[Federal Register Volume 61, Number 244 (Wednesday, December 18, 1996)]
[Rules and Regulations]
[Pages 66830-66851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31837]
[[Page 66829]]
_______________________________________________________________________
Part III
Office of Government Ethics
_______________________________________________________________________
5 CFR Part 2640
Interpretation, Exemptions and Waiver Guidance Concerning 18 U.S.C. 208
(Acts Affecting a Personal Financial Interest); Final Rule
Federal Register / Vol. 61, No. 244 / Wednesday, December 18, 1996 /
Rules and Regulations
[[Page 66830]]
OFFICE OF GOVERNMENT ETHICS
5 CFR Part 2640
RIN 3209-AA09
Interpretation, Exemptions and Waiver Guidance Concerning 18
U.S.C. 208 (Acts Affecting a Personal Financial Interest)
AGENCY: Office of Government Ethics (OGE).
ACTION: Final rule.
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SUMMARY: The Office of Government Ethics is issuing a final rule
describing circumstances under which the prohibitions contained in 18
U.S.C. 208(a) would be waived. Section 208(a) prohibits employees of
the executive branch from participating in an official capacity in
particular matters in which they, or certain persons or entities with
whom they have specified relationships, have a financial interest.
Section 208(b) of title 18 permits waivers of these prohibitions in
certain cases. First, section 208(b)(1) permits agencies to exempt
employees on a case-by-case basis from the disqualification provisions
of section 208(a). Similarly, section 208(b)(3) permits agencies to
waive, in certain cases, the disqualification requirement that would
apply to special Government employees serving on a Federal advisory
committee. Finally, under section 208(b)(2), the Office of Government
Ethics has the authority to promulgate executive branchwide regulations
describing financial interests that are too remote or inconsequential
to warrant disqualification pursuant to section 208(a). This final
regulation describes those financial interests. It also provides
guidance to agencies on the factors to consider when issuing individual
waivers under section 208 (b)(1) or (b)(3).
EFFECTIVE DATE: January 17, 1997.
FOR FURTHER INFORMATION CONTACT: Marilyn L. Glynn, Office of Government
Ethics, telephone: 202-208-8000, TDD: 202-208-8025; FAX: 202-208-8037.
SUPPLEMENTARY INFORMATION:
I. Rulemaking History
On September 11, 1995, the Office of Government Ethics (OGE)
published for comment a proposed rule to establish exemptions under 18
U.S.C. 208(b)(2) from the prohibition in the conflict of interest
statute at section 208(a). See 60 FR 47208-47233 (part II of the
September 11, 1995 daily FR issue). In part, the proposed rule also
provided guidance to agencies on issuing individual waivers of the
conflict of interest prohibition under 18 U.S.C. 208(b)(1) and (b)(3),
and on interpreting section 208 generally.
The proposed rule was issued pursuant to 18 U.S.C. 208(d)(2) which
directs OGE, after consultation with the Attorney General, to adopt
uniform regulations exempting financial interests from the
applicability of section 208(a) for all or a portion of the executive
branch, and to provide guidance on the types of interests that may be
waived on an individual basis. Prior to 1989, the authority to
promulgate regulations implementing the previous version of section
208(b)(2) resided in the individual agencies as to their own respective
employees. However, the Ethics Reform Act of 1989 (Pub. L. No. 101-
194), as amended, amended 18 U.S.C. 208 to eliminate the authority of
individual agencies to adopt agencywide regulatory exemptions and
granted branchwide authority to OGE.
The Office of Government Ethics also published an interim rule on
August 28, 1995 which established a single exemption under 18 U.S.C.
208(b)(2) for financial interests that arise from Federal Government
salary and benefits or from Social Security or veterans' benefits. See
60 FR 44706-44709 (part IX of the August 28, 1995 daily FR issue). The
interim rule, which became effective on the date of publication, was
codified at that time at 5 CFR 2640.101. However, the exemption in the
interim rule was also republished for consideration as part of the
proposed rule at 5 CFR 2640.203(d) published on September 11, 1995.
This single exemption is recodified in this final rule at 5 CFR
2640.203(d). Comments received on the interim rule were consolidated
with, and considered along with comments received on the proposed rule.
The proposed rule and the interim rule each provided a 60-day
comment period and invited comments by agencies and the public. Timely
comments were received from 25 sources. After carefully considering all
comments and making appropriate modifications, the Office of Government
Ethics is publishing this final rule after consultation with the Office
of Personnel Management and, pursuant to section 201(c) of Executive
Order 12674, as modified by E.O. 12731, after obtaining the concurrence
of the Department of Justice.
II. Summary of Comments
All of the comments received were from executive branch Departments
and agencies, including two from agency Inspectors General. Many
commented on several different sections of the proposed rule. The
Office of Government Ethics has considered each comment submitted by
each commenter and those determined to be significant are discussed
below in the context of the particular subparts or sections to which
they pertain. We have not specifically discussed comments that were
either generally laudatory or generally critical, either of style or of
substantive content, or that offered editorial suggestions or
suggestions regarding format that would not affect meaning. In
addition, we have not specifically discussed comments that were plainly
unreasonable or that exhibited a clear misunderstanding of the purpose
or language of the proposed regulation or of section 208. The following
comments fall within these latter categories: assertions that certain
types of interests (such as Government securities) do not raise section
208 implications for any Government employees; statements that certain
exemptions insult Federal employees by suggesting that performance of
official duties could violate a criminal law; and statements that
section 208 applies only to particular matters involving specific
parties. We have also not addressed comments that have been rendered
inapplicable by changes to the regulation which have been made for
other reasons, or that merely recommended revisions to examples
describing agency programs. Finally, we have not addressed comments
that call for a discussion of section 208 generally, but that are not
related to any particular provision of the regulation.
A number of commenters were generally satisfied with the approach
taken in the proposed rule in describing the exemptions. Most of these
commenters indicated that the rule as proposed would resolve some long-
standing issues and that it would address most of the situations in
which agencies have been routinely issuing waivers under section
208(b)(1) or (b)(3). A fewer number of commenters were generally
critical of the rule, citing its complexity and its attempt to devise
exemptions that apply in situations that do not concern a majority of
executive branch employees. To address these concerns, some of the
exemptions were rewritten to simplify language. For example, in certain
provisions, the term ``direct or beneficial ownership'' was deleted and
replaced simply with the term ``ownership.'' In other exemptions, the
term ``any particular matter, whether of general applicability or
involving specific parties,'' was replaced with the term ``any
particular matter.'' Changes
[[Page 66831]]
of this type have been made to make the rule easier to understand, and
are not intended to change a provision's substantive meaning from that
proposed.
In addition, a few proposed exemptions were eliminated to reduce
the rule's complexity. The deleted exemptions would have been generally
difficult to interpret and apply and did not appear to be relevant to a
majority of employees. Each of these exemptions is discussed under the
relevant subpart below.
Certain other proposed exemptions were retained in this final rule
even though they are not relevant to a large number of employees.
Because individual agencies no longer have authority to issue their own
exemptions, this exemption rule, where possible, must address conflicts
issues that affect employees of only a few agencies.
Finally, OGE, in adopting this final rule, has corrected a few
typographical errors and made a few other minor clarifying revisions to
the rule as proposed.
General Comments
Some agencies made suggestions, or raised issues, about matters
that did not concern any specific subpart or provision of the
regulation. One agency recommended that the rule address when, or under
what circumstances, an employee may engage in transactions (such as
buying or selling stock) involving a financial interest upon which a
particular agency matter will have a direct and predictable effect. The
Office of Government Ethics has not made any change in the regulation
to address this comment. Each exemption applies whether or not an
employee is engaged in a transaction that would involve a financial
interest affected by an agency matter in which the employee is
participating.
Another agency suggested that the Preamble accompanying the
proposed rule be preserved as part of the final regulation and
incorporated into the text of the regulation as published in the Code
of Federal Regulations. The Office of Government Ethics has not adopted
this suggestion since it would be inappropriate to incorporate
narrative explanations of a rule into the text of the rule itself.
However, agency ethics officials and others are free to consult the
Preamble of the proposed rule when interpreting section 208.
One agency asked OGE to explain how the exemptions are intended to
``mesh'' with one another. The regulation permits an employee to apply
or utilize all the exemptions that might be applicable in a particular
situation. Thus, for example, an employee might be called upon to act
in a particular matter affecting a certain company. He could act in the
matter even if: (1) He owns $4,000 worth of stock in the company; (2)
he owns two diversified mutual funds that are invested in the company;
and (3) his general partner owns $100,000 worth of stock in the
company.
The Office of Government Ethics did not adopt one agency's
suggestion to add a provision clarifying that the impartiality
provisions in subpart E of the Standards of Ethical Conduct for
Employees of the Executive Branch may be applied even when a regulatory
exemption is applicable under this regulation. As the note in 5 CFR
2635.501(b) indicates, the granting of a statutory waiver constitutes a
determination that ``the interest of the Government in the employee's
participation outweighs the concern that a reasonable person may
question the integrity of agency programs and operations.''
Finally, one agency requested that the final rule become effective
no sooner than three months after the date of publication so the agency
has adequate time to inform employees of the rule's existence and to
conduct training for employees. The Office of Government Ethics does
not agree that the rule needs a three-month effective date. Agency
programs and operations will not be harmed if employees are unaware of
the rule's existence on the date it becomes effective. Employees who
have not yet been informed of the exemptions that are applicable to
them will simply continue to disqualify themselves from matters
affecting their financial interests until they are advised of the
rule's provisions. And, in any case, agencies will no doubt apprise
their employees promptly of the final rule once it becomes effective.
Subpart A--General Provisions
Section 2640.102 Definitions
One agency objected to proposed definitions that cross-reference
statutes unrelated to ethics considerations. The agency recommended
keeping each definition self-contained so that employees do not have to
consult other sources to determine if an exemption applies. The Office
of Government Ethics has not adopted this recommendation. Reiterating
the text of the cross-referenced statutes would complicate and lengthen
the regulation considerably. On the other hand, paraphrasing the
language of the statutes might create ambiguity about the meaning of
certain definitions. Because this regulation establishes exemptions
from a criminal statute, the exemptions need to be described with
specificity.
An agency stated that the term ``institution of higher education''
did not need to be defined at Sec. 2640.102(g) as renumbered because it
has a commonly-understood meaning. The Office of Government Ethics
disagrees. The exemptions relating to such institutions (Sec. 2640.203
(b) and (c)) are intended to apply in the case of colleges and
universities, and other similar post- secondary institutions. Not all
post-secondary institutions are encompassed by the definition
referenced at Sec. 2640.102(g). For example, profit-making post-
secondary institutions are not included in the definition of
``institution of higher education'' at 20 U.S.C. 1141(a).
No changes have been made in this final regulation to address a
concern expressed by one agency that the definition of ``publicly
traded security'' at Sec. 2640.102(p) as proposed inadvertently
excludes securities issued by Government entities such as the
Government National Mortgage Association. Most executive branch
employees would not have a disqualifying financial interest in
Government securities. In the case of employees who do have a
disqualifying financial interest, however, the Office of Government
Ethics could not determine that a regulatory exemption applicable to
every such employee would be appropriate.
Technical corrections have been made to the proposed definitions of
``long-term Federal Government security'' and ``short-term Federal
Government security'' at Sec. 2640.102(i), as renumbered and
Sec. 2640.102(s). In addition, changes have been made in the proposed
definition of the term ``diversification'' to reflect changes made in
the exemptions at Sec. 2640.201, discussed below. Finally, the term
``unit investment trust'' at renumbered Sec. 2640.102(u) also has been
revised to accommodate changes made in the definition of the term
``diversification.'' The revision, however, does not change the
substantive meaning of the term ``unit investment trust.''
Section 2640.103 Prohibition
Two agencies questioned why the exemptions were not proposed to be
added to 5 CFR 2635.402 of the Standards of Ethical Conduct for
Employees of the Executive Branch, and why language from that provision
is repeated in the exemption rule. The Office of Government Ethics
considered consolidating the exemptions and
[[Page 66832]]
interpretations of section 208 in either part 2635 or part 2640.
However, changes could not be made to part 2635 without significantly
altering the integrity of that part. On the other hand, the language of
Sec. 2635.402 could not be repeated verbatim in part 2640 since much of
it deals with the implementation of other parts of the Standards of
Ethical Conduct. Accordingly, OGE decided to repeat in part 2640 as
proposed and, as issued as a final rule in this rulemaking document,
those parts of Sec. 2635.402 that are relevant to the overall
implementation of section 208. Where language between the two
provisions varies, no differences in interpretation are intended.
However, OGE intends to review the text of Sec. 2635.402 to determine
whether any language is substantively inconsistent with part 2640 and
make any appropriate modifications.
One agency criticized OGE for describing in the proposed rule
certain particular matters as ``particular matters of general
applicability'' and stated that use of the term would needlessly
confuse employees. On the other hand, the agency agreed that the term
``particular matters involving specific parties'' is an established and
useful concept. Another agency stated that different exemptions for
different types of matters (i.e. those involving parties and those
without parties) are unnecessary. The Office of Government Ethics
believes that, in certain circumstances, different exemptions are
warranted for matters that do not involve specific parties. Agencies
currently take these distinctions into account when issuing individual
waivers under section 208(b)(1), and it is reasonable to establish
somewhat broader regulatory exemptions for nonparty particular matters.
To address concerns about the meaning of the term particular matter of
general applicability, OGE has added a definition, at Sec. 2640.102(m)
of this final rule, describing such matters as those which are focused
on the interests of a discrete and identifiable class of persons, but
do not involve specific parties.
One agency noted that it has identified certain classes of matters
that are not particular matters because they are not sufficiently
focused on the interests of a discrete and identifiable class of
persons, even though the matters may have some collateral effect on
identified persons. The agency asked that OGE identify other matters
that are not focused enough to be considered particular matters. In the
absence of specific facts, OGE is unable to identify such matters. For
example, although the agency asserted that basic research is not a
particular matter, OGE believes that a grant to a university to conduct
such research is a particular matter. Without sufficient specificity of
this type, it would be misleading to state conclusively that certain
Government activities or operations are not particular matters.
Several agencies commented on the examples in proposed
Sec. 2640.103 that illustrate various terms in section 208. One agency
stated that Example 8 following Sec. 2640.103(a)(1) incorrectly
suggests that legislation can never constitute a particular matter;
another suggested that a certain provision dealing with charges for
prescription drugs that is in a larger piece of health care legislation
is not a particular matter because it affects everyone in the United
States. The Office of Government Ethics does not disagree that some
legislation is narrowly focused on the interests of a discrete and
identifiable class of persons, and would therefore be a particular
matter. For example, where a particular provision in a larger piece of
legislation focuses specifically on the regulation of prescription drug
prices, the provision is focused on the interests of pharmaceutical
companies, physicians, and pharmacies and would thus constitute a
particular matter.
One agency asked that OGE revise Example 2, and eliminate Example
3, following Sec. 2640.103(a)(3) as proposed. Because the requested
revision would change the concept Example 2 was intended to illustrate,
the Office of Government Ethics did not adopt this suggestion. For
similar reasons, OGE did not eliminate Example 3. Although the
commenting agency stated that the situation depicted in the example is
not wholly realistic, OGE believes the example provides a reasonable
illustration of the meaning of the term ``direct and predictable
effect.'' At the suggestion of another agency, OGE revised Example 4
following Sec. 2640.103(a)(3) to more clearly illustrate the concept
that section 208 applies when the Government matter has a direct and
predictable effect on the employee's financial interest.
The Office of Government Ethics did not adopt one agency's request
that the regulation define the term ``general partner.'' The term
``general partner'' does not have a special or unique meaning for
purposes of section 208. The term has a generally accepted meaning
within the area of partnership law.
Finally, one agency suggested that OGE revise proposed
Sec. 2640.103(e) to include a statement noting that resignation from an
outside position can end a disqualifying financial interest. The Office
of Government Ethics has not revised the provision in this final rule
because the current language of Sec. 2640.103(e) encompasses
divestiture of ``other interest[s]'' that cause disqualification from
participation in a particular matter.
Subpart B--Exemptions Pursuant to 18 U.S.C. 208(b)(2)
Section 2640.201 Exemptions for Interests in Mutual Funds, Unit
Investment Trusts, and Employee Benefit Plans
Common Trust Funds
As proposed, the regulation at Sec. 2640.201(a) contained an
exemption for diversified common trust funds. The term ``diversified''
was defined in reference to a regulation of the Office of the
Comptroller of the Currency, 12 CFR 9.18, which required common trust
funds maintained by State or national banks to be diversified. On
December 21, 1995, the Office of the Comptroller of the Currency (OCC)
published a proposed rule that would eliminate the diversification
requirement for common trust funds. See 60 FR 66163, 66170. The
Preamble to the proposed rule states that the ``* * * restrictions have
at times interfered with optimal management of common trust funds * *
*.'' Id. at 66170. If the revised regulation OCC becomes effective,
there will no longer be any assurance that common trust funds will
contain any particular number or types of assets. In the absence of any
other standardized way of determining whether such funds will be even
minimally diversified, the Office of Government Ethics cannot conclude,
as a regulatory matter, that an employee's interest arising from a fund
will be remote and inconsequential. Accordingly, the exemption for
common trust funds has been deleted from this final rule.
Diversified Mutual Funds
Four agencies stated that the exemption for diversified mutual
funds proposed at Sec. 2640.201(a) was too complicated for the average
employee to apply or for ethics officials to implement. As proposed,
the exemption would have applied to mutual funds that are diversified
management companies as defined in the Investment Company Act of 1940,
15 U.S.C. 80a-5(b)(1). Of the four commenters, one recommended simply
leaving the term ``diversified'' undefined; the second advocated
dropping any diversification requirement; the third recommended linking
the definition of diversification
[[Page 66833]]
to sector mutual funds; and the fourth recommended that the exemption
apply simply to publicly traded mutual funds.
Six agencies expressed particular concern that the proposed
definition of diversified mutual fund (as well as the definition for
diversified common trust fund, unit investment trust, and employee
benefit plan) would not be consistent with the definition of Excepted
Investment Fund (EIF), as that term is used for purposes of financial
reporting. These agencies expressed the view that employees would be
confused and frustrated by dealing with different definitions of
diversification. Three of the agencies suggested that we modify EIF
reporting requirements to make them consistent with the diversification
standards in the exemption rule. Another agency suggested that the EIF
standards be adopted in the exemption rule, while a third agency
expressed no preference for either approach as long as the standards
would be made consistent.
Based on these concerns, the Office of Government Ethics has
decided to revise the definition of ``diversified'' as that term is
used in Sec. 2640.201(a) in connection with mutual funds. Accordingly,
the term ``diversified'' in Sec. 2640.102(b) of this final rule now
states that ``diversified means that the fund * * * does not have a
stated policy of concentrating its investments in any industry,
business, single country other than the United States, or bonds of a
single State within the United States.'' In other words, the exemption
for diversified mutual funds applies to all mutual funds except sector
funds. An agency employee or ethics official can determine if a fund is
a sector fund by reading the prospectus, or by calling a broker or fund
manager. Often, it is possible to learn whether a fund is a sector fund
simply from the fund's name (i.e. Vanguard Specialized Portfolios:
Healthcare). In any event, a fund's concentration policy, if any, is
required under Securities and Exchange Commission (SEC) regulations to
be described in the prospectus.
The Office of Government Ethics has not, however, revised the
definition of the term ``mutual fund'' as proposed at Sec. 2640.102(l)
and which is now in renumbered Sec. 2640.102(k)). In order for the
exemption to apply, the mutual fund must still be a true fund, i.e. a
management company registered under the Investment Company Act of 1940,
as amended, 15 U.S.C. 80a-1 et seq. Informal collections of stocks,
bonds and similar holdings, such as family trusts, are not mutual funds
because they are not registered management companies.
The Office of Government Ethics has not adopted recommendations to
make the definition of the term diversified mutual fund the same as the
definition of Excepted Investment Fund (EIF) as that term is used in 5
CFR 2634.310(c) for purposes of financial reporting. As explained in
the Preamble to the proposed rule, using the numerical standards of the
EIF definition (no more than 5% of a fund's portfolio invested in any
one issuer nor more than 20% in any particular economic or geographic
sector) would be impractical and burdensome because mutual fund assets
continuously change and because employee participation in particular
matters typically occurs on continuing basis over time. Use of a
numerical standard is not a problem for purposes of financial reporting
because whether an asset is an EIF for those purposes is a
determination that must be made only once a year. And, relying on the
alternative definition of the term Excepted Investment Fund (i.e. that
the fund is publicly traded) does not advance conflicts of interest
concerns because publicly traded assets may still raise questions about
conflicts of interest. The Office of Government Ethics has not yet
determined whether it will seek to revise the definition of Excepted
Investment Fund to correspond with the term diversified mutual fund as
it is used in this regulation. Any such revision might require
Congressional action, since the standards for determining whether a
widely held investment fund is an Excepted Investment Fund are
statutory. See 5 U.S.C. app., section 102(f)(8) of the Ethics in
Government Act.
Two agencies objected to the fact that the exemption for
diversified mutual funds was proposed to apply to employees of all
agencies. One agency recommended that the rule permit individual
agencies to decide whether to allow employees of their agencies to
apply the mutual fund exemption. The other agency suggested that it be
allowed to limit applicability of the exemption where the fund is an
international regional fund (e.g. the Pacific Basin Fund) and the
employee has duties focused on the region in question. The Office of
Government Ethics has not revised Sec. 2640.201(b) in this final rule
in response to these comments. OGE believes it is inappropriate to
permit certain agencies to limit the applicability of these exemptions.
The exemptions are devised with the assumption that the financial
interests described are ``remote or inconsequential'' in the case of
all executive branch employees. Of course, particular agencies might
want to consider whether they wish to prohibit the holding of certain
sector funds by employees in their agency supplemental standards of
ethical conduct regulations. See 5 CFR 2635.105.
Sector Mutual Funds
Six agencies commented on various aspects of Sec. 2640.201(b) of
the proposed rule dealing with sector mutual funds. Of these, one
agency specifically endorsed the definition of ``sector mutual fund''
as that term is used in proposed Sec. 2640.201(b). Another agency,
however, characterized the proposed definition as too imprecise, and
appeared to recommend that OGE devise a numerical standard for
determining whether a fund concentrates in a particular sector. The
Office of Government Ethics did not adopt this suggestion. Because fund
managers often buy and sell holdings on a daily basis, it would be
practically impossible for employees to determine the composition of a
particular fund with any certainty on a particular date. Moreover,
determining whether a fund meets the present definition of sector
mutual fund should be less burdensome for employees because it does not
require them to undertake any numerical calculations. Employees simply
have to determine whether the fund has a policy of concentration. As
discussed above, SEC regulations require a mutual fund manager to
disclose such a policy, if any, in the fund's prospectus.
Two other agencies stated that sector mutual funds should be
totally exempt from the prohibition in section 208. These agencies
argued that the proposed exemption for sector funds is too difficult to
administer and would effectively bar employees from investing in sector
funds with holdings related to the activities of their agencies. Both
agencies theorized that other agencies that disagreed with their
proposed approach could simply bar employees, in their agency
supplemental standards regulations, from holding sector funds. The
Office of Government Ethics has not adopted these recommendations,
since OGE cannot reasonably determine that the interests of every
executive branch employee in the holdings of a sector mutual fund are
remote and inconsequential for every particular matter in which he or
she might participate. For example, an employee of an executive branch
agency who invests in an energy-related sector fund might direct his
staff to draft a regulation rescinding certain requirements relating to
the disposal of hazardous waste materials. The effect of
[[Page 66834]]
the new regulation would be to significantly reduce outlays that
utility companies have to make to comply with regulatory requirements.
As a result, the companies' profits would increase, and the
corresponding value of funds that invest in the companies would also
increase. Under these circumstances, OGE could not say that the
employee's interest would be remote or inconsequential. Of course, the
section 208 issue would not arise if the holding was prohibited by an
agency supplemental regulation. However, OGE cannot compel agencies to
adopt, in their supplemental agency standards regulations, prohibitions
on holding sector mutual funds. Moreover, many agencies do not choose
to issue supplemental standards.
Employee Benefit Plans
A few agencies submitted comments on the proposed exemption for
employee benefits plans at Sec. 2640.201(c). The Office of Government
Ethics did not adopt one agency's suggestion that the requirement for
an independent trustee in Sec. 2640.201(c)(1)(iii)(A) as proposed be
eliminated. The Office of Government Ethics believes that a plan's
trustee should be independent of the plan's sponsor, or at least be a
registered investment advisor, to insure that investment selections are
made without regard to the plan sponsor's relationship with the
employee.
Two agencies objected to the inclusion of the Thrift Savings Plan
for Federal employees in the list of employee benefit plans covered by
the exemption at proposed Sec. 2640.201(c). One of the agencies stated
that the class of persons affected by a matter which involves the
Thrift Plan is so large that any such matter could not be considered a
particular matter. The Office of Government Ethics does not agree with
this view. Employees who have invested in the Thrift Savings Plan are a
discrete and identifiable class of persons for purposes of section 208.
The agency alternatively argued, as did one other agency, that the
Thrift Plan would be covered by the exemption for interests arising
from Government salary and benefits at Sec. 2640.203(d) as proposed.
While OGE does not disagree that the Thrift Plan would be covered by
the exemption at Sec. 2640.203(d), to avoid any misunderstanding, OGE
has not revised the regulation in this regard in adopting it as final.
In particular, since the exemption at Sec. 2640.201(c)(1)(i) applies
specifically to the underlying holdings of the Thrift Plan, OGE would
prefer to retain the exemption to resolve any questions employees may
have on the issue.
Another agency requested that OGE add an exemption for a separate
investment plan the agency maintains for its employees. A number of
agencies have such investment plans. The Office of Government Ethics
believes that it would be impractical to list all such plans, and
considers them covered by the exemption at Sec. 2640.203(d). In
response to a question from the same agency, OGE confirms that employee
benefit plans that meet the definition at Sec. 2640.102(c) are covered
by the exemption even if they are not covered by the Employee
Retirement Income Security Act of 1974 (ERISA). Also, OGE confirms that
participation in selecting trustees and investment managers does not
constitute selection of plan investments for purposes of
Sec. 2640.201(c)(1)(iii)(A). Finally, the same agency asked OGE to
establish a new exemption for the sponsors of defined benefit plans
administered by an independent trustee and guaranteed by the Pension
Benefit Guaranty Corporation (PBGC). The Office of Government Ethics
did not add a new exemption in response to this request. First, where a
plan sponsor has defaulted on pension payments, the PBGC may not pay
employees the full amount due under the pension, and the payments
employees do receive may be delayed, causing financial harm to the
beneficiaries. Under the circumstances, OGE cannot conclude
definitively that an employee's interest in payment of defined benefit
is remote and inconsequential even when the pension is guaranteed by
the PBGC.
Section 2640.202 Exemptions for Interests in Securities
De Minimis Exemptions for Interests of Employee, Spouse, and Minor
Children
A total of thirteen agencies made a number of general comments
about the de minimis exemptions at Sec. 2640.202 (a)-(c), as proposed.
One agency stated that the three-tiered system of exemptions was
reasonable; two other agencies stated that three different de minimis
exemptions would create confusion and recommended that OGE eliminate at
least Sec. 2640.202(b). Two agencies suggested that the de minimis
amounts be raised. Of these, one agency emphasized that the de minimis
amounts should be higher for special Government employees. Five
agencies stated that the de minimis amounts should be lower. Of these,
one recommended that the exemption for party matters at
Sec. 2640.202(a) be lowered to $1,000; a second agency suggested that
OGE allow individual agencies to lower the de minimis amounts for
employees who serve on procurement boards; a third agency made a
suggestion for similar authority for regulatory agencies. A fourth
agency suggested that the de minimis amounts be set on a sliding scale
according to an employee's net worth and that the exemption for matters
of general applicability in Sec. 2640.202(c), as proposed, should be
conditioned on the employee's interest not being affected in a
disproportionate manner.
Four agencies objected to the fact that de minimis amounts proposed
did not match the categories of value listed on the public financial
disclosure statement (SF 278). Two of these agencies alternatively
recommended that OGE revise the financial disclosure statement to
correspond with the de minimis amounts. A fifth agency was satisfied
with the de minimis amounts, but recommended that the SF 278 form be
revised to add a box that employees could check indicating whether a
particular holding was in excess of $5,000, $25,000, or $50,000. In
general, the agencies that commented on the lack of uniformity between
the SF 278 and the de minimis amounts proposed expressed concern about
having to contact employees about the value of their holdings before
certifying the disclosure form. In addition, one Office of Inspector
General stated that the de minimis exemptions would interfere with the
ability to conduct investigations because investigators would have to
contact an employee early in the investigatory process to determine the
value of his holdings before deciding to continue an investigation.
The Office of Government Ethics has carefully considered these
comments, and has decided to make one change to the three basic de
minimis exemptions as proposed at Sec. 2640.202 (a)-(c). Section
2640.202(b), as proposed, would have established an exemption for
employees participating in a particular matter involving specific
parties where the financial interest arises from the ownership of
securities issued by an entity that is not a party to the matter. After
evaluating the comments concerning the overall complexity of the
regulation, as well as comments on proposed Sec. 2640.202(b)
specifically, the Office of Government Ethics has deleted the separate
exemption proposed for disqualifying financial interests arising from
ownership of securities issued by nonparties. Accordingly, this final
regulation contains two basic de minimis exemptions: A $5,000 de
minimis exemption (at Sec. 2640.202(a)) for
[[Page 66835]]
interests arising from the ownership of securities issued by an entity
that is affected by a particular party matter; and a $25,000/$50,000 de
minimis exemption (at Sec. 2640.202(b)) for interests arising from the
ownership of securities issued by an entity affected by a particular
matter of general applicability. The latter exemption also contains a
provision exempting interests arising from the ownership of no more
than $50,000 of long-term Federal Government securities, discussed
below.
The elimination of proposed Sec. 2640.202(b) will address concerns
that the rule's complexity prevents employees from determining when a
particular exemption applies. It also avoids the problem of forcing
agencies to determine when a specific entity becomes a party to a
particular matter. Interests in non-parties will be addressed in the
$5,000 exemption at Sec. 2640.202(a), which has been revised to extend
coverage to interests arising from ownership of securities issued by
both parties and by non-parties. As revised, the exemption applies to
security interests in entities that are ``affected by'' the particular
party matter. Of course, individual waivers under section 208 (b)(1) or
(b)(3) can be issued to address situations where interests in excess of
$5,000 are appropriate subjects for a waiver.
The Office of Government Ethics has not adopted other agency
recommendations to either raise or lower the de minimis amounts from
the levels proposed. As the variety of the comments on this issue
indicates, the appropriate level of a de minimis exemption is
necessarily a subjective determination about which reasonable people
can disagree. The amounts chosen are the maximum that OGE believes can
reasonably be considered ``remote or inconsequential'' for any
executive branch employee acting in a particular matter. As noted in
the Preamble to the proposed rule, OGE will periodically review the
specific dollar thresholds as well as other aspects of this regulation.
Moreover, although the comments indicate there is no consensus on
the amounts that would be appropriate, or to whom the exemptions should
apply, they demonstrate the need for uniform exemptions for all
executive branch employees. Accordingly, in this final rule OGE has not
revised the regulation as proposed to establish different exemption
amounts based on the responsibilities of employees or on a particular
agency's mission. In the absence of uniformity, reliance on an
exemption by an employee might suggest that the employee is acting less
impartially than another employee for whom the exemption is not
available. In addition, establishing different exemption amounts for
different groups of employees would only add to the rule's complexity.
The Office of Government Ethics did not agree with the suggestion
that the exemption amounts should be higher for special Government
employees (SGE). Like regular employees, special Government employees
have a responsibility to act in the public's interest and to ensure
that their participation in official Government matters is not
influenced by their personal financial interests. Interests arising
from the ownership of securities are likely to present as much of a
conflict for SGEs as for regular employees. Moreover, individual
waivers may be issued for SGEs serving on advisory committees under
section 208(b)(3) or for any SGE under section 208(b)(1).
While OGE agrees it is unfortunate that the exemption amounts and
the categories of value on the financial disclosure statement (SF 278)
are not consistent, OGE does not have the authority to change the
categories on the form, which are required by statute, to match the
values of the exemption. Although the basic exemption amount at
Sec. 2640.202(a) could have been set to conform to a SF 278 category of
value, the exemption would have to have been set at either $1,000 or
$15,000. In OGE's view, the former amount is too low to be of much use
to employees utilizing the exemptions, while the latter amount is too
high to be considered ``remote or inconsequential'' in every case.
Additionally, since the holdings of an employee, his spouse and child
must be aggregated to determine whether the exemptions apply, it would
be virtually impossible to have reconciled the de minimis amounts to
the SF 278 categories. The same problem would arise in connection with
the exemption at Sec. 2640.202(b), as renumbered, because the
employee's holdings in all affected entities must be aggregated to
determine if the exemption applies. After the exemption rule has been
in effect for long enough to permit agencies and employees to gain
experience in applying the rule, OGE intends to evaluate any problems
that might interfere with the efficient application of the rule. If
warranted, at that time OGE will consider whether it should seek
legislation to reconcile the financial reporting system and the
exemptions.
Two agencies recommended that the exemptions proposed in
Sec. 2640.202 (a) and (b), as renumbered, be expanded to apply to not
only the interests of the employee, his spouse and minor children, but
to those of all persons listed in section 208 (such as the employee's
general partner and person with whom he has an arrangement for future
employment). The Office of Government Ethics has not adopted this
recommendation. Other provisions in the rule provide broader exemptions
for the interests of some of these persons (for example, Sec. 2640.202
(c), (d) and (e)). It would complicate the rule to duplicate coverage
for these persons in Sec. 2640.202 (a) and (b), as renumbered, since
employees would have to decide which, or how many, exemptions apply to
the interests of those persons.
One agency complained that the rule as proposed did not provide
clear guidance about what an employee should do when the value of his
holdings rises above the de minimis amounts during the course of his
participation in a particular matter. The agency suggested that an
employee should be required to value his holdings once a year, and then
have 45 days to take steps to resolve any disqualifying financial
interest before having to disqualify himself from participation in
particular matters. The Office of Government Ethics has not revised the
rule to address this comment. Example 3 following Sec. 2640.202(a)
describes an employee's obligation once he knows the value of his
holdings has risen above the de minimis levels.
Under Secs. 2640.102(r) and 2640.202 of the rule, a mutual fund,
including a sector mutual fund, is considered a publicly traded
security for purposes of the various de minimis exemptions. The
Preamble of the proposed rule indicated that for purposes of
determining whether a de minimis exemption applies in the case of a
mutual fund, the value of the employee's interest would be the value of
his interest in the fund as a whole, not the pro rata value of any
underlying holding of the fund. The Office of Government Ethics
proposed this valuation method primarily because the holdings of most
mutual funds change frequently and it would be infeasible for an
employee to calculate the value of an affected holding at the point he
might act in a particular matter. And moreover, in many cases an
employee's interest in the sector as a whole is really a more accurate
measure of his interest in the particular matter. However, three
agencies objected to this proposed valuation method and stated that the
value of the underlying holding should determine whether the de minimis
amount is exceeded. The agencies pointed out that an employee,
[[Page 66836]]
consistent with the de minimis exemption at Sec. 2640.202(a), could
participate in a party matter affecting a company in which he owns
$5,000 worth of stock, but would be barred from participating in the
same matter if he owned $6,000 in a sector mutual fund whose
proportionate holding in the same company is $50. The Office of
Government Ethics agrees that the value of the affected underlying
holding may sometimes be a more precise measure of whether an
employee's financial interest is remote or inconsequential within the
meaning of section 208, but remains concerned that an employee cannot
accurately determine the value of an underlying holding at the time of
his proposed participation because mutual fund assets are bought and
sold so frequently. Moreover, interpreting the exemption to apply to
the value of the fund as a whole is not inherently unfair since, in
many cases, an employee's interest in the entire sector may be a more
accurate measure of the value of his interest in the matter.
Additionally, OGE is sensitive to concerns expressed by other
commenters about devising exemptions that are unduly complicated. On
balance, OGE believes the rule will be fairer and easier to implement
if the $5,000 exemption applies to the value of the sector fund as a
whole. Of course, individual waivers under section 208(b)(1) may be
issued to employees whose mutual fund is in excess of $5,000. And, if
agencies report difficulties in implementing the de minimis provisions
as they apply to sector mutual funds, OGE will reconsider the issue.
Interests in Federal Government Securities
One agency questioned why there should be any distinction between
long- and short-term Government securities for purposes of the
exemptions. The Office of Government Ethics, in consultation with the
Department of Justice, has concluded that employees whose duties
concern setting interest rates or formulating monetary policy may have
the potential for more significant gains or losses arising from the
ownership of long-term Government securities. Therefore, the exemption
for those securities is narrower than the exemption for short-term
Government securities. At the request of another agency, OGE expanded
the exemption at Sec. 2640.202(b), as renumbered, for long-term Federal
Government securities to $50,000. As requested by the same agency, OGE
added an exemption for U.S. Savings bonds at Sec. 2640.202(c), as
renumbered. Corresponding changes to the definition of ``long-term
Federal Government security'' have been added to Sec. 2640.102(i), as
renumbered, and a definition of ``U.S. Savings bond'' has been added at
Sec. 2640.102(v). Although interests in these Federal Government
securities do not create a disqualifying financial interest for most
employees, these exemptions will be available for those employees of
the Department of the Treasury, the Federal Reserve, and similar other
agencies where duties may create a disqualifying financial interest.
Interests of Tax Exempt Organizations
Four agencies commented on the exemption for the interests of tax
exempt organizations in proposed Sec. 2640.202(e), now renumbered as
Sec. 2640.202(d). One agency stated that the exemption should apply to
the securities holdings of all companies, whether or not they are
nonprofit; another thought it should apply to the interests of
nonprofits that are tax exempt under other subparts of 26 U.S.C.
501(c), in particular section 501(c)(4). The Office of Government
Ethics originally devised this exemption in response to requests from
agencies who stated that they routinely issue individual waivers to
employees serving on the boards of various nonprofits, particularly
colleges and universities. Interests arising from the holdings of other
types of companies the employee serves as officer, director, trustee or
employee are better handled on an individual basis through a waiver
under section 208 (b)(1) or (b)(3). However, OGE has revised the
regulation to include nonprofit organizations that are tax exempt under
either 26 U.S.C. 501 (c)(3) or (c)(4).
Two agencies objected to limiting the exemption proposed, at
renumbered Sec. 2640.202(d), to situations where the affected holdings
amount to no more than 20% of the organization's portfolio. One of the
agencies pointed out that an employee would have to be recalculating
percentages during the course of his participation in a matter to
ensure that the 20% limitation was not exceeded. The Office of
Government Ethics agrees, and has accordingly revised the regulation in
adopting it in final form.
One agency suggested that OGE delete the proposed requirement that
an employee must be an unpaid officer, director, or trustee for the
exemption to apply. OGE did not adopt this recommendation because it
believes such situations should be handled on an individual basis under
the waiver provisions at section 208 (b)(1) or (b)(3). However, OGE
wishes to clarify that receipt of travel reimbursement (or
reimbursement of other similar types of expenses) from an organization
would not be considered a form of pay for purposes of this exemption.
Finally, OGE disagrees with an agency which suggested that the
exemption is an unnecessary change from past OGE practice in handling
interests of organizations an employee serves as officer, director, or
trustee. To the extent that OGE has not required recusal or individual
waivers for such an employee, it has assumed that the employee had no
knowledge of the organization's investments.
Interests of General Partners
The Office of Government Ethics did not adopt one agency
recommendation to broaden the proposed exemption at Sec. 2640.202(e),
as renumbered, to include any interest of an employee's general partner
as long as it is not related to the partnership. That approach would
amount to eliminating the interests of general partners from coverage
under section 208, which is a legislative function. For similar
reasons, OGE also did not adopt an agency recommendation to exempt all
the interests of an employee's general partner in cases where the
employee is a limited partner. Finally, OGE does not agree with one
agency's contention that section 208 has no applicability to an
employee's general partners if the employee is only a limited partner.
It also does not agree with the suggestion of that agency, and of one
other agency, that an exemption should apply to all the interests of an
employee's general partner where the employee is a limited partner in a
partnership with more 15 limited partners. The Office of Government
Ethics cannot say with any certainty that all such interests are
``remote or inconsequential'' enough to warrant automatic exemptions
for all employees under this regulation.
Section 2640.203 Miscellaneous Exemptions
Hiring Decisions
Four agencies commented on proposed Sec. 2640.203(a). Two agencies
stated that Sec. 2640.203(a) is unnecessary and confusing and should be
omitted from the final rule. The Office of Government Ethics disagrees.
The provision was included at the request of an agency that is
routinely involved in hiring new employees with significant financial
interests in corporations. Hiring in some of these cases significantly
impacts the financial interests of the former private sector employer
and the exemption will provide those employees involved in
[[Page 66837]]
the hiring with assurance that section 208 will not be violated.
One agency suggested that OGE define the term ``hiring decisions.''
The Office of Government Ethics decided not to define the term so that
the provision, given the common understanding of the term, will be
broad enough to cover various stages of the hiring process. One agency
recommended that OGE define the term ``vested pension plan'' or delete
the word ``vested.'' In order to simplify the provision, the Office of
Government Ethics has decided to delete the word ``vested.''
Employees on Leave From Institutions of Higher Education
Two comments were received regarding Sec. 2640.203(b) as proposed.
One agency commented that the exemption will be very helpful to
agencies that recruit a large number of noncareer appointees from the
private sector. Another agency stated that many employees will benefit
from the application of the exemption. Both agencies recommended that
Sec. 2640.203(b) be broadened. One recommended that the exemption
include nonprofit employers such as medical institutions and other
nonprofit entities. The other agency requested that the exemption also
include State and local governmental entities. The Office of Government
Ethics has not changed this provision. The exemption was proposed for
inclusion primarily at the request of agencies who hire large numbers
of persons whose principal employers are universities, which commonly
grant leaves of absence. There is no indication that agencies must
routinely address conflicts of interest questions involving employees
who are on leaves of absence from other nonprofit entities or from
State or local governments.
Multi-Campus Institutions of Higher Education
One agency commented on proposed Sec. 2640.203(c). No changes have
been made in the regulation to address the agency's concern that the
exemption include participation in matters affecting the State that
operates the institution. In a formal advisory opinion (82 OGE 1,
February 12, 1982), as published in ``The Informal Advisory Letters and
Memoranda and Formal Opinions of the United States Office of Government
Ethics'' 851 (1979-1988), OGE stated that the interests of a university
will not be imputed to the State that operates the institution.
Accordingly, no exemption would be necessary. The same agency commented
on the note which followed Sec. 2640.203(c) as proposed. The agency
questioned why it would be necessary to determine whether State
institutions constitute a State ``system.'' To further simplify the
rule, OGE has decided to eliminate the note.
Financial Interests Arising From Federal Government Employment or From
Social Security or Veterans' Benefits
Thirteen comments were received concerning recodified and
renumbered Sec. 2640.203(d), which was published as an interim rule at
Sec. 2640.101 in the Federal Register on August 28, 1995 (60 FR 44706,
44709). One general comment, made by four agencies, expressed concern
regarding the decision to treat financial interests that arise from
Government salary and employment as disqualifying under 18 U.S.C.
208(a). The Office of Government Ethics understands these concerns.
However, for reasons discussed in the Preamble of the interim rule, OGE
has decided not to change the position adopted by this Office in
consultation with the Department of Justice. Most of the potential
adverse effects of treating these interests as disqualifying are
mitigated by this regulation, which would exempt most of the financial
interests from the disqualification provision of section 208(a).
One agency recommended that OGE emphasize that Sec. 2640.203(d)
does not preclude an employee from seeking improvements in his working
conditions merely because a spouse's working conditions might also
benefit from the change. Under Sec. 2640.203(d), if the request is made
on his behalf, rather than on behalf of his spouse, an employee may
request that his working environment be enhanced even if the request
results in an improved working environment for his spouse.
Three agencies commented on the phrase ``determinations that
individually or specially affect their Government salary and benefits.
The first agency commented that the phrase did not clarify the scope of
the exemption. The Office of Government Ethics has not modified the
regulation because the ten examples which follow the exemption help
illustrate the scope of the exemption. This agency also questioned
whether the exemption would permit an office director and her top
management to decide what positions will be subject to a reduction in
force without requiring them to obtain individual waivers. Example 10
following the exemption addresses a very similar issue.
A second agency questioned whether the adverbs ``individually or
specially'' would modify both ``relate to'' and ``affect.''
``Individually or specially'' modify both phrases. The third agency
requested that the terms ``individually'' and ``specially'' be defined.
The Office of Government Ethics believes that the examples which follow
Sec. 2640.203(d) illustrate the meaning of the terms ``individually''
and ``specially.'' Of course, in cases where an agency is uncertain
whether an exemption applies, it is always free to issue an individual
waiver under section 208 (b)(1) or (b)(3).
The third agency also recommended that the phrase ``make
determinations'' be defined. Through the examples following
Sec. 2640.203(d), the Office of Government Ethics has illustrated what
constitutes a determination. Generally, a determination involves an
official Government decision whether intermediate or final.
Six agencies commented on Example 3 following Sec. 2640.203(d).
Generally, these agencies indicated that some high-level officials and
senior personnel do not have a ``supervising official'' to approve
travel authorizations or vouchers. To accommodate agency concerns, OGE
inserted the following clause into the final sentence of Example 3 as
adopted in this final rule: ``unless he has been delegated, in advance,
authority to make such approvals in accordance with agency policy.''
Consequently, an employee may approve his own travel authorization or
payment of his own travel expenses if, in advance, such authority has
been delegated to him according to agency policy. For purposes of this
exemption, an advance delegation of this type will be deemed to be a
determination by the employee's agency rather than a determination by
the employee. Another agency questioned whether the approval of an
employee's travel voucher by both the ``approving official'' and the
``certifying official'' are ``determinations'' for purposes of
Sec. 2640.203(d). Both certification and approval are determinations
within the scope of the exemption found at Sec. 2640.203(d) of this
final rule.
One agency stated that it was not clear that the situations
described in Examples 4 and 6 following Sec. 2640.203(d) present
``particular matters.'' The examples concern all Federal employees or a
very large group of Federal employees. The Office of Government Ethics
believes that the class of all Federal employees or a large group of
Federal employees is a ``discrete and identifiable class of persons''
within the meaning of a ``particular matter'' found in this regulation
at Sec. 2640.103(a)(1).
[[Page 66838]]
One agency commented on Example 5 following Sec. 2640.203(d). The
agency argued that drafting a regulation that will provide expanded
hospital benefits for veterans is not a ``particular matter'' and would
not require an exemption. The Office of Government Ethics disagrees
with this argument. According to Sec. 2640.103(a)(1), a particular
matter includes `` * * * matters that involve deliberation, decision,
or action that is focused upon the interests of specific persons, or a
discrete and identifiable class of persons.'' Veterans are a discrete
and identifiable class of persons; therefore, a regulation dealing with
hospital benefits for veterans is a particular matter.
Another agency did not understand the distinction, if any, between
Example 7 and Example 8 which follow Sec. 2640.203(d). Example 7 allows
an employee to participate in GSA's evaluation of the feasibility of
privatizing the Federal Supply Service, even though the employee's own
position would be eliminated if the decision to privatize were made.
The employee may participate in the evaluation because according to the
facts as described, he is merely studying whether it is feasible to
privatize the Federal Supply Service. Ultimately, GSA may decide not to
privatize. At this point, it cannot be said that the matter will have a
direct and predictable effect on the employee's financial interest, and
therefore, no exemption or waiver is needed to allow the employee to
participate. Moreover, even if the employee was involved in the
implementation of a decision to privatize the Federal Supply Service,
the employee would not be making a determination that individually or
specially affects his own Government salary. In Example 8, the employee
may not participate in the implementation of the privatization plan to
eliminate the employee's Federal position and create a new position in
a private organization because the employee would be making
determinations that affect interests other than those that arise from
Government employment. The employee's interest in a position in the
newly privatized corporation is not an interest that ``arises from
Federal Government employment or from Social Security or veterans'
benefits.''
One agency suggested that recodified Sec. 2640.203(d) be broadened
to cover the salary and benefits of employees of the Federal Reserve
banks. The Office of Government Ethics revised the provision
accordingly.
Three comments were received regarding privatization concerns. One
agency recommended that the Office of Government Ethics assume a
leadership role to facilitate privatization efforts through the
development of solutions to potential ethics impediments to
privatization. The Office of Government Ethics has addressed some
privatization issues in the interim rule published in the Federal
Register on August 28, 1995 (60 FR 44706). With some limitations, the
exemption permits an employee to engage in many of the activities
associated with privatization. Furthermore, OGE provides practical
advice to agency officials involved in privatization. Another agency's
comment requested that OGE adopt an exemption in the cases of salaries
and benefits of employees of any Federal agency engaged in planning the
transfer of all its assets, programs and employees to a successor
nonprofit corporation in either the public or the private sector. A
comprehensive regulatory exemption is not appropriate in such cases.
The Office of Government Ethics cannot make a blanket determination
that in all such situations the financial interests of all employees
are too remote or too inconsequential to affect the integrity of their
services. Therefore, no exemption has been adopted; however, the agency
may issue individual waivers under section 208(b)(1) or (b)(3) where
applicable to facilitate the transition to a nonprofit corporation.
Finally, one person questioned whether Sec. 2640.203(d) applies to
union officials involved in privatization negotiations. The exemptions
found at part 2640 apply to union officials to the same extent to which
they apply to all other executive branch employees.
One agency questioned why interests arising from Social Security
and veterans' benefits were exempted under Sec. 2640.203(d), but
financial interests arising from participation in programs such as
Medicare, Medicaid, Food Stamps, Aid to Families with Dependent
Children and Federal student loans were not exempted. Because interests
in those programs are not derived from the individual's status as a
Government employee, the exemption at Sec. 2640.203(d) is not
applicable.
Special Government Employees Serving on Advisory Committees
Four agencies responded positively to Sec. 2640.203(g) of the
proposed rule indicating that the exemption will make it easier for
agencies to recruit special Government employees (SGE). One agency
recommended that the exemption be expanded to cover investment
interests in the special Government employee's area of expertise. The
agency asserted that such interests do not pose any greater threat to
the integrity of the SGE's services than employment interests. The
Office of Government Ethics has not expanded the exemption to cover
investment interests in a SGE's area of expertise because exemptions
for certain investment interests are already available under
Sec. 2640.202. If the exemptions under Sec. 2640.202 are not
sufficient, then the employee may request a waiver under 18 U.S.C.
208(b)(3).
Another agency suggested that Sec. 2640.203(g) apply to all non-
Federal employers of the SGE, not just the SGE's ``principal
employer,'' since many advisory committee members act as consultants to
various different private sector entities. The Office of Government
Ethics believes the exemption should apply only where the employee has
an employee/employer relationship with the outside entity. Employees
serving on advisory committees often are chosen because of their
expertise in a certain field or because of their affiliation with
certain interest groups. Because advisory committee meetings are open,
employment interests are readily apparent to the public. Members and
their employment affiliations are typically identified publicly. On the
other hand, an SGE's bias because of an affiliation as a consultant may
not be so evident and since such relationships may not be well known to
the public. Therefore, the Office of Government Ethics has not changed
this provision.
Another agency recommended that the exemption cover all SGEs, not
just those serving on advisory committees. The Office of Government
Ethics disagrees with the recommendation and is not adopting it in this
final rule. As explained in the preamble of the proposed rule, the
exemption at Sec. 2640.203(g) is limited to special Government
employees who are on Federal advisory committees because the public's
interest in the integrity of advisory committee proceedings is
protected by the nature of the proceedings themselves. Ordinarily, no
one individual can control the recommendations of the committee.
Moreover, the public interest in the employees' integrity is protected
by the openness required by the Federal Advisory Committee Act, 5
U.S.C. app. Such safeguards are not present in the case of SGEs not
serving on advisory committees.
One agency asked that OGE clarify the phrase ``special or distinct
effect'' used in proposed Sec. 2640.203(g). Because of the need for
flexibility, the Office of Government Ethics did not define the
[[Page 66839]]
phrase. Example 1 following Sec. 2640.203(g) explains that an SGE may
participate in a matter on an advisory committee even though the
recommendation by the advisory committee will affect his non-Federal
employer as part of a class. However, it is not OGE's intent that the
exemption apply only where the effect of the matter on members within a
class is identical. Normally, the matter would have a ``special or
distinct effect'' when its impact would be unique to the employee or
his employer, or where the effect would be clearly out of proportion in
comparison to the effect on other members of the class. Where it is
difficult to determine if a ``special or distinct effect'' may occur,
an agency has the option of issuing an individual waiver under section
208 (b)(1) or (b)(3).
Directors of Federal Reserve Banks
One agency commented on Sec. 2640.203(h) of the proposed rule and
questioned whether use of the exemption would preclude the use of other
exemptions such as those for de minimis investments. The exemptions
found in this final part 2640 regulation are intended to be used where
applicable in particular situations with no restriction on the number
of exemptions utilized by an employee. Therefore, application of one
exemption does not preclude the application of another exemption.
Medical Products
One agency commented on Sec. 2640.203(i) as proposed. The agency
stated that Sec. 2640.203(i)(1) should not be limited to matters
involving the ``approval or classification'' of medical products, but
should be broadened to cover ``Federal advisory committee matters
concerning medical products * * * .'' The agency recommended
eliminating the distinction between medical products and medical
devices because in the industry ``medical products'' is a generic term
used to describe all products and devices intended for therapeutic or
diagnostic purposes. The Office of Government Ethics has adopted both
recommendations in this final rule. The agency requested that the
language of Sec. 2640.203(i)(1) include ``use by or sale to its
patients'' to reflect actual practice where hospitals have a pharmacy
from which patients buy prescription products for use on an outpatient
basis. The agency also recommended that proposed Sec. 2640.203(i)(2) be
changed to cover ``the use or prescription of medical products for
patients.'' Based on the commenting agency's expertise, OGE has revised
Sec. 2640.203(i) to accommodate the agency's recommendations. The
agency also requested that it should be noted that intellectual
property rights are not covered by this exemption. The Office of
Government Ethics has not incorporated this suggestion. To simplify the
regulation, OGE has decided to describe only what interests are covered
by the exemptions rather than what interests are not included.
The same agency recommended that proposed Sec. 2640.203(i) should
cover SGEs who are not serving on a Federal advisory committee,
provided that the SGEs work no more than 60 days in any 365 day period
and their services are advisory only. The safeguards of the Federal
advisory committee process, as described above, are not present in
situations involving SGEs not serving on advisory committees;
therefore, the Office of Government Ethics has not expanded the
exemption in the final rule.
Representative Members of FDA Advisory Committees
A new exemption has been added, at the request of the Food and Drug
Administration (FDA), at Sec. 2640.203(j) of the final rule for certain
nonvoting representative members of technical advisory committees
established by the FDA. The provision exempts any disqualifying
financial interest the nonvoting member has in the class that he
represents on the committee. The exemption continues, in part, an
existing FDA exemption promulgated in 1976 when individual agencies had
the authority to issue old section 208(b)(2) regulatory waivers.
Nonvoting members of FDA technical advisory committees may be
appointed pursuant to one of several authorities, including 21 U.S.C.
394, 360c(b), or 360j(f)(3). Some of these statutory authorities
require that certain members of the committees be appointed as
representatives of consumer and industry groups and specify that these
groups have the opportunity to nominate persons to serve in a
representative capacity. Ordinarily, persons serving in a
representative capacity would not be considered employees of the
Government. See Office of Government Ethics (OGE) Informal Advisory
Letter 82x22, ``The Informal Advisory Letters and Memoranda and Formal
Opinions of the United States Office of Government Ethics'' 325, 329-31
(1979-1988).
Nevertheless, HHS has appointed these members as special Government
employees because 21 U.S.C. 331(j) prohibits the FDA from disclosing
trade secret information to persons who are not employees of HHS, and
the members of these technical advisory committees need to have access
to certain trade secret information in order to carry out the
committees' activities. Therefore, in order to accomplish the work that
Congress intended these committees perform, the representative members
of these committees are appointed as special Government employees.
As a general proposition, OGE believes that representatives are not
Government employees because they are not carrying out a Federal
function on behalf of the Government. Accordingly, in OGE's view,
representatives ordinarily would not be appointed as employees. Where
members of FDA technical advisory committees are required by statute to
be appointed as representatives and must have access to confidential
information to carry out their duties as members of the committee,
however, it is arguable that Congress envisioned that they would act as
both representatives and as employees.
Regulations promulgated by the FDA that govern the activities of
these representative members contain certain limitations designed to
safeguard the integrity of the advisory committee proceedings. First,
although the members are appointed as special Government employees,
they are still under an obligation to represent the views of non-
Federal industry and consumer groups, and this obligation is publicly
disclosed. See 21 CFR 14.84(c). And although representative members
participate in committee discussions, they are not permitted to vote on
committee recommendations. 21 CFR 14.86(a)(1). Representative members
are also subject to specific limitations on their participation in
matters directly involving their employer, as well as general
limitations on their advocacy. 21 CFR 14.86(c)(4)-(6). Failure to
adhere to these limitations may result in removal from the committee.
21 CFR 14.86(d). Accordingly, in view of the limited nature of their
services and the public expectation that they will act as
representatives, there appears to be little risk that appointment of
these representatives as special Government employees will impair the
advisory committee process.
The exemption applies only to disqualifying financial interests
that arise from the class which the employee represents. For example,
an employee who represents the pharmaceutical industry may have
disqualifying financial interests that arise from his employment with a
pharmaceutical company and from ownership of stock
[[Page 66840]]
in the company. The employee's disqualifying financial interests
arising from these relationships and assets are exempt under
Sec. 2640.203(j). On the other hand, ownership of stock in the same
company by an employee who represents consumer groups does not create a
disqualifying financial interest in the same class which the employee
represents. In this case, the employee who represents consumer groups
would need an individual waiver under section 208(b)(1) or (b)(3)
before participating in advisory committee activities affecting the
company in which she owns stock.
Employees of the Tennessee Valley Authority
Section 2640.203(k) of the final rule contains a new exemption
applicable to employees of the Tennessee Valley Authority (TVA) who
participate in developing or approving power rate schedules, or other
similar matters, for the production of electric power within the TVA
service area. The provision continues an existing exemption promulgated
by the TVA at 18 CFR 1300.735 pursuant to its authority under 18 U.S.C.
208(b)(2) before the statute was amended in 1989. The exemption applies
only to disqualifying financial interests arising from the use of
electric power sold by the TVA.
Section 2640.204 Prohibited Financial Interests
One agency stated that 5 CFR 2635.403(b), which authorizes an
agency to prohibit the holding of certain financial interests in
individual cases, should have no applicability where a financial
interest is covered by a regulatory exemption. The agency noted that
situations arising under Sec. 2635.403(b) are not analogous to
situations where financial interests are prohibited under statute or
supplemental regulation. The Office of Government Ethics did not make
the recommended modification. Deleting the reference to 5 CFR
2635.403(b) would interfere with an agency's ability to make
independent determinations about substantial conflicts. However,
Sec. 2640.204 has been revised to clarify that none of the exemptions
apply to financial interests ``held or acquired by the employee, his
spouse, or minor child in violation of a statute or agency supplemental
regulation * * *.'' This clarifying revision is necessary to address
the fact that a few agencies have supplemental regulations which
prohibit spouses and minor children from holding or acquiring certain
interests.
Section 2640.205 Employee Responsibility
One agency requested that the final sentence in this section as
proposed, which referred in part to an employee's uncertainty about
whether a waiver is applicable, should be changed to reference an
``exemption or waiver.'' The Office of Government Ethics has corrected
that provision in the final rule to state, ``An employee who is unsure
whether an exemption is applicable * * *.''
Two agencies made comments regarding employee reliance on agency
advice. One agency thought it would be useful to encourage employees to
rely on specific advice of their organization's ethics officials.
Another agency recommended that OGE add a ``safe harbor'' provision
under which the employee would not be subject to criminal prosecution
or disciplinary action when relying in good faith on the advice of an
agency ethics official with respect to the applicability of the
exemptions. The Office of Government Ethics did not add a ``safe
harbor'' provision. The correct standard concerning reliance on the
advice of ethics officials is stated at 5 CFR 2635.107(b). That
provision states that ``good faith reliance on the advice of an agency
ethics official is a factor that may be taken into account by the
Department of Justice in the selection of cases for prosecution.''
One agency stated that it supports the concept that employees have
to take responsibility for determining whether an exemption applies in
a particular case. A second agency, however, expressed concern that the
regulation as proposed would not accomplish its stated purpose of
lessening the burden on agency ethics officials since employees may not
rely on a provision unless the interest is specifically exempt and
employees will be forced to consult with an ethics official prior to
taking action. The Office of Government Ethics understands this
concern, but believes that most employees will be able to apply the
basic exemption provisions once they take effect. In addition, because
this regulation implements a criminal statute, it should be
sufficiently precise so that employees have adequate notice of when
they may act without fear of violating section 208. Naturally, when an
employee is in doubt as to the application of a particular provision,
he will have to consult with an ethics official. However, as addressed
earlier in the Summary of Contents, OGE has attempted to make the
regulations less complex by simplifying language and deleting some
exemptions. These modifications should make the regulation somewhat
easier for employees to understand and apply.
One agency complained about the burden on employees in complying
with the regulation to the extent that they would have to obtain
information about their investments to determine whether they meet with
conditions set forth in the exemptions. The Office of Government Ethics
does not believe this should be an onerous task. Most employees receive
prospectuses and periodic updates about their investments. If they did
not keep these materials, they can obtain information by calling the
manager of the fund, trust or plan.
The same agency suggested the creation of a Governmentwide database
listing investments (e.g., nonsector mutual funds and certain pensions)
that do not create conflicts of interests and that could be updated
quarterly and shared by all agencies and employees as a means of
ensuring compliance. The Office of Government Ethics does not believe
this would be a practical use of resources or staff. The number of
investments that could be included would be so large that it would be
nearly impossible to identify them all with any precision. Inevitably,
some investments would be omitted, and the system would prove to be
unreliable.
One agency suggested that OGE provide training resources for
employees and ethics officials. The Office of Government Ethics
anticipates developing training resources and materials concerning the
new regulation.
Section 2640.206 Existing Agency Exemptions
An agency suggested that the regulation include a grandfather
clause for those employees who currently have exempted interests under
individual agency regulations, allowing the employee to continue to
hold that exempted interest as long as the employee maintains the same
duties. The Office of Government Ethics does not agree that a
grandfather clause would be desirable. A grandfather clause would
result in a complicated scheme for agencies to administer. Under such
system, some employees would function under section 208(b)(2) agency
exemptions in existence prior to these regulations, while others would
function under the new exemptions. If an agency needs to continue a
specific exemption not covered under these regulations, it should
submit one to OGE for consideration. Alternatively, an agency can
consider granting waivers on an individual basis under section
[[Page 66841]]
208(b)(1) to employees who have exemptions under current agency rules.
Subpart C--Individual Waivers
Section 2640.301 Waivers Issued Pursuant to 18 U.S.C. 208(b)(1)
One agency commented that subpart C of the part 2640 regulation as
proposed should be deleted in its entirety, as it is duplicative and
unnecessary since individual waivers are covered at 5 CFR
2635.402(d)(2). The Office of Government Ethics has not adopted this
suggestion in this final rule. These new regulations contain more
detailed requirements than those described in Sec. 2635.402(d)(2), as
well as a list of factors an agency may use in determining whether a
disqualifying financial interest is sufficiently substantial to be
deemed likely to affect the integrity of the employee's services to the
Government.
A second agency responded with two observations. First, the agency
assumed that describing the broad scope of duties encompassed by an
employee's official duties will be sufficient to meet the requirement
under Sec. 2640.301(a)(3). Second, it stated that an appointing
authority has discretion, but is not required to issue a waiver even if
all of the enumerated requirements are met. The Office of Government
Ethics agrees with the commenter on both points and has retained
subpart C in its entirety in this final rule.
Another agency thought it would be helpful to add to proposed
Sec. 2640.301(b) another factor such as ``availability at the location
of other persons qualified to perform the service in a timely
fashion,'' in order to assist agencies that have small posts abroad
where no one else can perform the employee's tasks. The Office of
Government Ethics did not add this factor because consideration of such
circumstances is implicit in the factor described at
Sec. 2640.301(b)(b)(6)(ii).
Section 2640.304 Public Availability of Agency Waivers
One agency requested that OGE add a requirement that advisory
committee members file public financial disclosure statements or,
alternatively, that OGE seek appropriate legislation modifying section
107(a)(2) of the Ethics in Government Act to require agencies to
disclose publicly the identity of an individual's principal employment,
positions held and contractual relationships, and investment interests
that may be relevant to the purposes and functions of the advisory
committee. This request is outside the scope of this regulation, which
deals principally with exemptions from section 208.
III. Existing Agency Exemptions
As of the effective date of this regulation, regulatory exemptions
issued by individual agencies under the authority of 18 U.S.C.
208(b)(2), as in effect prior to November 30, 1989, will no longer be
effective.
IV. Matters of Regulatory Procedure
Executive Order 12866
In promulgating this final regulation, the Office of Government
Ethics has adhered to the regulatory philosophy and the applicable
principles of regulation set forth in section 1 of Executive Order
12866, Regulatory Review and Planning. This regulation has also been
reviewed by the Office of Management and Budget under that Executive
order.
Regulatory Flexibility Act
As Director of the Office of Government Ethics, I certify under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) that this final
regulation will not have a significant impact on a substantial number
of small entities because it primarily affects Federal executive branch
employees.
Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply
because this final regulation does not contain information collection
requirements that require the approval of the Office of Management and
Budget.
List of Subjects in 5 CFR Part 2640
Conflict of interests, Government employees.
Approved: September 26, 1996.
Stephen D. Potts,
Director, Office of Government Ethics.
Accordingly, for the reasons set forth in the preamble, the Office
of Government Ethics is amending title 5, chapter XVI, subchapter B of
the Code of Federal Regulations by revising part 2640 to read as
follows:
PART 2640--INTERPRETATION, EXEMPTIONS AND WAIVER GUIDANCE
CONCERNING 18 U.S.C. 208 (ACTS AFFECTING A PERSONAL FINANCIAL
INTEREST)
Subpart A--General Provisions
Sec.
2640.101 Purpose.
2640.102 Definitions.
2640.103 Prohibition.
Subpart B--Exemptions Pursuant to 18 U.S.C. 208(b)(2)
2640.201 Exemptions for interests in mutual funds, unit investment
trusts, and employee benefit plans.
2640.202 Exemptions for interests in securities.
2640.203 Miscellaneous exemptions.
2640.204 Prohibited financial interests.
2640.205 Employee responsibility.
2640.206 Existing agency exemptions.
Subpart C--Individual Waivers
2640.301 Waivers issued pursuant to 18 U.S.C. 208(b)(1).
2640.302 Waivers issued pursuant to 18 U.S.C. 208(b)(3).
2640.303 Consultation and notification regarding waivers.
2640.304 Public availability of agency waivers.
Authority: 5 U.S.C. App. (Ethics in Government Act of 1978); 18
U.S.C. 208; E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as
modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306.
Subpart A--General Provisions
Sec. 2640.101 Purpose.
18 U.S.C. 208(a) prohibits an officer or employee of the executive
branch, of any independent agency of the United States, of the District
of Columbia, or Federal Reserve bank director, officer, or employee, or
any special Government employee from participating in an official
capacity in particular matters in which he has a personal financial
interest, or in which certain persons or organizations with which he is
affiliated have a financial interest. The statute is intended to
prevent an employee from allowing personal interests to affect his
official actions, and to protect governmental processes from actual or
apparent conflicts of interests. However, in certain cases, the nature
and size of the financial interest and the nature of the matter in
which the employee would act are unlikely to affect an employee's
official actions. Accordingly, the statute permits waivers of the
disqualification provision in certain cases, either on an individual
basis or pursuant to general regulation. Section 208(b)(2) provides
that the Director of the Office of Government Ethics may, by
regulation, exempt from the general prohibition, financial interests
which are too remote or too inconsequential to affect the integrity of
the services of the employees to which the prohibition applies. The
regulations in this part describe those financial interests. This part
also provides guidance to agencies on the factors to consider when
issuing individual waivers under 18 U.S.C. 208 (b)(1) or (b)(3), and
provides an interpretation of 18 U.S.C. 208(a).
[[Page 66842]]
Sec. 2640.102 Definitions.
For purposes of this part:
(a) Diversified means that the fund, trust or plan does not have a
stated policy of concentrating its investments in any industry,
business, single country other than the United States, or bonds of a
single State within the United States and, in the case of an employee
benefit plan, means that the plan's trustee has a written policy of
varying plan investments.
Note to paragraph (a): A mutual fund is diversified for purposes
of this part if it does not have a policy of concentrating its
investments in an industry, business, country other than the United
States, or single State within the United States. Whether a mutual
fund meets this standard may be determined by checking the fund's
prospectus or by calling a broker or the manager of the fund. An
employee benefit plan is diversified if the plan manager has a
written policy of varying assets. This policy might be found in
materials describing the plan or may be obtained in a written
statement from the plan manager. It is important to note that a
mutual fund or employee benefit plan that is diversified for
purposes of this part may not necessarily be an excepted investment
fund (EIF) for purposes of reporting financial interests pursuant to
5 CFR 2634.310(c). In some cases, an employee may have to report the
underlying assets of a fund or plan on his financial disclosure
statement even though an exemption set forth in this part would
permit the employee to participate in a matter affecting the
underlying assets of the fund or plan. Conversely, there may be
situations in which no exemption in this part is applicable to the
assets of a fund or plan which is properly reported as an EIF on the
employee's financial disclosure statement.
(b) Employee means an officer or employee of the executive branch
of the United States, or of any independent agency of the United
States, a Federal Reserve bank director, officer, or employee, or an
officer or employee of the District of Columbia. The term also includes
a special Government employee as defined in 18 U.S.C. 202.
(c) Employee benefit plan means a plan as defined in section 3(3)
of the Employee Retirement Income Security Act of 1974, 29 U.S.C.
1002(3), and that has more than one participant. An employee benefit
plan is any plan, fund or program established or maintained by an
employer or an employee organization, or both, to provide its
participants medical, disability, death, unemployment, or vacation
benefits, training programs, day care centers, scholarship funds,
prepaid legal services, deferred income, or retirement income.
(d) He, his, and him include she, hers, and her.
(e) Holdings means portfolio of investments.
(f) Independent trustee means a trustee who is independent of the
sponsor and the participants in a plan, or is a registered investment
advisor.
(g) Institution of higher education means an educational
institution as defined in 20 U.S.C. 1141(a).
(h) Issuer means a person who issues or proposes to issue any
security, or has any outstanding security which it has issued.
(i) Long-term Federal Government security means a bond or note,
except for a U.S. Savings bond, with a maturity of more than one year
issued by the United States Treasury pursuant to 31 U.S.C. chapter 31.
(j) Municipal security means direct obligation of, or obligation
guaranteed as to principal or interest by, a State (or any of its
political subdivisions, or any municipal corporate instrumentality of
one or more States), or the District of Columbia, Puerto Rico, the
Virgin Islands, or any other possession of the United States.
(k) Mutual fund means an entity which is registered as a management
company under the Investment Company Act of 1940, as amended (15 U.S.C.
80a-1 et seq.). For purposes of this part, the term mutual fund
includes open-end and closed-end mutual funds and registered money
market funds.
(l) Particular matter involving specific parties includes any
judicial or other proceeding, application, request for a ruling or
other determination, contract, claim, controversy, investigation,
charge, accusation, arrest or other particular matter involving a
specific party or parties. The term typically involves a specific
proceeding affecting the legal rights of the parties, or an isolatable
transaction or related set of transactions between identified parties.
(m) Particular matter of general applicability means a particular
matter that is focused on the interests of a discrete and identifiable
class of persons, but does not involve specific parties.
(n) Pension plan means any plan, fund or program maintained by an
employer or an employee organization, or both, to provide retirement
income to employees, or which results in deferral of income for periods
extending to, or beyond, termination of employment.
(o) Person means an individual, corporation, company, association,
firm, partnership, society or any other organization or institution.
(p) Publicly traded security means a security as defined in
paragraph (r) of this section and which is:
(1) Registered with the Securities and Exchange Commission pursuant
to section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l)
and listed on a national or regional securities exchange or traded
through NASDAQ;
(2) Issued by an investment company registered pursuant to section
8 of the Investment Company Act of 1940, as amended (15 U.S.C. 80a-8);
or
(3) A corporate bond registered as an offering with the Securities
and Exchange Commission under section 12 of the Securities Exchange Act
of 1934 (15 U.S.C. 78l) and issued by an entity whose stock is a
publicly traded security.
Note to paragraph (p): National securities exchanges include the
American Stock Exchange and the New York Stock Exchange. Regional
exchanges include Boston, Cincinnati, Intermountain (Salt Lake
City), Midwest (Chicago), Pacific (Los Angeles and San Francisco),
Philadelphia (Philadelphia and Miami), and Spokane stock exchanges.
(q) Sector mutual fund means a mutual fund that concentrates its
investments in an industry, business, single country other than the
United States, or bonds of a single State within the United States.
(r) Security means common stock, preferred stock, corporate bond,
municipal security, mutual fund, long-term Federal Government security,
and limited partnership interest.
(s) Short-term Federal Government security means a bill with a
maturity of one year or less issued by the United States Treasury
pursuant to 31 U.S.C. chapter 31.
(t) Special Government employee means 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.
(u) Unit investment trust means an investment company as defined in
15 U.S.C. 80a-4(2) that is a regulated investment company under 26
U.S.C. 851.
(v) United States Savings bond means a savings bond issued by the
United States Treasury pursuant to 31 U.S.C. 3105.
Sec. 2640.103 Prohibition.
(a) Statutory prohibition. Unless permitted by 18 U.S.C. 208(b)
(1)-(4), an employee is prohibited by 18 U.S.C. 208(a) from
participating personally and substantially in an official capacity in
any particular matter in which, to his knowledge, he or any other
person specified in the statute has a financial interest, if the
particular matter will have a direct and predictable effect on
[[Page 66843]]
that interest. The restrictions of 18 U.S.C. 208 are described more
fully in 5 CFR 2635.401 and 2635.402.
(1) Particular matter. The term ``particular matter'' includes only
matters that involve deliberation, decision, or action that is focused
upon the interests of specific persons, or a discrete and identifiable
class of persons. The term may include matters which do not involve
formal parties and may extend to legislation or policy making that is
narrowly focused on the interests of a discrete and identifiable class
of persons. It does not, however, cover consideration or adoption of
broad policy options directed to the interests of a large and diverse
group of persons. The particular matters covered by this part include a
judicial or other proceeding, application or request for a ruling or
other determination, contract, claim, controversy, charge, accusation
or arrest.
Example 1: The Overseas Private Investment Corporation decides
to hire a contractor to conduct EEO training for its employees. The
award of a contract for training services is a particular matter.
Example 2: The spouse of a high level official of the Internal
Revenue Service (IRS) requests a meeting on behalf of her client (a
major U.S. corporation) with IRS officials to discuss a provision of
IRS regulations governing depreciation of equipment. The spouse will
be paid a fee by the corporation for arranging and attending the
meeting. The consideration of the spouse's request and the decision
to hold the meeting are particular matters in which the spouse has a
financial interest.
Example 3: A regulation published by the Department of
Agriculture applicable only to companies that operate meat packing
plants is a particular matter.
Example 4: A change by the Department of Labor to health and
safety regulations applicable to all employers in the United States
is not a particular matter. The change in the regulations is
directed to the interests of a large and diverse group of persons.
Example 5: The allocation of additional resources to the
investigation and prosecution of white collar crime by the
Department of Justice is not a particular matter. Similarly,
deliberations on the general merits of an omnibus bill such as the
Tax Reform Act of 1986 are not sufficiently focused on the interests
of specific persons, or a discrete and identifiable group of persons
to constitute participation in a particular matter.
Example 6: The recommendations of the Council of Economic
Advisors to the President about appropriate policies to maintain
economic growth and stability are not particular matters.
Discussions about economic growth policies are directed to the
interests of a large and diverse group of persons.
Example 7: The formulation and implementation of the response of
the United States to the military invasion of a U.S. ally is not a
particular matter. General deliberations, decisions and actions
concerning a response are based on a consideration of the political,
military, diplomatic and economic interests of every sector of
society and are too diffuse to be focused on the interests of
specific individuals or entities. However, at the time consideration
is given to actions focused on specific individuals or entities, or
a discrete and identifiable class of individuals or entities, the
matters under consideration would be particular matters. These would
include, for example, discussions whether to close a particular oil
pumping station or pipeline in the area where hostilities are taking
place, or a decision to seize a particular oil field or oil tanker.
Example 8: A legislative proposal for broad health care reform
is not a particular matter because it is not focused on the
interests of specific persons, or a discrete and identifiable class
of persons. It is intended to affect every person in the United
States. However, consideration and implementation, through
regulations, of a section of the health care bill limiting the
amount that can be charged for prescription drugs is sufficiently
focused on the interests of pharmaceutical companies that it would
be a particular matter.
(2) Personal and substantial participation. To participate
``personally'' means to participate directly. It includes the direct
and active supervision of the participation of a subordinate in the
matter. To participate ``substantially'' means that the employee's
involvement is of significance to the matter. Participation may be
substantial even though it is not determinative of the outcome of a
particular matter. However, it requires more than official
responsibility, knowledge, perfunctory involvement, or involvement on
an administrative or peripheral issue. A finding of substantiality
should be based not only on the effort devoted to the matter, but also
on the importance of the effort. While a series of peripheral
involvements may be insubstantial, the single act of approving or
participating in a critical step may be substantial. Personal and
substantial participation may occur when, for example, an employee
participates through decision, approval, disapproval, recommendation,
investigation or the rendering of advice in a particular matter.
Example 1: An agency's Office of Enforcement is investigating
the allegedly fraudulent marketing practices of a major corporation.
One of the agency's personnel specialists is asked to provide
information to the Office of Enforcement about the agency's
personnel ceiling so that the Office can determine whether new
employees can be hired to work on the investigation. The employee
personnel specialist owns $10,000 worth of stock in the corporation
that is the target of the investigation. She does not have a
disqualifying financial interest in the matter (the investigation
and possible subsequent enforcement proceedings) because her
involvement is on a peripheral personnel issue and her participation
cannot be considered ``substantial'' as defined in the statute.
(3) Direct and predictable effect. (i) A particular matter will
have a ``direct'' effect on a financial interest if there is a close
causal link between any decision or action to be taken in the matter
and any expected effect of the matter on the financial interest. An
effect may be direct even though it does not occur immediately. A
particular matter will not have a direct effect on a financial
interest, however, if the chain of causation is attenuated or is
contingent upon the occurrence of events that are speculative or that
are independent of, and unrelated to, the matter. A particular matter
that has an effect on a financial interest only as a consequence of its
effects on the general economy does not have a direct effect within the
meaning of this part.
(ii) A particular matter will have a ``predictable'' effect if
there is a real, as opposed to a speculative, possibility that the
matter will affect the financial interest. It is not necessary,
however, that the magnitude of the gain or loss be known, and the
dollar amount of the gain or loss is immaterial.
Example 1: An attorney at the Department of Justice is working
on a case in which several large companies are defendants. If the
Department wins the case, the defendants may be required to
reimburse the Federal Government for their failure to adequately
perform work under several contracts with the Government. The
attorney's spouse is a salaried employee of one of the companies,
working in a division that has no involvement in any of the
contracts. She does not participate in any bonus or benefit plans
tied to the profitability of the company, nor does she own stock in
the company. Because there is no evidence that the case will have a
direct and predictable effect on whether the spouse will retain her
job or maintain the level of her salary, or whether the company will
undergo any reorganization that would affect her interests, the
attorney would not have a disqualifying financial interest in the
matter. However, the attorney must consider, under the requirements
of Sec. 2635.502 of this chapter, whether his impartiality would be
questioned if he continues to work on the case.
Example 2: A special Government employee (SGE) whose principal
employment is as a researcher at a major university is appointed to
serve on an advisory committee that will evaluate the safety and
effectiveness of a new medical device to regulate arrhythmic
heartbeats. The device is being developed by Alpha Medical Inc., a
company which also has contracted with the SGE's university to
assist in developing another medical device related to
[[Page 66844]]
kidney dialysis. There is no evidence that the advisory committee's
determinations concerning the medical device under review will
affect Alpha Medical's contract with the university to develop the
kidney dialysis device. The SGE may participate in the committee's
deliberations because those deliberations will not have a direct and
predictable effect on the financial interests of the researcher or
his employer.
Example 3: The SGE in the preceding example is instead asked to
serve on an advisory committee that has been convened to conduct a
preliminary evaluation of the new kidney dialysis device developed
by Alpha Medical under contract with the employee's university.
Alpha's contract with the university requires the university to
undertake additional testing of the device to address issues raised
by the committee during its review. The committee's actions will
have a direct and predictable effect on the university's financial
interest.
Example 4: An engineer at the Environmental Protection Agency
(EPA) was formerly employed by Waste Management, Inc., a corporation
subject to EPA's regulations concerning the disposal of hazardous
waste materials. Waste Management is a large corporation, with less
than 5% of its profits derived from handling hazardous waste
materials. The engineer has a vested interest in a defined benefit
pension plan sponsored by Waste Management which guarantees that he
will receive payments of $500 per month beginning at age 62. As an
employee of EPA, the engineer has been assigned to evaluate Waste
Management's compliance with EPA hazardous waste regulations. There
is no evidence that the engineer's monitoring activities will affect
Waste Management's ability or willingness to pay his pension
benefits when he is entitled to receive them at age 62. Therefore,
the EPA's monitoring activities will not have a direct and
predictable effect on the employee's financial interest in his Waste
Management pension. However, the engineer should consider whether,
under the standards set forth in 5 CFR 2635.502, a reasonable person
would question his impartiality if he acts in a matter in which
Waste Management is a party.
(b) Disqualifying financial interests. For purposes of 18 U.S.C.
208(a) and this part, the term financial interest means the potential
for gain or loss to the employee, or other person specified in section
208, as a result of governmental action on the particular matter. The
disqualifying financial interest might arise from ownership of certain
financial instruments or investments such as stock, bonds, mutual
funds, or real estate. Additionally, a disqualifying financial interest
might derive from a salary, indebtedness, job offer, or any similar
interest that may be affected by the matter.
Example 1: An employee of the Department of the Interior owns
transportation bonds issued by the State of Minnesota. The proceeds
of the bonds will be used to fund improvements to certain State
highways. In her official position, the employee is evaluating an
application from Minnesota for a grant to support a State wildlife
refuge. The employee's ownership of the transportation bonds does
not create a disqualifying financial interest in Minnesota's
application for wildlife funds because approval or disapproval of
the grant will not in any way affect the current value of the bonds
or have a direct and predictable effect on the State's ability or
willingness to honor its obligation to pay the bonds when they
mature.
Example 2: An employee of the Bureau of Land Management owns
undeveloped land adjacent to Federal lands in New Mexico. A portion
of the Federal land will be leased by the Bureau to a mining company
for exploration and development, resulting in an increase in the
value of the surrounding privately owned land, including that owned
by the employee. The employee has a financial interest in the lease
of the Federal land to the mining company and, therefore, cannot
participate in Bureau matters involving the lease unless he obtains
an individual waiver pursuant to 18 U.S.C. 208(b)(1).
Example 3: A special Government employee serving on an advisory
committee studying the safety and effectiveness of a new arthritis
drug is a practicing physician with a specialty in treating
arthritis. The drug being studied by the committee would be a low
cost alternative to current treatments for arthritis. If the drug is
ultimately approved, the physician will be able to prescribe the
less expensive drug. The physician does not own stock in, or hold
any position, or have any business relationship with the company
developing the drug. Moreover, there is no indication that the
availability of a less expensive treatment for arthritis will
increase the volume and profitability of the doctor's private
practice. Accordingly, the physician has no disqualifying financial
interest in the actions of the advisory committee.
(c) Interests of others. The financial interests of the following
persons will serve to disqualify an employee to the same extent as the
employee's own interests:
(1) The employee's spouse;
(2) The employee's minor child;
(3) The employee's general partner;
(4) An organization or entity which the employee serves as officer,
director, trustee, general partner, or employee; and
(5) A person with whom the employee is negotiating for, or has an
arrangement concerning, prospective employment.
Example 1: An employee of the Consumer Product Safety Commission
(CPSC) has two minor children who have inherited shares of stock
from their grandparents in a company that manufactures small
appliances. Unless an exemption is applicable under Sec. 2640.202 or
he obtains a waiver under 18 U.S.C. 208(b)(1), the employee is
disqualified from participating in a CPSC proceeding to require the
manufacturer to remove a defective appliance from the market.
Example 2: A newly appointed employee of the Department of
Housing and Urban Development (HUD) is a general partner with three
former business associates in a partnership that owns a travel
agency. The employee knows that his three general partners are also
partners in another partnership that owns a HUD-subsidized housing
project. Unless he receives a waiver pursuant to 18 U.S.C. 208(b)(1)
permitting him to act, the employee must disqualify himself from
particular matters involving the HUD-subsidized project which his
general partners own.
Example 3: The spouse of an employee of the Department of Health
and Human Services (HHS) works for a consulting firm that provides
support services to colleges and universities on research projects
they are conducting under grants from HHS. The spouse is a salaried
employee who has no direct ownership interest in the firm such as
through stockholding, and the award of a grant to a particular
university will have no direct and predictable effect on his
continued employment or his salary. Because the award of a grant
will not affect the spouse's financial interest, section 208 would
not bar the HHS employee from participating in the award of a grant
to a university to which the consulting firm will provide services.
However, the employee should consider whether her participation in
the award of the grant would be barred under the impartiality
provision in the Standards of Ethical Conduct for Employees of the
Executive Branch at 5 CFR 2635.502.
(d) Disqualification. Unless the employee is authorized to
participate in the particular matter by virtue of an exemption or
waiver described in subpart B or subpart C of this part, or the
interest has been divested in accordance with paragraph (e) of this
section, an employee shall disqualify himself from participating in a
particular matter in which, to his knowledge, he or any other person
specified in the statute has a financial interest, if the particular
matter will have a direct and predictable effect on that interest.
Disqualification is accomplished by not participating in the particular
matter.
(1) Notification. An employee who becomes aware of the need to
disqualify himself from participation in a particular matter to which
he has been assigned should notify the person responsible for his
assignment. An employee who is responsible for his own assignments
should take whatever steps are necessary to ensure that he does not
participate in the matter from which he is disqualified. Appropriate
oral or written notification of the employee's disqualification may be
made to coworkers by the employee or a supervisor to ensure that the
employee is not involved in a matter from which he is disqualified.
[[Page 66845]]
(2) Documentation. An employee need not file a written
disqualification statement unless he is required by part 2634 of this
chapter to file written evidence of compliance with an ethics agreement
with the Office of Government Ethics, is asked by an agency ethics
official or the person responsible for his assignment to file a written
disqualification statement, or is required to do so by agency
supplemental regulation issued pursuant to 5 CFR 2635.105. However, an
employee may elect to create a record of his actions by providing
written notice to a supervisor or other appropriate official.
Example 1: The supervisor of an employee of the Department of
Education asks the employee to attend a meeting on his behalf on
developing national standards for science education in secondary
schools. When the employee arrives for the meeting, she realizes one
of the participants is the president of Education Consulting
Associates (ECA), a firm which has been awarded a contract to
prepare a bulletin describing the Department's policies on science
education standards. The employee's spouse has a subcontract with
ECA to provide the graphics and charts that will be used in the
bulletin. Because the employee realizes that the meeting will
involve matters relating to the production of the bulletin, the
employee properly decides that she must disqualify herself from
participating in the discussions. After withdrawing from the
meeting, the employee should notify her supervisor about the reason
for her disqualification. She may elect to put her disqualification
statement in writing, or to simply notify her supervisor orally. She
may also elect to notify appropriate coworkers about her need to
disqualify herself from this matter.
(e) Divestiture of a disqualifying financial interest. Upon sale or
other divestiture of the asset or other interest that causes his
disqualification from participation in a particular matter, an employee
is no longer prohibited from acting in the particular matter.
(1) Voluntary divestiture. An employee who would otherwise be
disqualified from participation in a particular matter may voluntarily
sell or otherwise divest himself of the interest that causes the
disqualification.
(2) Directed divestiture. An employee may be required to sell or
otherwise divest himself of the disqualifying financial interest if his
continued holding of that interest is prohibited by statute or by
agency supplemental regulation issued in accordance with
Sec. 2635.403(a) of this chapter, or if the agency determines in
accordance with Sec. 2635.403(b) of this chapter that a substantial
conflict exists between the financial interest and the employee's
duties or accomplishment of the agency's mission.
(3) Eligibility for special tax treatment. An employee who is
directed to divest an interest may be eligible to defer the tax
consequences of divestiture under subpart J of part 2634 of this
chapter. An employee who divests before obtaining a certificate of
divestiture will not be eligible for this special tax treatment.
(f) Official duties that give rise to potential conflicts. Where an
employee's official duties create a substantial likelihood that the
employee may be assigned to a particular matter from which he is
disqualified, the employee should advise his supervisor or other person
responsible for his assignments of that potential so that conflicting
assignments can be avoided, consistent with the agency's needs.
Subpart B--Exemptions Pursuant to 18 U.S.C. 208(b)(2)
Sec. 2640.201 Exemptions for interests in mutual funds, unit
investment trusts, and employee benefit plans.
(a) Diversified mutual funds and unit investment trusts. An
employee may participate in any particular matter affecting one or more
holdings of a diversified mutual fund or a diversified unit investment
trust where the disqualifying financial interest in the matter arises
because of the ownership of an interest in the fund or trust.
Example 1: An employee owns shares worth $100,000 in several
mutual funds whose portfolios contain stock in a small computer
company. Each mutual fund prospectus describes the fund as a
``management company,'' but does not characterize the fund as having
a policy of concentrating its investments in any particular
industry, business, single country (other than the U.S.) or bonds of
a single State. The employee may participate in agency matters
affecting the computer company.
Example 2: A nonsupervisory employee of the Department of Energy
owns shares in a mutual fund that expressly concentrates its
holdings in the stock of utility companies. The employee may not
rely on the exemption in paragraph (a) of this section to act in
matters affecting a utility company whose stock is part of the
mutual fund's portfolio because the fund is not a diversified fund
as defined in Sec. 2640.102(a). The employee may, however, seek an
individual waiver under 18 U.S.C. 208(b)(1) permitting him to act.
Moreover, depending upon the value of the employee's interest in the
fund and the type of particular matter in which he would
participate, one of the exemptions at Sec. 2640.202(a) or (b) for
interests arising from publicly traded securities may be applicable.
(b) Sector mutual funds. An employee may participate in any
particular matter affecting one or more holdings of a sector mutual
fund where the affected holding is not invested in the sector in which
the fund concentrates, and where the disqualifying financial interest
in the matter arises because of ownership of an interest in the fund.
Example 1: An employee of the Federal Reserve owns shares in the
mutual fund described in the preceding example. In addition to
holdings in utility companies, the mutual fund contains stock in
certain regional banks and bank holding companies whose financial
interests would be affected by an investigation in which the Federal
Reserve employee would participate. The employee is not disqualified
from participating in the investigation because the banks that would
be affected are not part of the sector in which the fund
concentrates.
(c) Employee benefit plans. An employee may participate in:
(1) Any particular matter affecting one or more holdings of an
employee benefit plan, where the disqualifying financial interest in
the matter arises from membership in:
(i) The Thrift Savings Plan for Federal employees described in 5
U.S.C. 8437;
(ii) A pension plan established or maintained by a State government
or any political subdivision of a State government for its employees;
or
(iii) A diversified employee benefit plan, provided:
(A) The investments of the plan are administered by an independent
trustee, and the employee, or other person specified in section 208(a)
does not participate in the selection of the plan's investments or
designate specific plan investments (except for directing that
contributions be divided among several different categories of
investments, such as stocks, bonds or mutual funds, which are available
to plan participants); and
(B) The plan is not a profit-sharing or stock bonus plan.
Note to paragraph (a)(1): Employee benefit plans that are tax
deferred under 26 U.S.C. 401(k) are not considered profit-sharing
plans for purposes of this section. However, for the exemption to
apply, 401(k) plans must meet the requirements of paragraph
(c)(1)(iii)(A) of this section.
(2) Particular matters of general applicability, such as
rulemaking, affecting the State or local government sponsor of a State
or local government pension plan described in paragraph (c)(1)(ii) of
this section where the disqualifying financial interest in the matter
arises because of participation in the plan.
Example 1: An attorney terminates his position with a law firm
to take a position with the Department of Justice. As a result of
his employment with the firm, the employee has interests in a 401(k)
plan, the assets of which are invested primarily in stocks chosen by
an independent financial management firm. He also participates in a
[[Page 66846]]
defined contribution pension plan maintained by the firm, the assets
of which are stocks, bonds, and financial instruments. The plan is
managed by an independent trustee. Assuming that the manager of the
pension plan has a written policy of diversifying plan investments,
the employee may act in matters affecting the plan's holdings. The
employee may also participate in matters affecting the holdings of
his 401(k) plan if the individual financial management firm that
selects the plan's investments has a written policy of diversifying
the plan's assets. Employee benefit plans that are tax deferred
under 26 U.S.C. 401(k) are not considered profit-sharing or stock
bonus plans for purposes of this part.
Example 2: An employee of the Department of Agriculture who is a
former New York State employee has a vested interest in a pension
plan established by the State of New York for its employees. She may
participate in an agency matter that would affect a company whose
stock is in the pension plan's portfolio. She also may participate
in a matter of general applicability affecting all States, including
the State of New York, such as the drafting and promulgation of a
rule requiring States to expend additional resources implementing
the Food Stamp program. Unless she obtains an individual waiver
under 18 U.S.C. 208(b)(1), she may not participate in a matter
involving the State of New York as a party, such as an application
by the State for additional Federal funding for administrative
support services, if that matter would affect the State's ability or
willingness to honor its obligation to pay her pension benefits.
Sec. 2640.202 Exemptions for interests in securities.
(a) De minimis exemption for matters involving parties. An employee
may participate in any particular matter involving specific parties in
which the disqualifying financial interest arises from the ownership by
the employee, his spouse or minor children of securities issued by one
or more entities affected by the matter, if:
(1) The securities are publicly traded, or are long-term Federal
Government, or are municipal securities; and
(2) The aggregate market value of the holdings of the employee, his
spouse, and his minor children in the securities of all entities does
not exceed $5,000.
Example 1: An employee owns 100 shares of publicly traded stock
valued at $3,000 in XYZ Corporation. As part of his official duties,
the employee is evaluating bids for performing computer maintenance
services at his agency and discovers that XYZ Corporation is one of
the companies that has submitted a bid. The employee is not required
to recuse himself from continuing to evaluate the bids.
Example 2: In the preceding example, the employee and his spouse
each own 100 shares of stock in XYZ Corporation, resulting in
ownership of $6,000 worth of stock by the employee and his spouse.
The exemption in paragraph (a) of this section would not permit the
employee to participate in the evaluation of bids because the
aggregate market value of the holdings of the employee, spouse and
minor children in XYZ Corporation exceeds $5,000. The employee
could, however, seek an individual waiver under 18 U.S.C. 208(b)(1)
in order to participate in the evaluation of bids.
Example 3: An employee is assigned to monitor XYZ Corporation's
performance of a contract to provide computer maintenance services
at the employee's agency. At the time the employee is first assigned
these duties, he owns publicly traded stock in XYZ Corporation
valued at less than $5,000. During the time the contract is being
performed, however, the value of the employee's stock increases to
$7,500. When the employee knows that the value of his stock exceeds
$5,000, he must disqualify himself from any further participation in
matters affecting XYZ Corporation or seek an individual waiver under
18 U.S.C. 208(b)(1). Alternatively, the employee may divest the
portion of his XYZ stock that exceeds $5,000. This can be
accomplished through a standing order with his broker to sell when
the value of the stock exceeds $5,000.
(b) De minimis exemption for matters of general applicability. An
employee may participate in any particular matter of general
applicability, such as rulemaking, in which the disqualifying financial
interest arises from the ownership by the employee, his spouse or minor
children of securities issued by one or more entities affected by the
matter, if:
(i) The securities are publicly traded, or are municipal
securities, the market value of which does not exceed:
(A) $25,000 in any one such entity; and
(B) $50,000 in all affected entities; or
(ii) The securities are long-term Federal Government securities,
the market value of which does not exceed $50,000.
(2) For purposes of this paragraph (b), the value of securities
owned by the employee, his spouse, and minor children must be
aggregated in applying the exemption.
Example 1: The Bureau of Export Administration at the Department
of Commerce is in the process of formulating a regulation concerning
exportation of portable computers. The regulation will affect all
domestic companies that sell portable computers. An employee of the
Department who is assisting in drafting the regulation owns $17,000
worth of stock in CompAmerica and $20,000 worth of stock in XYZ
Computer Inc. Even though the employee owns $37,000 worth of stock
in companies that will be affected by the regulation, she may
participate in drafting the regulation because the value of the
securities she owns does not exceed $25,000 in any one affected
company and the total value of stock owned in all affected companies
does not exceed $50,000.
Example 2: A health scientist administrator employed in the
Public Health Service at the Department of Health and Human Services
is assigned to serve on a Department-wide task force that will
recommend changes in how Medicare reimbursements will be made to
health care providers. The employee owns $10,000 worth of shares in
a sector mutual fund invested primarily in health-related companies
such as pharmaceuticals, developers of medical instruments and
devices, managed care health organizations, and acute care
hospitals. Because the fund is not a ``diversified mutual fund'' as
defined in Sec. 2640.102(a), the exemption at Sec. 2640.201(a) is
not applicable. However, because the fund is a ``publicly traded
security'' as defined in Sec. 2640.102(p), the exemption for
financial interests arising from ownership of a de minimis amount of
securities at paragraph (b) of this section will permit the employee
to participate on the task force.
(c) Exemption for certain Federal Government securities. An
employee may participate in any particular matter in which the
disqualifying financial interest arises from the ownership of short-
term Federal Government securities or from U.S. Savings bonds.
(d) Exemption for interests of tax-exempt organizations. An
employee may participate in any particular matter in which the
disqualifying financial interest arises from the ownership of publicly
traded or municipal securities, or long-term Federal Government
securities by an organization which is tax-exempt pursuant to 26 U.S.C.
501(c) (3) or (4), and of which the employee is an unpaid officer,
director, or trustee, or an employee, if:
(1) The matter affects only the organization's investments, not the
organization directly;
(2) The employee plays no role in making investment decisions for
the organization, except for participating in the decision to invest in
several different categories of investments such as stocks, bonds, or
mutual funds; and
(3) The organization's only relationship to the issuer, other than
that which arises from routine commercial transactions, is that of
investor.
Example 1: An employee of the Federal Reserve is a director of
the National Association to Save Trees (NAST), an environmental
organization that is tax-exempt under section 501(c)(3) of the
Internal Revenue Code. The employee knows that NAST has an endowment
fund that is partially invested in the publicly traded stock of
Computer Inc. The employee's position at the Federal Reserve
involves the procurement of computer software, including software
marketed by Computer Inc. The employee may participate in the
procurement of software from Computer Inc. provided that he is not
involved in selecting NAST's investments, and that NAST has no
relationship to Computer Inc. other than as
[[Page 66847]]
an investor in the company and routine purchaser of Computer Inc.
software.
(e) Exemption for certain interests of general partners. An
employee may participate in any particular matter in which the
disqualifying financial interest arises from:
(1) The ownership of publicly traded securities, long-term Federal
Government securities, or municipal securities by the employee's
general partner, provided:
(i) Ownership of the securities is not related to the partnership
between the employee and his general partner, and
(ii) The value of the securities does not exceed $200,000; or
(2) Any interest of the employee's general partner if the
employee's relationship to the general partner is as a limited partner
in a partnership that has at least 100 limited partners.
Example 1: An employee of the Department of Transportation is a
general partner in a partnership that owns commercial property. The
employee knows that one of his partners owns stock in an aviation
company valued at $100,000 because the stock has been pledged as
collateral for the purchase of the commercial property by the
partnership. In the absence of an individual waiver under 18 U.S.C.
208(b)(1), the employee may not act in a matter affecting the
aviation company. Because the stock has been pledged as collateral,
ownership of the securities is related to the partnership between
the employee and his general partner.
Example 2: An employee of the Pension Benefit Guaranty
Corporation (PBGC) has a limited partnership interest in Ambank
Partners, a large partnership with more than 500 limited partners.
The partnership assets are invested in the securities of various
financial institutions. Ambank's general partner is Capital
Investment Services, an investment firm whose pension plan for its
own employees is being examined by the PBGC for possible unfunded
liabilities. Even though the employee's general partner (Capital
Investment Services) has a financial interest in PBGC's review of
the pension plan, the employee may participate in the review because
his relationship with his general partner is that of a limited
partner in a partnership that has at least 100 limited partners.
Sec. 2640.203 Miscellaneous exemptions.
(a) Hiring decisions. An employee may participate in a hiring
decision involving an applicant who is currently employed by a
corporation that issues publicly traded securities, if the
disqualifying financial interest arises from:
(1) Ownership of publicly traded securities issued by the
corporation; or
(2) Participation in a vested pension plan sponsored by the
corporation.
(b) Employees on leave from institutions of higher education. An
employee on a leave of absence from an institution of higher education
may participate in any particular matter of general applicability
affecting the financial interests of the institution from which he is
on leave, provided that the matter will not have a special or distinct
effect on that institution other than as part of a class.
Example 1: An employee at the Department of Defense (DOD) is on
a leave of absence from his position as a tenured Professor of
Engineering at the University of California (UC) at Berkeley. While
at DOD, he is assigned to assist in developing a regulation which
will contain new standards for the oversight of grants given by DOD.
Even though the University of California at Berkeley is a DOD
grantee, and will be affected by these new monitoring standards, the
employee may participate in developing the standards because UC
Berkeley will be affected only as part of the class of all DOD
grantees. However, if the new standards would affect the employee's
own financial interest, such as by affecting his tenure or his
salary, the employee could not participate in the matter unless he
first obtains an individual waiver under section 208(b)(1).
Example 2: An employee on leave from a university could not
participate in the development of an agency program of grants
specifically designed to facilitate research in jet propulsion
systems where the employee's university is one of just two or three
universities likely to receive a grant under the new program. Even
though the grant announcement is open to all universities, the
employee's university is among the very few known to have facilities
and equipment adequate to conduct the research. The matter would
have a distinct effect on the institution other than as part of a
class.
(c) Multi-campus institutions of higher education. An employee may
participate in any particular matter affecting one campus of a State
multi-campus institution of higher education, if the employee's
disqualifying financial interest is employment in a position with no
multi-campus responsibilities at a separate campus of the same multi-
campus institution.
Example 1: A special Government employee (SGE) member of an
advisory committee convened by the National Science Foundation is a
full-time professor in the School of Engineering at one campus of a
State university. The SGE may participate in formulating the
committee's recommendation to award a grant to a researcher at
another campus of the same State university system.
Example 2: A member of the Board of Regents at a State
university is asked to serve on an advisory committee established by
the Department of Health and Human Services to consider applications
for grants for human genome research projects. An application from
another university that is part of the same State system will be
reviewed by the committee. Unless he receives an individual waiver
under section 208(b)(1) or (b)(3), the advisory committee member may
not participate in matters affecting the second university that is
part of the State system because as a member of the Board of
Regents, he has duties and responsibilities that affect the entire
State educational system.
(d) Exemptions for financial interests arising from Federal
Government employment or from Social Security or veterans' benefits. An
employee may participate in any particular matter where the
disqualifying financial interest arises from Federal Government or
Federal Reserve Bank salary or benefits, or from Social Security or
veterans' benefits, except an employee may not:
(1) Make determinations that individually or specially affect his
own salary and benefits; or
(2) Make determinations, requests, or recommendations that
individually or specially relate to, or affect, the salary or benefits
of any other person specified in section 208.
Example 1: An employee of the Office of Management and Budget
may vigorously and energetically perform the duties of his position
even though his outstanding performance would result in a
performance bonus or other similar merit award.
Example 2: A policy analyst at the Defense Intelligence Agency
may request promotion to another grade or salary level. However, the
analyst may not recommend or approve the promotion of her general
partner to the next grade.
Example 3: An engineer employed by the National Science
Foundation may request that his agency pay the registration fees and
appropriate travel expenses required for him to attend a conference
sponsored by the Engineering Institute of America. However, the
employee may not approve payment of his own travel expenses and
registration fees unless he has been delegated, in advance,
authority to make such approvals in accordance with agency policy.
Example 4: A GS-14 attorney at the Department of Justice may
review and make comments about the legal sufficiency of a bill to
raise the pay level of all Federal employees paid under the General
Schedule even though her own pay level, and that of her spouse who
works at the Department of Labor, would be raised if the bill were
to become law.
Example 5: An employee of the Department of Veterans Affairs
(VA) may assist in drafting a regulation that will provide expanded
hospital benefits for veterans, even though he himself is a veteran
who would be eligible for treatment in a hospital operated by the
VA.
Example 6: An employee of the Office of Personnel Management may
participate in discussions with various health insurance providers
to formulate the package of benefits that will be available to
Federal employees who participate in the Government's Federal
Employees Health Benefits Program, even though the employee will
obtain health insurance from one of these providers through the
program.
[[Page 66848]]
Example 7: An employee of the Federal Supply Service Division of
the General Services Administration (GSA) may participate in GSA's
evaluation of the feasibility of privatizing the entire Federal
Supply Service, even though the employee's own position would be
eliminated if the Service were privatized.
Example 8: Absent an individual waiver under section 208(b)(1),
the employee in the preceding example could not participate in the
implementation of a GSA plan to create an employee-owned private
corporation which would carry out Federal Supply Service functions
under contract with GSA. Because implementing the plan would result
not only in the elimination of the employee's Federal position, but
also in the creation of a new position in the new corporation to
which the employee would be transferred, the employee would have a
disqualifying financial interest in the matter arising from other
than Federal salary and benefits, or Social Security or veterans
benefits.
Example 9: A career member of the Senior Executive Service (SES)
at the Internal Revenue Service (IRS) may serve on a performance
review board that makes recommendations about the performance awards
that will be awarded to other career SES employees at the IRS. The
amount of the employee's own SES performance award would be affected
by the board's recommendations because all SES awards are derived
from the same limited pool of funds. However, the employee's
activities on the board involve only recommendations, and not
determinations that individually or specially affect his own award.
Additionally, 5 U.S.C. 5384(c)(2) requires that a majority of the
board's members be career SES employees.
Example 10: In carrying out a reorganization of the Office of
General Counsel (OGC) of the Federal Trade Commission, the Deputy
General Counsel is asked to determine which of five Senior Executive
Service (SES) positions in the OGC to abolish. Because her own
position is one of the five SES positions being considered for
elimination, the matter is one that would individually or specially
affect her own salary and benefits and, therefore, the Deputy may
not decide which position should be abolished.
Note to paragraph (d): This exemption does not permit an
employee to take any action in violation of any other statutory or
regulatory requirement, such as the prohibition on the employment of
relatives at 5 U.S.C. 3110.
(e) Commercial discount and incentive programs. An employee may
participate in any particular matter affecting the sponsor of a
discount, incentive, or other similar benefit program if the
disqualifying financial interest arises because of participation in the
program, provided:
(1) The program is open to the general public; and
(2) Participation in the program involves no other financial
interest in the sponsor, such as stockholding.
Example 1: An attorney at the Pension Benefit Guaranty
Corporation who is a member of a frequent flier program sponsored by
Alpha Airlines may assist in an action against Alpha for failing to
make required payments to its employee pension fund, even though the
agency action will cause Alpha to disband its frequent flier
program.
(f) Mutual insurance companies. An employee may participate in any
particular matter affecting a mutual insurance company if the
disqualifying financial interest arises because of an interest as a
policyholder, unless the matter would affect the company's ability to
pay claims required under the terms of the policy or to pay the cash
value of the policy.
Example 1: An administrative law judge at the Department of
Labor receives dividends from a mutual insurance company which he
takes in the form of reduced premiums on his life insurance policy.
The amount of the dividend is based upon the company's overall
profitability. Nevertheless, he may preside in a Department hearing
involving a major corporation insured by the same company even
though the insurance company will have to pay the corporation's
penalties and other costs if the Department prevails in the hearing.
Example 2: An employee of the Department of Justice is assigned
to prosecute a case involving the fraudulent practices of an issuer
of junk bonds. While developing the facts pertinent to the case, the
employee learns that the mutual life insurance company from which he
holds a life insurance policy has invested heavily in these junk
bonds. If the Government succeeds in its case, the bonds will be
worthless and the corresponding decline in the insurance company's
investments will impair the company's ability to pay claims under
the policies it has issued. The employee may not continue assisting
in the prosecution of the case unless he obtains an individual
waiver pursuant to section 208(b)(1).
(g) Exemption for employment interests of special Government
employees serving on advisory committees. A special Government employee
serving on an advisory committee within the meaning of the Federal
Advisory Committee Act (5 U.S.C. app.) may participate in any
particular matter of general applicability where the disqualifying
financial interest arises from his non-Federal employment or non-
Federal prospective employment, provided that the matter will not have
a special or distinct effect on the employee or employer other than as
part of a class. For purposes of this paragraph, ``disqualifying
financial interest'' arising from non-Federal employment does not
include the interests of a special Government employee arising from the
ownership of stock in his employer or prospective employer.
Example 1: A chemist employed by a major pharmaceutical company
has been appointed to serve on an advisory committee established to
develop recommendations for new standards for AIDS vaccine trials
involving human subjects. Even though the chemist's employer is in
the process of developing an experimental AIDS vaccine and therefore
will be affected by the new standards, the chemist may participate
in formulating the advisory committee's recommendations. The
chemist's employer will be affected by the new standards only as
part of the class of all pharmaceutical companies and other research
entities that are attempting to develop an AIDS vaccine.
Example 2: The National Cancer Institute (NCI) has established
an advisory committee to evaluate a university's performance of an
NCI grant to study the efficacy of a newly developed breast cancer
drug. An employee of the university may not participate in the
evaluation of the university's performance because it is not a
matter of general applicability.
Example 3: An engineer whose principal employment is with a
major Department of Defense (DOD) contractor is appointed to serve
on an advisory committee established by DOD to develop concepts for
the next generation of laser-guided missiles. The engineer's
employer, as well as a number of other similar companies, has
developed certain missile components for DOD in the past, and has
the capability to work on aspects of the newer missile designs under
consideration by the committee. The engineer owns $20,000 worth of
stock in his employer. Because the exemption for the employment
interests of special Government employees serving on advisory
committees does not extend to financial interests arising from the
ownership of stock, the engineer may not participate in committee
matters affecting his employer unless he receives an individual
waiver under section 208(b)(1) or (b)(3), or determines whether the
exemption for interests in securities at Sec. 2640.202(b) applies.
(h) Directors of Federal Reserve Banks. A Director of a Federal
Reserve Bank or a branch of a Federal Reserve Bank may participate in
the following matters, even though they may be particular matters in
which he, or any other person specified in section 208(a), has a
disqualifying financial interest:
(1) Establishment of rates to be charged for all advances and
discounts by Federal Reserve Banks;
(2) Consideration of monetary policy matters, regulations, statutes
and proposed or pending legislation, and other matters of broad
applicability intended to have uniform application to banks within the
Reserve Bank district;
(3) Approval or ratification of extensions of credit, advances or
discounts to a depository institution that has not been determined to
be in a
[[Page 66849]]
hazardous financial condition by the President of the Reserve Bank; or
(4) Approval or ratification of extensions of credit, advances or
discounts to a depository institution that has been determined to be in
a hazardous financial condition by the President of the Reserve Bank,
provided that the disqualifying financial interest arises from the
ownership of stock in, or service as an officer, director, trustee,
general partner or employee, of an entity other than the depository
institution, or its parent holding company or subsidiary of such
holding company.
(i) Medical products. A special Government employee serving on an
advisory committee within the meaning of the Federal Advisory Committee
Act (5 U.S.C. app.) may participate in Federal advisory committee
matters concerning medical products if the disqualifying financial
interest arises from:
(1) Employment with a hospital or other similar medical facility
whose only interest in the medical product or device is purchase of it
for use by, or sale to, its patients; or
(2) The use or prescription of medical products for patients.
(j) Nonvoting members of standing technical advisory committees
established by the Food and Drug Administration. A special Government
employee serving as a nonvoting representative member of an advisory
committee established by the Food and Drug Administration pursuant to
the requirements of the Federal Advisory Committee Act (5 U.S.C. app.)
and appointed under a statutory authority requiring the appointment of
representative members, may participate in any particular matter
affecting a disqualifying financial interest in the class which the
employee represents. Nonvoting representative members of Food and Drug
Administration advisory committees are described in 21 CFR 14.80(b)(2),
14.84, 14.86, and 14.95(a).
Example 1: The FDA's Medical Devices Advisory Committee is
established pursuant to 21 U.S.C. 360c(b), which requires that each
panel of the Committee include one nonvoting industry representative
and one nonvoting consumer representative. An industry
representative on the Ophthalmic Devices Panel of this Committee has
been appointed as a special Government employee, in accordance with
the procedures described at 14 CFR 14.84. The special Government
employee may participate in Panel discussions concerning the
premarket approval application for a silicone posterior chamber
intraocular lens manufactured by MedInc, even though she is employed
by, and owns stock in, another company that manufactures a competing
product. However, a consumer representative who serves as a special
Government employee on the same Panel may not participate in Panel
discussions if he owns $30,000 worth of stock in MedInc unless he
first obtains an individual waiver under 18 U.S.C. 208 (b)(1) or
(b)(3).
(k) Employees of the Tennessee Valley Authority. An employee of the
Tennessee Valley Authority (TVA) may participate in developing or
approving rate schedules or similar matters affecting the general cost
of electric power sold by TVA, if the disqualifying financial interest
arises from use of such power by the employee or by any other person
specified in section 208(a).
Sec. 2640.204 Prohibited financial interests.
None of the exemptions set forth in Secs. 2640.201, 2640.202, or
2640.203 apply to any financial interest held or acquired by an
employee, his spouse, or minor child in violation of a statute or
agency supplemental regulation issued in accordance with 5 CFR
2635.105, or that is otherwise prohibited under 5 CFR 2635.403(b).
Example 1: The Office of the Comptroller of the Currency (OCC),
in a regulation that supplements part 2635 of this chapter,
prohibits certain employees from owning stock in commercial banks.
If an OCC employee purchases stock valued at $2,000 in contravention
of the regulation, the exemption at Sec. 2640.202(a) for interests
arising from the ownership of no more than $5,000 worth of publicly
traded stock will not apply to the employee's participation in
matters affecting the bank.
Sec. 2640.205 Employee responsibility.
Prior to taking official action in a matter which an employee knows
would affect his financial interest or the interest of another person
specified in 18 U.S.C. 208(a), an employee must determine whether one
of the exemptions in Secs. 2640.201, 2640.202, or 2640.203 would permit
his action notwithstanding the existence of the disqualifying interest.
An employee who is unsure whether an exemption is applicable in a
particular case, should consult an agency ethics official prior to
taking action in a particular matter.
Sec. 2640.206 Existing agency exemptions.
An employee who, prior to January 17, 1997, acted in an official
capacity in a particular matter in which he had a financial interest,
will be deemed to have acted in accordance with applicable regulations
if he acted in reliance on an exemption issued by his employing
Government agency pursuant to 18 U.S.C. 208(b)(2), as in effect prior
to November 30, 1989.
Subpart C--Individual Waivers
Sec. 2640.301 Waivers issued pursuant to 18 U.S.C. 208(b)(1).
(a) Requirements for issuing an individual waiver under 18 U.S.C.
208(b)(1). Pursuant to 18 U.S.C. 208(b)(1), an agency may determine in
an individual case that a disqualifying financial interest in a
particular matter or matters is not so substantial as to be deemed
likely to affect the integrity of the employee's services to the
Government. Upon making that determination, the agency may then waive
the employee's disqualification notwithstanding the financial interest,
and permit the employee to participate in the particular matter.
Waivers issued pursuant to section 208(b)(1) should comply with the
following requirements:
(1) The disqualifying financial interest, and the nature and
circumstances of the particular matter or matters, must be fully
disclosed to the Government official responsible for appointing the
employee to his position (or other Government official to whom
authority to issue such a waiver for the employee has been delegated);
(2) The waiver must be issued in writing by the Government official
responsible for appointing the employee to his position (or other
Government official to whom the authority to issue such a waiver for
the employee has been delegated);
(3) The waiver should describe the disqualifying financial
interest, the particular matter or matters to which it applies, the
employee's role in the matter or matters, and any limitations on the
employee's ability to act in such matters;
(4) The waiver shall be based on a determination that the
disqualifying financial interest is not so substantial as to be deemed
likely to affect the integrity of the employee's services to the
Government. Statements concerning the employee's good character are not
material to, nor a basis for making, such a decision;
(5) The waiver must be issued prior to the employee taking any
action in the matter or matters; and
(6) The waiver may apply to both present and future financial
interests, provided the interests are described with sufficient
specificity.
Note to paragraph (a): The disqualifying financial interest, the
particular matter or matters to which the waiver applies, and the
employee's role in such matters do not need to be described with any
particular degree of specificity. For example, if a waiver were to
apply to all matters which an employee would undertake as part of
his official duties,
[[Page 66850]]
the waiver document would not have to enumerate those duties. The
information contained in the waiver, however, should provide a clear
understanding of the nature and identity of the disqualifying
financial interest, the matters to which the waiver will apply, and
the employee's role in such matters.
(b) Agency determination concerning substantiality of the
disqualifying financial interest. In determining whether a
disqualifying financial interest is sufficiently substantial to be
deemed likely to affect the integrity of the employee's services to the
Government, the responsible official may consider the following
factors:
(1) The type of interest that is creating the disqualification
(e.g. stock, bonds, real estate, other securities, cash payment, job
offer, or enhancement of a spouse's employment);
(2) The identity of the person whose financial interest is
involved, and if the interest is not the employee's, the relationship
of that person to the employee;
(3) The dollar value of the disqualifying financial interest, if it
is known or can be estimated (e.g. the amount of cash payment which may
be gained or lost, the salary of the job which will be gained or lost,
the predictable change in either the market value of the stock or the
actual or potential profit or loss or cost of the matter to the company
issuing the stock, the change in the value of real estate or other
securities);
(4) The value of the financial instrument or holding from which the
disqualifying financial interest arises (e.g. the face value of the
stock, bond, other security or real estate) and its value in
relationship to the individual's assets. If the disqualifying financial
interest is that of a general partner or organization specified in
section 208, this information must be provided only to the extent that
it is known by the employee; and
(5) The nature and importance of the employee's role in the matter,
including the extent to which the employee is called upon to exercise
discretion in the matter.
(6) Other factors which may be taken into consideration include:
(i) The sensitivity of the matter;
(ii) The need for the employee's services in the particular matter;
and
(iii) Adjustments that may be made in the employee's duties that
would reduce or eliminate the likelihood that the integrity of the
employee's services would be questioned by a reasonable person.
Sec. 2640.302 Waivers issued pursuant to 18 U.S.C. 208(b)(3).
(a) Requirements for issuing an individual waiver under 18 U.S.C.
208(b)(3). Pursuant to 18 U.S.C. 208(b)(3), an agency may determine in
an individual case that the prohibition of 18 U.S.C. 208(a) should not
apply to a special Government employee serving on, or an individual
being considered for, appointment to an advisory committee established
under the Federal Advisory Committee Act, notwithstanding the fact that
the individual has one or more financial interests that would be
affected by the activities of the advisory committee. The agency's
determination must be based on a certification that the need for the
employee's services outweighs the potential for a conflict of interest
created by the financial interest involved. Waivers issued pursuant to
18 U.S.C. 208(b)(3) should comply with the following requirements:
(1) The advisory committee upon which the individual is serving, or
will serve, is an advisory committee within the meaning of the Federal
Advisory Committee Act, 5 U.S.C. app.;
(2) The waiver must be issued in writing by the Government official
responsible for the individual's appointment (or other Government
official to which authority to issue such waivers has been delegated)
after the official reviews the financial disclosure report filed by the
individual pursuant to the Ethics in Government Act of 1978;
(3) The waiver must include a certification that the need for the
individual's services on the advisory committee outweighs the potential
for a conflict of interest;
(4) The facts upon which the certification is based should be fully
described in the waiver, including the nature of the financial
interest, and the particular matter or matters to which the waiver
applies;
(5) The waiver should describe any limitations on the individual's
ability to act in the matter or matters;
(6) The waiver must be issued prior to the individual taking any
action in the matter or matters; and
(7) The waiver may apply to both present and future financial
interests of the individual, provided the interests are described with
sufficient specificity.
(b) Agency certification concerning need for individual's services.
In determining whether the need for an individual's services on an
advisory committee outweighs the potential for a conflict of interest
created by the disqualifying financial interest, the responsible
official may consider the following factors:
(1) The type of interest that is creating the disqualification
(e.g. stock, bonds, real estate, other securities, cash payment, job
offer, or enhancement of a spouse's employment);
(2) The identity of the person whose financial interest is
involved, and if the interest is not the individual's, the relationship
of that person to the individual;
(3) The uniqueness of the individual's qualifications;
(4) The difficulty of locating a similarly qualified individual
without a disqualifying financial interest to serve on the committee;
(5) The dollar value of the disqualifying financial interest, if it
is known or can be estimated (e.g. the amount of cash payment which may
be gained or lost, the salary of the job which will be gained or lost,
the predictable change in either the market value of the stock or the
actual or potential profit or loss or cost of the matter to the company
issuing the stock, the change in the value of real estate or other
securities);
(6) The value of the financial instrument or holding from which the
disqualifying financial interest arises (e.g. the face value of the
stock, bond, other security or real estate) and its value in
relationship to the individual's assets. If the disqualifying financial
interest is that of a general partner or organization specified in
section 208, this information must be provided only to the extent that
it is known by the employee; and
(7) The extent to which the disqualifying financial interest will
be affected individually or particularly by the actions of the advisory
committee.
Sec. 2640.303 Consultation and notification regarding waivers.
When practicable, an official is required to consult formally or
informally with the Office of Government Ethics prior to granting a
waiver referred to in Secs. 2640.301 and 2640.302. A copy of each such
waiver is to be forwarded to the Director of the Office of Government
Ethics.
Sec. 2640.304 Public availability of agency waivers.
(a) Availability. A copy of an agency waiver issued pursuant to 18
U.S.C. 208 (b)(1) or (b)(3) shall be made available upon request to the
public by the issuing agency. Public release of waivers shall be in
accordance with the procedures set forth in section 105 of the Ethics
in Government Act of 1978, as amended. Those procedures are described
in 5 CFR 2634.603.
[[Page 66851]]
(b) Limitations on availability. In making a waiver issued pursuant
to 18 U.S.C. 208 (b)(1) or (b)(3) publicly available, an agency:
(1) May withhold from public disclosure any information contained
in the waiver that would be exempt from disclosure pursuant to 5 U.S.C.
552; and
(2) Shall withhold from public disclosure information in a waiver
issued pursuant to 18 U.S.C. 208(b)(3) concerning an individual's
financial interest which is more extensive than that required to be
disclosed by the individual in his financial disclosure report under
the Ethics in Government Act of 1978, as amended, or which is otherwise
subject to a prohibition on public disclosure under law.
[FR Doc. 96-31837 Filed 12-17-96; 8:45 am]
BILLING CODE 6345-01-P
