§ 3101.109 - Additional rules for Office of Thrift Supervision employees.

The following rules apply to the employees of the Office of Thrift Supervision and are in addition to §§3101.101 through 3101.104:

(a) Covered OTS employee. For purposes of this section, the term “covered OTS employee” means:

(1) An OTS examiner;

(2) An employee in a position at OTS grade 17 or above; and

(3) Any other OTS employee specified in an OTS instruction or manual issuance whose duties and responsibilities, as determined by the Director of the OTS or his or her designee, require application of the prohibitions contained in this section to ensure public confidence that the OTS's programs are conducted impartially and objectively.

(b) Prohibited financial interests—(1) Prohibition. Except as provided in paragraphs (b)(3) and (g) of this section, no covered OTS employee, or spouse or minor child of a covered OTS employee, shall own, directly or indirectly, securities of any OTS-regulated savings association or savings association holding company.

(2) Definition of “securities”. For purposes of paragraphs (b)(1) and (b)(3) of this section, the term “securities” includes all interests in debt or equity instruments. The term includes, without limitation, secured and unsecured bonds, debentures, notes, securitized assets and commercial paper, as well as all types of preferred and common stock. The term encompasses both current and contingent ownership interests, including any beneficial or legal interest derived from a trust. It extends to any right to acquire or dispose of any long or short position in such securities and includes, without limitation, interests convertible into such securities, as well as options, rights, warrants, puts, calls, and straddles with respect thereto.

(3) Exceptions. Nothing in this section prohibits a covered OTS employee, or spouse or minor child of a covered OTS employee, from:

(i) Investing in a publicly traded or publicly available mutual fund or other collective investment fund or in a widely held pension or similar fund provided that the fund does not invest more than 25 percent of its assets in securities of one or more OTS-regulated savings associations or savings association holding companies and the employee neither exercises control over nor has the ability to exercise control over the financial interests held in the fund;

(ii) Investing in certain non-financial holding companies whose principal business is unrelated to the financial services industry and which are identified as such on a list maintained by the Chief Counsel of the OTS;

(iii) Using a savings association as custodian or trustee of accounts containing tax-deferred retirement funds; or

(iv) Owning any security pursuant to a waiver granted under paragraph (g) of this section.

(c) Prohibited borrowing—(1) Prohibition on employee borrowing. Except as provided in this section, no covered OTS employee shall seek or obtain any loan or extension of credit from any OTS-regulated savings association or from an officer, director, employee, or subsidiary of any such association.

(2) Prohibition on borrowing by a spouse or minor child. The prohibition in paragraph (c)(1) of this section applies to the spouse and minor child of a covered OTS employee, except that a spouse or minor child may obtain and hold a loan or extension of credit from an OTS-regulated savings association (or its subsidiary) if:

(i) The loan or extension of credit is supported only by the income or independent means of the spouse or minor child;

(ii) The spouse or minor child satisfies all financial requirements for the loan or extension of credit that are generally applicable to all applicants for the same type of loan or extension of credit;

(iii) The terms and conditions applicable with respect to the loan or extension of credit and any credit extended to the borrower under the loan or extension of credit are no more favorable generally to the borrower than the terms and conditions that are generally applicable to loans or extensions of credit offered by the same savings association (or same subsidiary) to other borrowers in comparable circumstances for the same type of loan or extension of credit; and

(iv) The covered OTS employee does not participate in the negotiation for the loan or serve as a co-maker, endorser, or guarantor of the loan or extension of credit.

(3) Exceptions—(i) Credit cards. A covered OTS employee (or a spouse or minor child of a covered OTS employee) may obtain and hold a credit card account established under an open-end consumer credit plan and issued by an OTS-regulated savings association (or its subsidiary), subject to the following conditions:

(A) The cardholder must satisfy all financial requirements for the credit card account that are generally applicable to all applicants for the same type of credit card account;

(B) The terms and conditions applicable with respect to the account and any credit extended to the cardholder under the account are no more favorable generally to that cardholder than the terms and conditions that are generally applicable to credit card accounts offered by the same savings association (or the same subsidiary) to other cardholders in comparable circumstances under open-end consumer credit plans; and

(C) The covered OTS employee must submit a written disqualification to OTS if the cardholder becomes involved in an adversarial dispute with the issuer of the credit card account. The written disqualification must state that the covered OTS employee will not participate in any examination, the review of any application, or any other supervisory or regulatory matter directly affecting the savings association or its subsidiaries. For the purposes of this paragraph (c)(3)(i), a cardholder is involved in an adversarial dispute if he or she is delinquent in payments on the credit card account; the issuer and the cardholder are negotiating to restructure the credit card debt; the issuer garnishes the cardholder's wages; the cardholder disputes the terms and conditions of the account; or the cardholder becomes involved in any disagreement with the issuer that may cast doubt on the covered OTS employee's ability to remain impartial with respect to the savings association or its subsidiaries. Preliminary inquiries to the issuer regarding the accuracy of billing information or billed items are not, but may become, an adversarial dispute.

(ii) Loans secured primarily by principal residence. A covered OTS employee (or a spouse or minor child of a covered OTS employee) may obtain and hold a residential real property loan from an OTS-regulated savings association (or its subsidiary) subject to the following conditions:

(A) The loan must be secured primarily by residential real property that is the borrower's principal residence. The borrower may retain the loan if the residential real property ceases to be that borrower's principal residence. However, any subsequent renewal or renegotiation of the original terms of such a loan must meet the requirements of this paragraph (c)(3)(ii);

(B) The borrower may not apply for the loan while the covered OTS employee participates, or is scheduled to participate, in any examination, the review of any application, or any other supervisory or regulatory matter directly affecting the savings association or its subsidiaries;

(C) The borrower must satisfy all financial requirements for the loan that are generally applicable to all applicants for the same type of residential real property loan;

(D) The terms and conditions applicable with respect to the loan and any credit extended to the borrower under the loan are no more favorable generally to that borrower than the terms and conditions that are generally applicable to residential real property loans offered by the same savings association (or same subsidiary) to other borrowers in comparable circumstances for residential real property loans;

(E) The covered OTS employee must inform his or her OTS supervisor and the OTS ethics officer before the borrower applies for a residential real property loan under this paragraph (c)(3)(ii); and

(F) Immediately after the borrower enters into the loan agreement, the covered OTS employee must:

(1) Notify his or her supervisor and the OTS ethics officer of the loan agreement;

(2) Certify that the loan meets the requirements of this paragraph (c)(3)(ii); and

(3) Submit a written disqualification stating that the covered OTS employee will not participate in any examination, the review of any application, or any other supervisory or regulatory matter directly affecting the savings association or its subsidiaries.

(4) Pre-existing loans. (i) Other than a credit card account, which must comply with paragraph (c)(3)(i) of this section, a covered OTS employee (or spouse or minor child of a covered OTS employee) may retain a loan from an OTS-regulated savings association (or its subsidiary) on its original terms if:

(A) The loan was incurred before April 30, 1991 or the date that the individual became a covered OTS employee, whichever date is later; or

(B) The savings association (or its subsidiary) acquired the loan in a purchase or other transfer, or acquired the loan in a conversion or merger of the lender.

(ii) A covered OTS employee must notify the OTS ethics officer, in a timely manner, of any loan that meets the requirements of paragraph (c)(4)(i) of this section, and must submit a written disqualification stating that the covered OTS employee will not participate in any examination, the review of any application, or any other supervisory or regulatory matter directly affecting the savings association or its subsidiaries.

(iii) If a covered OTS employee (or his or her spouse or minor child) renews or renegotiates the original terms of a pre-existing loan described in this paragraph (c)(4), the renewed or renegotiated loan will become subject to paragraphs (c)(1) through (c)(3) of this section.

(5) Loans from holding companies. An OTS examiner must submit to OTS a written disqualification if the OTS examiner (or a spouse or minor child of an OTS examiner) obtains or holds a loan from a savings and loan holding company or its subsidiary (other than a subsidiary that is an OTS-regulated savings association or its subsidiary, loans from which are covered by paragraph (c)(3) of this section). The written disqualification must state that the examiner will not participate in any examination, the review of any application, or any other supervisory or regulatory matter directly affecting that lender. A disqualification is not required for a loan that would have been permitted and would not have required a disqualification under this paragraph (c), if a savings association (or its subsidiary) had made the loan.

(d) Restrictions arising from third party relationships. If any of the entities listed in paragraphs (d)(1) through (d)(7) of this section have securities that a covered OTS employee would be prohibited from having by paragraph (b) of this section, or loans or extensions of credit that a covered OTS employee would be prohibited from obtaining under paragraph (c) of this section, the employee shall promptly report such interests to the Chief Counsel or designee. The Chief Counsel or designee may require the employee to terminate the third party relationship, undertake an appropriate disqualification, or take other appropriate action necessary, under the particular circumstances, to avoid a statutory violation or a violation of part 2635 of this title or this part, including an appearance of misuse of position or loss of impartiality. This paragraph (d) applies to any:

(1) Partnership in which the employee, or spouse or minor child of the employee, is a general partner;

(2) Partnership in which the employee, or spouse or minor child of the employee, individually or jointly holds more than a 10 percent limited partnership interest;

(3) Closely held corporation in which the employee, or spouse or minor child of the employee, individually or jointly holds more than a 10 percent equity interest;

(4) Trust in which the employee, or spouse or minor child of the employee, has a legal or beneficial interest;

(5) Investment club or similar informal investment arrangement between the employee, or spouse or minor child of the employee, and others;

(6) Qualified profit sharing, retirement or similar plan in which the employee, or spouse or minor child of the employee, has an interest; or

(7) Other entity if the employee, or spouse or minor child of the employee, individually or jointly holds more than a 25 percent equity interest.

(e) Prohibited recommendations. Employees of the OTS shall not make recommendations or suggestions, directly or indirectly, concerning the acquisition or sale, or other divestiture of securities of any OTS-regulated savings association or savings association holding company.

(f) Prohibited purchase of assets. No covered OTS employee, or spouse or minor child of a covered OTS employee, shall purchase, directly or indirectly, an asset (e.g., real property, automobiles, furniture, or similar items) from a savings association or savings association affiliate, including a savings association holding company, unless it is sold at a public auction or by other means which assure that the selling price is the asset's fair market value.

(g) Waivers. An agency designee may grant a written waiver from any provision of this section based on a determination made with the advice and legal clearance of the DAEO or Office of the Chief Counsel that the waiver is not inconsistent with part 2635 of this title or otherwise prohibited by law and that, under the particular circumstances, application of the prohibition is not necessary to avoid the appearance of misuse of position or loss of impartiality, or otherwise to ensure confidence in the impartiality and objectivity with which agency programs are administered. A waiver under this paragraph may impose appropriate conditions, such as requiring execution of a written disqualification.

[60 FR 22251, May 5, 1995, as amended at 66 FR 8506, Feb. 1, 2001; 72 FR 48224, Aug. 23, 2007]