[Federal Register Volume 78, Number 177 (Thursday, September 12, 2013)]
[Rules and Regulations]
[Pages 56127-56129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22214]



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  Federal Register / Vol. 78, No. 177 / Thursday, September 12, 2013 / 
Rules and Regulations  

[[Page 56127]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

5 CFR Part 7501

[Docket No. FR-5722-F-01]
RIN 2501-AD61


Supplemental Standards of Ethical Conduct for Employees of the 
Department of Housing and Urban Development; Correction to Standards 
Governing Prohibited Financial Interests

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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

SUMMARY: HUD (or Department), with the concurrence of the Office of 
Government Ethics (OGE), amends its Supplemental Standards of Ethical 
Conduct, which are regulations for HUD officers and employees that 
supplement the Standards of Ethical Conduct for Employees of the 
Executive Branch (Standards) issued by OGE. In its final rule published 
on August 6, 2012, HUD did not comprehensively describe an exception to 
the provision that prohibits Department employees from directly or 
indirectly receiving, acquiring, or owning certain financial interests 
that may be subsidized by the Department. This final rule corrects this 
omission and establishes that HUD employees may not hold a financial 
interest in any grant, loan, cooperative agreement, or other form of 
assistance provided by the Department, including the insurance or 
guarantee of a loan, except to the extent that such interest represents 
assistance on the employee's principal residence. This final rule 
codifies current policy and practice.

DATES: Effective Date: October 15, 2013.

FOR FURTHER INFORMATION CONTACT: Robert H. Golden, Assistant General 
Counsel, Ethics and Appeals Division, telephone number 202-402-6334, or 
Peter J. Constantine, Associate General Counsel for Ethics Appeals and 
Personnel Law, Office of General Counsel, Department of Housing and 
Urban Development, 451 7th Street SW., Washington, DC 20410, telephone 
number 202-402-2377. Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal Relay 
Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: On August 6, 2012 (77 FR 46601), HUD 
published a final rule revising its Supplemental Standards of Ethical 
Conduct regulation. HUD revised its Supplemental Standards of Ethical 
Conduct regulation to ensure that its ethics program reflected the 
significant statutory changes to HUD's programs and operations enacted 
subsequent to 1996, the year that HUD issued its original Supplemental 
Standards of Ethical Conduct regulation. In this regard, HUD stated 
that the Housing and Economic Recovery Act of 2008 (HERA) (Pub. L. 110-
289, approved July 20, 2008) transferred regulatory authority over the 
Federal National Mortgage Association (Fannie Mae) and the Federal Home 
Loan Mortgage Corporation (Freddie Mac) (collectively known as 
Government-Sponsored Enterprises or GSEs) from HUD to the Federal 
Housing Finance Agency. Based on this transfer of regulatory authority, 
HUD removed provisions of its Supplemental Standards of Ethical Conduct 
that prohibited all HUD employees from owning financial interests 
issued by the GSEs. HUD also removed a provision that limited employees 
whose official duties included the regulation or oversight of the GSEs 
from owning financial interests in certain mortgage institutions. HUD 
also issued its August 6, 2012, final rule to clarify and streamline 
several sections of its Supplemental Standards of Ethical Conduct.
    One section that HUD revised in the August 6, 2012, final rule was 
Sec.  7501.104, entitled ``Prohibited financial interests.'' 
Specifically, HUD revised this section to remove reference to covered 
employees under Sec.  7501.106 and to remove paragraphs (a)(1) and 
(a)(2) of this section, that, respectively, prohibited HUD employees 
from directly or indirectly receiving, acquiring, or owning securities 
issued by Fannie Mae or Freddie Mac. HUD removed these provisions 
consistent with the transfer of regulatory authority over Fannie Mae 
and Freddie Mac under HERA.
    HUD also revised and reorganized what was Sec.  7501.104(a)(4) for 
clarity. This section prohibited employees, their spouses, or minor 
children, from directly or indirectly receiving, acquiring, or owning 
stock or another financial interest in a multifamily project or single-
family dwelling, cooperative unit, or condominium unit which is owned 
or subsidized by the Department or which is subject to a note or 
mortgage or other security interest insured by the Department, except 
to the extent that the stock or other interest represents the 
employee's principal residence.
    Specifically, HUD's August 6, 2012, final rule revised Sec.  
7501.104(a)(4) by redesignating it as Sec.  7501.104(a)(2). HUD also 
removed the phrase, ``in a multifamily project or single family 
dwelling, cooperative unit or condominium unit'' and substituted the 
term ``project.'' HUD intended that this change would cover all HUD 
projects that exist or that may come into existence in the future. In 
revising this section, however, HUD did not retain in the redesignated 
paragraph the language that establishes an exception to the 
prohibition; specifically, ``to the extent that the stock or other 
interest represents the employee's principal residence.''
    To correct this omission, HUD is revising, in this rule, its 
Supplemental Standards of Ethical Conduct regulation by defining 
``Subsidized by the Department'' in Sec.  7501.102. Specifically, HUD 
is defining this term to mean ``any grant, loan, cooperative agreement, 
or other form of assistance provided by the Department, including the 
insurance or guarantee of a loan.'' This definition is intended to 
ensure that HUD's Supplemental Standards of Conduct regulation 
comprehensively covers all HUD programs. In addition, this rule revises 
Sec.  7501.104(a)(2) by restoring the exception to the prohibition that 
HUD employees, their spouses, or minor children may not receive, 
acquire, or own financial interests in projects, including any single-
family dwelling or unit that is subsidized by the Department, ``except 
to the extent that such subsidy represents assistance on the employee's 
principal residence.''

[[Page 56128]]

    Providing an exception that permits HUD employees to hold a 
financial interest in a project, including a single-family dwelling or 
unit, that is subsidized by the Department to the extent that such 
interest assists the employee's principal residence is not new. As 
noted in this preamble, such an exception existed since 1996, when HUD 
issued its original Supplemental Standards of Ethical Conduct. This 
long-standing exception recognizes that HUD employees remain subject to 
ethical requirements that ensure the public's confidence in the 
impartiality and objectivity with which HUD programs are administered. 
These requirements include 18 U.S.C. 208, a federal criminal statute, 
which prohibits employees from participating personally and 
substantially in any particular matters that will have a direct and 
predictable effect on the employee's financial interests, and 5 CFR 
2635.502, which provides that an employee should not participate in a 
particular matter when the employee or the agency designee determines 
that the circumstances may cause a reasonable person with knowledge of 
the relevant facts to question his or her impartiality in the matter. 
Additionally, HUD employees must also adhere to the procedures 
established by the HUD Assistant Secretary with responsibility for the 
program in order to participate in the program.

Justification for Final Rulemaking

    In general, HUD publishes a rule for public comment before issuing 
a rule for effect, in accordance with HUD's regulations on rulemaking 
at 24 CFR part 10. Part 10, however, provides, in Sec.  10.1, for 
exceptions from that general rule when HUD finds good cause to omit 
advance notice and public participation. The good cause requirement is 
satisfied when the prior public procedure is ``impracticable, 
unnecessary, or contrary to the public interest.''
    HUD finds that good cause exists to publish this rule for effect 
without soliciting public comment, on the basis that public procedure 
is unnecessary. This rule does not substantively change HUD's 
Supplemental Standards of Ethical Conduct regulation but is technical 
in nature, reflecting long-standing policy and practice and correcting 
an omission in HUD's August 6, 2012, final rule. Specifically, it 
restores to HUD's Supplemental Standards of Ethical Conduct regulation 
the language that establishes that HUD employees may not hold a 
financial interest in any grant, loan, cooperative agreement, or other 
form of assistance provided by the Department, including the insurance 
or guarantee of a loan, except to the extent that such interest 
represents assistance on the employee's principal residence. To this 
extent, it relates solely to agency organization, procedure, and 
practices and is exempt from the provision of the Administrative 
Procedure Act (5 U.S.C. 551 et seq.) requiring notice and opportunity 
for public comment.

Matters of Regulatory Procedure

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if the 
regulation is necessary, to select the regulatory approach that 
maximizes net benefits. Because this rule relates solely to the 
internal operations of HUD, this rule was determined to be not a 
significant regulatory action under section 3(f) of Executive Order 
12866, Regulatory Planning and Review, and therefore was not reviewed 
by the Office of Management and Budget (OMB).

Information Collection Requirements

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) does not 
apply to this regulation because it does not contain information 
collection requirements subject to the approval of OMB.

Environmental Impact

    In accordance with 40 CFR 1508.4 of the regulations of the Council 
on Environmental Quality and 24 CFR 50.20(k) of HUD regulations, the 
policies and procedures contained in this rule relate only to internal 
administrative procedures whose content does not constitute a 
development decision nor affect the physical condition of project areas 
or building sites, and therefore, are categorically excluded from the 
requirements of the National Environmental Policy Act.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute or preempts state law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments, and on the private sector. Since it is only 
directed toward HUD employees, this rule would not impose any federal 
mandates on any state, local, or tribal governments, or on the private 
sector, within the meaning of the UMRA.

List of Subjects in 5 CFR Part 7501

    Conflicts of interests.

    Accordingly, for the reasons described in the preamble, HUD, with 
the concurrence of OGE, amends 5 CFR part 7501, as follows:

PART 7501--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES 
OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

0
1. The authority citation for part 7501 continues to read as follows:

    Authority:  5 U.S.C. 301, 7301, 7351, 7353; 5 U.S.C. App. 
(Ethics in Government Act of 1978); 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, 2635.203(a), 2635.403(a), 
2635.803, 2635.807.

0
2. In Sec.  7501.102, add in alphabetical order a definition of 
``Subsidized by the Department'' to read as follows:


Sec.  7501.102  Definitions.

* * * * *
    Subsidized by the Department means any grant, loan, cooperative 
agreement, or other form of assistance provided by the Department, 
including the insurance or guarantee of a loan.
* * * * *

0
3. In Sec.  7501.104, revise paragraph (a)(2) to read as follows:


Sec.  7501.104  Prohibited financial interests.

    (a) * * *
    (2) A financial interest in a project, including any single family 
dwelling or unit, which is subsidized by the Department, except to the 
extent such subsidy represents assistance on the employee's principal 
residence. The definition of ``financial interest'' is found at 5 CFR 
2635.403(c);
* * * * *


[[Page 56129]]


    Dated: September 9, 2013.
Shaun Donovan,
Secretary.
Walter M. Shaub, Jr.,
Director, Office of Government Ethics.
[FR Doc. 2013-22214 Filed 9-11-13; 8:45 am]
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