent the interests of

[[Page 61051]]

the Treasury. When the arrangement concerns the acquisition, valuation, 
management, or disposition of troubled assets, the information shall be 
no less extensive than that required of certain new federal employees 
under Office of Government Ethics Form 450. Treasury may extend the 
time necessary to meet these requirements in urgent and compelling 
circumstances.
    (c) Disqualification. The retained entity shall disqualify key 
individuals with personal conflicts of interest from performing work 
pursuant to the arrangement unless mitigation measures have neutralized 
the conflict to the satisfaction of the TARP Chief Compliance Officer. 
The retained entity may seek a waiver from the TARP Chief Compliance 
Officer to allow a key individual with a personal conflict of interest 
to work under the arrangement.
    (d) Initial certification. No later than ten business days after 
the effective date of the arrangement, the retained entity shall 
certify to the Treasury that all key individuals performing services 
under the arrangement have no personal conflicts of interest, or are 
subject to a mitigation plan or waiver approved by Treasury. In making 
this certification, the retained entity may rely on the information 
obtained pursuant to paragraph (b) of this section, unless the retained 
entity knows or should have known that the information provided is 
false or inaccurate. Treasury may extend the time necessary to meet 
these requirements where the retained entity has a large number of key 
individuals, or in other appropriate circumstances.
    (e) Periodic certification. No later than one year after the 
arrangement's effective date, and at least annually thereafter, the 
retained entity shall renew the certification required by paragraph (d) 
of this section. The retained entity shall provide more frequent 
certifications to Treasury when requested.
    (f) Retained entities' responsibilities. The retained entity shall 
adopt and implement procedures designed to search for, report, and 
mitigate personal conflicts of interest on a continuous basis.
    (g) Subsequent notification. Within five business days after 
learning of a personal conflict of interest, the retained entity shall 
notify Treasury of the conflict and describe the steps it has taken and 
will take in the future to neutralize the conflict.
    (h) Retention of information. A retained entity shall retain the 
information needed to comply with this section and to support the 
certifications required by this section for three years following 
termination or expiration of the arrangement, and shall make that 
information available to Treasury upon request.


Sec.  31.213  General standards.

    (a) During the time period in which a retained entity is seeking an 
arrangement and during the term of any arrangement:
    (1) The retained entity's officers, partners, or employees 
performing work under the arrangement shall not accept or solicit 
favors, gifts, or other items of monetary value above $20 from any 
individual or entity whom the retained entity, officer, partner, or 
employee knows is seeking official action from the Treasury in 
connection with the arrangement or has interests which may be 
substantially affected by the performance or nonperformance of duties 
to the Treasury under the arrangement, provided that the total value of 
gifts from the same person or entity does not exceed $50 in any 
calendar year.
    (2) The retained entity and its officers and partners, and its 
employees shall not improperly use or allow the improper use of 
Treasury property for the personal benefit of any individual or entity 
other than the Treasury.
    (3) The retained entity and its officers and partners, and its 
employees shall not make any unauthorized promise or commitment on 
behalf of the Treasury.
    (b) Any individual who acts for or on behalf of the Treasury 
pursuant to an arrangement shall comply with 18 U.S.C. 201, which 
generally prohibits the direct or indirect acceptance by a public 
official of anything of value in return for being influenced in, or 
because of, an official act. Violators are subject to criminal 
penalties.
    (c) Any individual or entity that provides information or makes a 
certification to the Treasury that is relating to services under EESA 
or required pursuant to 31 CFR Part 31 is subject to 18 U.S.C. 1001, 
which generally prohibits the making of any false or fraudulent 
statement to a federal officer. Upon receipt of information indicating 
that any individual or entity has violated any provision of title 18 of 
the U.S. Code or other provision of criminal law, Treasury shall refer 
such information to the Department of Justice and the Special Inspector 
General for the Troubled Asset Relief Program (SIGTARP).
    (d) A retained entity shall disclose to the SIGTARP, any credible 
evidence, in connection with the designation, services, or closeout of 
the arrangement, that an employee, or contractor of the retained entity 
has committed a violation of Federal criminal law involving fraud, 
conflict of interest, bribery, or gratuity violations found in Title 18 
of the United States Code, or a violation of the civil False Claims Act 
(31 U.S.C. 3729-3733).


Sec.  31.214  Limitations on concurrent activities.

    Treasury has determined that certain market activities by a 
retained entity during the arrangement are likely to cause 
impermissible conflicts of interest. Accordingly, the following 
restrictions shall apply unless waived pursuant to section 31.215, or 
Treasury agrees in writing to specific mitigation measures.
    (a) If the retained entity assists Treasury in the acquisition, 
valuation, management, or disposition of specific troubled assets, the 
retained entity and key individuals shall not purchase or offer to 
purchase such assets from Treasury, or assist anyone else in purchasing 
or offering to purchase such troubled assets from the Treasury, during 
the term of its arrangement.
    (b) If the retained entity advises Treasury with respect to a 
program for the purchase of troubled assets, the retained entity and 
key individuals shall not, during the term of the arrangement, sell or 
offer to sell, or act on behalf of anyone with respect to a sale or 
offer to sell, any asset to Treasury under the terms of that program.


Sec.  31.215  Grant of waivers.

    The TARP Chief Compliance Officer may waive a requirement under 
this Part that is not otherwise imposed by law when it is clear from 
the totality of the circumstances that a waiver is in the government's 
interest.


Sec.  31.216  Communications with Treasury employees.

    (a) Prohibitions. During the course of any process for selecting a 
retained entity (including any process using non-competitive 
procedures), a retained entity participating in the process and its 
representatives shall not:
    (1) Directly or indirectly make any offer or promise of future 
employment or business opportunity to, or engage directly or indirectly 
in any discussion of future employment or business opportunity with, 
any Treasury employee with personal or direct responsibility for that 
procurement.
    (2) Offer, give, or promise to offer or give, directly or 
indirectly, any money, gratuity, or other thing of value to any 
Treasury employee, except as permitted by the Standards of Conduct for 
Employees of the Executive Branch, 5 CFR part 2635.
    (3) Solicit or obtain from any Treasury employee, directly or 
indirectly, any

[[Page 61052]]

information that is not public and was prepared for use by Treasury for 
the purpose of evaluating an offer, quotation, or response to enter 
into an arrangement.
    (b) Certification. Before a retained entity enters a new 
arrangement, the retained entity must certify to the following:
    (1) The retained entity is aware of the prohibitions of paragraph 
(a) of this section and, to the best of its knowledge after making 
reasonable inquiry, the retained entity has no information concerning a 
violation or possible violation of paragraph (a) of this section.
    (2) Each officer, employee, and representative of the retained 
entity who participated personally and substantially in preparing and 
submitting a bid, offer, proposal, or request for modification of the 
arrangement has certified that he or she:
    (i) Is familiar with and will comply with the requirements of 
paragraph (a) of this section; and
    (ii) Has no information of any violations or possible violations of 
paragraph (a) of this section, and will report immediately to the 
retained entity any subsequently gained information concerning a 
violation or possible violation of paragraph (a) of this section.


Sec.  31.217  Confidentiality of information.

    (a) Nonpublic information defined. Any information that Treasury 
provides to a retained entity under an arrangement, or that the 
retained entity obtains or develops pursuant to the arrangement, shall 
be deemed nonpublic until the Treasury determines otherwise in writing, 
or the information becomes part of the body of public information from 
a source other than the retained entity.
    (b) Prohibitions. The retained entity shall not:
    (1) Disclose nonpublic information to anyone except as required to 
perform the retained entity's obligations pursuant to the arrangement, 
or pursuant to a lawful court order or valid subpoena after giving 
prior notice to Treasury.
    (2) Use or allow the use of any nonpublic information to further 
any private interest other than as contemplated by the arrangement.
    (c) Retained entity's responsibility. A retained entity shall take 
appropriate measures to ensure the confidentiality of nonpublic 
information and to prevent its inappropriate use. The retained entity 
shall document these measures in sufficient detail to demonstrate 
compliance, and shall maintain this documentation for three years after 
the arrangement has terminated. The retained entity shall notify the 
TARP Chief Compliance Officer in writing within five business days of 
detecting a violation of the prohibitions in paragraph (b), above. The 
security measures required by this paragraph shall include:
    (1) Security measures to prevent unauthorized access to facilities 
and storage containers where nonpublic information is stored.
    (2) Security measures to detect and prevent unauthorized access to 
computer equipment and data storage devices that store or transmit 
nonpublic information.
    (3) Periodic training to ensure that persons receiving nonpublic 
information know their obligation to maintain its confidentiality and 
to use it only for purposes contemplated by the arrangement.
    (4) Programs to ensure compliance with federal securities laws, 
including laws relating to insider trading, when the arrangement 
relates to the acquisition, valuation, management, or disposition of 
troubled assets.
    (5) A certification from each key individual stating that he or she 
will comply with the requirements in section 31.217(b). The retained 
entity shall obtain this certification, in the form of a nondisclosure 
agreement, before a key individual performs work under the arrangement, 
and then annually thereafter.
    (d) Certification. No later than ten business days after the 
effective date of the arrangement, the retained entity shall certify to 
the Treasury that it has received a certification form from each key 
individual stating that he or she will comply with the requirements in 
Sec.  31.217(b). In making this certification, the retained entity may 
rely on the information obtained pursuant to paragraph (b) of this 
section, unless the retained entity knows or should have known that the 
information provided is false or inaccurate.


Sec.  31.218  Enforcement.

    (a) Compliance with these rules concerning conflicts of interest is 
of the utmost importance. In the event a retained entity or any 
individual or entity providing information pursuant to 31 U.S.C. part 
31 violates any of these rules, Treasury may impose or pursue one or 
more of the following sanctions:
    (1) Rejection of work tainted by an organizational conflict of 
interest or a personal conflict of interest and denial of payment for 
that work.
    (2) Termination of the arrangement for default.
    (3) Debarment of the retained entity for Federal government 
contracting and/or disqualification of the retained entity from future 
financial agency agreements.
    (4) Imposition of any other remedy available under the terms of the 
arrangement or at law.
    (5) In the event of violation of a criminal statue, referral to the 
Department of Justice for prosecution of the retained entity and/or its 
officers or employees. In such cases, the Department of Justice may 
make direct and derivative use of any statements and information 
provided by any entity, its representatives and employees or any 
individual, to the extent permitted by law.
    (b) To the extent Treasury has discretion in selecting or imposing 
a remedy, it will give significant consideration to a retained entity's 
prompt disclosure of any violation of these rules.

    Dated: September 19, 2011.
Timothy G. Massad,
Assistant Secretary for Financial Stability.
[FR Doc. 2011-25443 Filed 9-30-11; 8:45 am]
BILLING CODE 4810-25-P