96-17450. Supplemental Standards of Ethical Conduct for Employees of the Department of Housing and Urban Development  

  • [Federal Register Volume 61, Number 132 (Tuesday, July 9, 1996)]
    [Rules and Regulations]
    [Pages 36246-36251]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 96-17450]
    
    
    
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    _______________________________________________________________________
    
    Part V
    
    
    
    
    
    Department of Housing and Urban Development
    
    
    
    
    
    _______________________________________________________________________
    
    
    
    5 CFR Chapter LXV
    
    
    
    24 CFR Part 0
    
    
    
    Supplemental Standards of Ethical Conduct for Employees of the 
    Department of Housing and Urban Development; Final Rule
    
    Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules 
    and Regulations
    
    [[Page 36246]]
    
    
    
    DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
    
    5 CFR Chapter LXV
    
    24 CFR Part 0
    
    [Docket No. FR-3331-F-01]
    RIN 2501-AB55, 3209-AA15
    
    
    Supplemental Standards of Ethical Conduct for Employees of the 
    Department of Housing and Urban Development
    
    AGENCY: Office of the Secretary, Department of Housing and Urban 
    Development (HUD or Department).
    
    ACTION: Final rule.
    
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    SUMMARY: The Department of Housing and Urban Development, with the 
    concurrence of the Office of Government Ethics (OGE), is issuing a 
    final rule establishing uniform standards of ethical conduct for 
    employees of the Department to supplement the Standards of Ethical 
    Conduct for Employees of the Executive Branch issued by OGE. The final 
    rule is a necessary supplement to the executive branch-wide Standards 
    because it addresses ethical issues unique to the Department. The final 
    rule will become effective 30 days after the date of publication, and 
    will establish regulations prohibiting certain financial interests and 
    restricting certain outside employment.
    
    EFFECTIVE DATE: This rule is effective on August 8, 1996.
    
    FOR FURTHER INFORMATION CONTACT: Aaron Santa Anna, Assistant General 
    Counsel, Ethics Law Division, 202-708-3815; or Sam E. Hutchinson, 
    Associate General Counsel, Office of Human Resources Law, 202-708-0888. 
    Hearing or speech-impaired individuals may call HUD's TDD number 202-
    708-3259. (Telephone numbers are not toll-free.)
    
    SUPPLEMENTARY INFORMATION:
    
    I. Background
    
        On June 30, 1995, the Department, with OGE's concurrence, published 
    for comment a proposed rule to establish supplemental standards of 
    ethical conduct for HUD employees (60 FR 34420-34426). The proposed 
    rule was intended to supplement the Standards of Ethical Conduct for 
    Employees of the Executive Branch (Standards) published by OGE on 
    August 7, 1992, and effective February 3, 1993 (57 FR 35006-35067, as 
    corrected at 57 FR 48557, 57 FR 52583, and 60 FR 51667, with additional 
    grace period extensions for certain exisiting agency standards of 
    conduct at 59 FR 4779-4780, 60 FR 6390-6391, and 60 FR 66857-66858). 
    The executive branch-wide Standards, codified at 5 CFR part 2635, 
    establish uniform standards of ethical conduct for executive branch 
    employees. The proposed rule was issued pursuant to 5 CFR 2635.105, 
    which authorizes executive branch agencies to publish agency-specific 
    supplemental regulations necessary to implement their respective ethics 
    programs. The Department, with OGE's concurrence, determined that the 
    supplemental regulations contained in the proposed rule were necessary 
    to implement the Department's ethics program successfully, in light of 
    the Department's unique programs and operations.
        The proposed rule prescribed a 60-day comment period and invited 
    comments from all interested parties. The Department received one 
    public comment, and after careful consideration of it, has made 
    appropriate modifications to the rule. In addition, the Department has 
    made appropriate modifications to the rule based on various intra-
    departmental comments. The Department, with OGE's concurrence, is now 
    publishing as a final rule the Supplemental Standards of Ethical 
    Conduct for Employees of the Department of Housing and Urban 
    Development, to be codified in a new chapter LXV of 5 CFR, consisting 
    of part 7501.
    
    II. Summary of the Comments
    
        The Department received one public comment; it was from the Federal 
    Home Loan Mortgage Corporation (``Freddie Mac''). The Department also 
    received six intra-departmental comments. Freddie Mac's comments 
    focused primarily on three distinct areas under the proposed rule: 
    scope of coverage, ownership interests, and outside employment. The 
    intra-departmental comments contained both requests for substantive 
    changes and for additional clarification regarding the application of 
    the rule in general or specific sections.
    
    III. Analysis of the Comments
    
    Section 7501.102  Definitions
    
        One commenter within the Department recommended that one portion of 
    the definition of ``security'' be modified to read that the term 
    ``includes'' any right to acquire or dispose of any long or short term 
    position in securites. The Department agrees that the suggested 
    language is more reflective of the Department's intent than the 
    originally proposed language and has, therefore, implemented this 
    revision to the definition of ``security'' in Sec. 7501.102 of the 
    final rule.
        Freddie Mac suggested that the Department include definitions for 
    ``employee'' and ``special Government employee.'' The Department has 
    not adopted this recommendation because the definitions of those terms 
    in the executive branch-wide Standards, at 5 CFR 2635.102 (h) and (l), 
    apply to supplemental regulations unless otherwise specified.
    
    Section 7501.104  Prohibited Financial Interests
    
        One commenter within the Department recommended that special 
    Government employees assigned to work in one of the program offices 
    listed in Sec. 7501.106(b)(1) not be excluded from the coverage of the 
    financial interest prohibitions in Sec. 7501.104 of the rule, since 
    such employees would have access to the same types of confidential 
    information as would other employees in those officies. The Department 
    has adopted this recommendation to protect against the appearance that 
    any HUD employee is using confidential information for private gain. 
    The proposed exclusion of special Government employees from the 
    coverage of this section has been eliminated.
        Another commenter within the Department recommended that the first 
    sentence of the description of prohibited financial interests in real 
    estate, at Sec. 7501.104(a)(4), be amended to read: ``Stock or another 
    financial interest in a multifamily project or single family dwelling, 
    cooperative unit or condominium unit, which is owned or subsidized by 
    the Department, or which is subject to a note and mortgage or other 
    security instrument insured by the Secretary, except to the extent that 
    the stock or other interest represents the employee's principal 
    residence.'' The Department has decided to adopt this language as a 
    better characterization of the Department's interest in various real 
    estate interests covered by the final rule.
    
    Section 7501.105  Outside Employment
    
        One commenter within the Department recommended that the Department 
    include a provision regarding an employee's service on the board of a 
    non-Federal organization in an official capacity, similar to prior 24 
    CFR 0.735-210 of HUD's old departmental standards of conduct. In 
    response, a Note has been added to this section to clarify that while 
    service in an official capacity on the Board of a non-Federal 
    organization is not outside employment or other activity subject to
    
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    this section, employees need to be aware that such service is subject 
    to other applicable laws.
        While generally supportive of the outside employment provisions in 
    this section, Freddie Mac wanted the requirements in the section to 
    extend to any type of writing by employees. The Department has included 
    within the coverage of this section those types of outside employment 
    which the Department believes pose the greatest potential for employees 
    to engage in conduct which might violate applicable laws or 
    regulations, and is not convinced that the suggested extension of 
    coverage is warranted.
        In addition, Freddie Mac suggested that the public impact of an 
    outside activity in relation to the employee's official position be 
    taken into consideration when deciding whether to grant a waiver, under 
    Sec. 7501.103 of the rule, from the prohibitions in this section. The 
    specific inclusion of the suggested factors in the final rule is 
    uncalled for, because the factors are largely covered by the terms of 
    the waiver standard at Sec. 7501.103, i.e., that application of the 
    prohibition is not necessary to ensure public confidence in the 
    impartiality and objectivity with which the Department's programs are 
    administered.
    
    Section 7501.106  Additional Rules for Certain Department Employees 
    Involved in the Regulation or Oversight of Government Sponsored 
    Enterprises
    
        Freddie Mac noted that the supplemental regulation is not 
    specifically applicable to individuals who serve pursuant to a 
    consulting agreement with the Department. The Department has decided 
    not to make the regulation specifically applicable to consultants, 
    since the generic term ``consultants'' may include individuals who are 
    independent contractors as well as those who are deemed employees of 
    the Department. Whether a consultant will be deemed an employee of the 
    Department for these purposes depends on various factors, including the 
    type of functions or activities being performed by the consultant for 
    the Department, and the extent of the consultant's supervision by an 
    officer or employee of the Department. A consultant deemed an employee 
    of the Department would be subject to the executive branch-wide 
    Standards and these rules.
        Freddie Mac also recommended that the description of prohibited 
    financial interests in Sec. 7501.106(c)(ii) be amended to parallel the 
    description of prohibited financial interests in Sec. 7501.104(a), by 
    adding the terms ``issued'' and ``collateralized'' in the description 
    of prohibited securities in a mortgage institution, a certain 
    percentage of whose originated mortgages involve the Federal National 
    Mortgage Association or Freddie Mac in various specified capacities. 
    This recommendation was adopted to attain uniformity.
        A commenter within the Department suggested that employees of the 
    Office of Inspector General and all employees of the Office of Federal 
    Housing Enterprise Oversight be included in the list at 
    Sec. 7501.106(b)(1) of employees covered by the prohibition in this 
    section. The Department has adopted this recommendation to make the 
    prohibitions contained in Sec. 7501.106 uniformly applicable to all 
    employees whose official duties require that they have access to 
    information regarding a Government sponsored enterprise (GSE). 
    Similarly, another commenter within the Department recommended that the 
    Department's Office of Lead-Based Paint and Poisoning Prevention be 
    excluded from coverage under Sec. 7501.106(b)(1), since it is not 
    involved in the regulation or oversight of GSEs. This recommendation 
    was adopted for the reason asserted by the commenter.
        This same commenter also recommended that the definition of 
    mortgage institution be amended to include entities that insure 
    mortgages. The Department has adopted this recommendation as a more 
    specific reflection of its intent. In addition, the Department has 
    adopted this commenter's recommendation that an institution's most 
    recent annual financial statement be used to determine whether it 
    exceeds the thresholds contained in Sec. 7501.106(c)(1).
        This same commenter also expressed concern that the definition of 
    covered employee in Sec. 7501.106(b)(1), which encompasses only 
    employees who are required to file financial disclosure reports, 
    excludes many employees whose primary job responsibilities 
    significantly include the regulation or oversight of GSEs. To address 
    this concern, the Department has modified proposed 
    Sec. 7501.106(b)(1)(viii) to include the DAEO in the list of those 
    individuals who may designate an employee as a ``covered employee'' to 
    ensure compliance with the principles set forth in 5 CFR 2635.403. To 
    ensure that the prohibition in this section is not unnecessarily 
    burdensome, the Department has also added a new Sec. 7501.106(b)(2) 
    (the prior proposed paragraph (b)(2) has been redesignated paragraph 
    (b)(3)), which permits the DAEO, upon recommendation of the appropriate 
    individual of Assistant Secretary rank, to exclude in writing an 
    employee otherwise designated as a ``covered employee'' if the 
    employee's official duties do not substantially involve the regulation 
    or oversight of GSEs and ownership of the interests prohibited by 
    Sec. 7501.106(c) would not cause a reasonable person to question the 
    impartiality and objectivity with which the Department's programs are 
    administered.
        In response to another comment from within the Department, the 
    Department has specifically included the Federal National Mortgage 
    Association and the Federal Home Loan Mortgage Corporation under 
    Sec. 7501.106(e) to make clear that special Government employees who 
    are covered employees under Sec. 7501.106(b)(1) cannot be employed by 
    any of these organizations or their affiliates. This modification is 
    required to ensure compliance with 5 CFR 2635.403 and because special 
    Government employees are not otherwise subject to the outside 
    employment and other activities provisions of Sec. 7501.105.
    
    IV. Other Changes
    
        An exception is being added to the prohibition in 
    Sec. 7501.104(a)(5) against an employee receiving any Department 
    subsidy provided pursuant to Section 8 of the United States Housing Act 
    of 1937, as amended (42 U.S.C. 1437f). Under new 
    Sec. 7501.104(a)(5)(iii), an employee may receive such a subsidy if the 
    tenant of the subsidized unit is the parent, child, grandchild, or 
    sibling of the employee, but only if there is no increase in that 
    tenant's rent upon the commencement of subsidy payments other than 
    normal annual adjustments. This change from the proposed rule reflects 
    current Departmental practice.
        In addition, the Department has decided to exclude special 
    Government employees (SGEs) from the prior approval requirement at 
    Sec. 7501.105(c) of the final rule. Proposed Sec. 7501.105(c)(1) would 
    have required all employees of the Department to obtain approval before 
    engaging in certain types of outside employment or activities. Special 
    Government Employees have been subject to this requirement because they 
    are included within the meaning of ``employee,'' as used in the 
    supplemental regulation. However, SGEs were not required to obtain 
    prior approval for outside employment under the Department's old 
    Standards of Conduct. Moreover, SGEs are excluded from the outside 
    employment prohibitions at Sec. 7501.105(a) of the final rule. 
    Accordingly, the Department has concluded that it would be unreasonable 
    to apply the prior approval requirement to SGEs, and is providing in 
    Sec. 7501.103(c)(1) of the final
    
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    rule that the prior approval requirement therein applies to employees 
    of the Department, ``except special Government employees.''
        Finally, the Department has decided not to exclude employees who 
    file public or confidential financial disclosure reports in the Office 
    of Housing's Office of Deputy Assistant Secretary for Operations from 
    the list of ``covered employees'' in Sec. 7501.106(b)(1). Section 
    7501.106 sets forth additional rules for certain employees involved in 
    the regulation or oversight of the Government sponsored enterprises. 
    The reason for this change is that the Office of Housing has been 
    reorganized since the publication of the proposed rule to give the 
    Deputy Assistant Secretary for Operations programmatic responsibility 
    over matters that affect the Government sponsored enterprises. 
    Accordingly, the exclusionary clause ``with the exception of the Office 
    of Deputy Assistant Secretary for Operations'' has been deleted from 
    paragraph (b)(1)(ii) containing the definition of ``covered employee'' 
    for purposes of Sec. 7501.106.
    
    V. Removal of Old Department Standards of Conduct Regulations and 
    Revision of the Residual Cross-Reference Provision
    
        On April 5, 1996, the Department published a final rule that 
    provided for removal of all of the then existing provisions in the 
    Department's old Standards of Conduct regulation at 24 CFR part 0, and 
    their replacement with a single section that provides a cross-reference 
    to 5 CFR parts 2634 and 2635, effective May 6, 1996 (61 FR 15350). To 
    prevent an untimely lapse in enforcement authority for the two sections 
    of 24 CFR part 0 that had temporarily remained in effect pursuant to 
    the extended grace periods in the Standards--Sec. 0.735-203 regarding 
    outside employment and other activities, and Sec. 0.735-204 regarding 
    financial interests--the Department published a correction to the final 
    rule on May 1, 1996, effective May 6, 1996, preserving those two 
    sections at 24 CFR 0.2 and 0.3. (61 FR 19187-19188). Upon the effective 
    date of the Department's supplemental standards of ethical conduct as a 
    final rule, the Department is amending 24 CFR part 0 to remove the 
    temporarily preserved sections regarding outside employment and 
    financial interests, and to include in the residual cross-reference 
    provision a notation of the Department's newly issued supplemental 
    standards of ethical conduct at 5 CFR part 7501.
    
    VI. Matters of Regulatory Procedure
    
    Regulatory Flexibility Act
    
        It is hereby certified that this rule will not have significant 
    economic impact on a substantial number of small entities. This rule 
    affects only Federal employees and their immediate families.
    
    Environmental Impact
    
        In accordance with 40 CFR 1508.4 of the regulations of the Council 
    on Environmental Quality and 24 CFR 50.20(k) of the HUD regulations, 
    the policies and procedures contained in this rule relate only to 
    internal administrative procedures whose content does not constitute a 
    development decision nor affect the physical condition of project areas 
    or building sites, and therefore, are categorically excluded from the 
    requirements of the National Environmental Policy Act.
    
    Executive Order 12612, Federalism
    
        The General Counsel, as the Designated Official under section 6(a) 
    of Executive Order 12612, Federalism, has determined that the policies 
    contained in this rule will not have substantial direct effects on 
    States or their political subdivisions, or the relationship between the 
    Federal Government and the States, or on the distribution of power and 
    responsibilities among the various levels of government. Specifically, 
    this rule is only directed toward Federal employees and would not alter 
    the established roles of HUD and the States and local governments. As a 
    result, the rule is not subject to review under the order.
    
    Executive Order 12606, The Family
    
        The General Counsel, as the Designated Official under Executive 
    Order 12606, The Family, has determined that this rule does not have 
    potential for significant impact on family formation, maintenance, and 
    general well-being, and, thus, is not subject to review under the 
    order. No significant change in existing HUD policies or programs would 
    result from promulgation of this rule, as those policies and programs 
    relate to family concerns.
    
    List of Subjects
    
    5 CFR Part 7501
    
        Conflict of interests, Government employees.
    
    24 CFR Part 0
    
        Administrative practice and procedure, Conflict of interests.
    
        Dated: July 2, 1996.
    Henry G. Cisneros,
    Secretary of the Department of Housing and Urban Development.
        Approved: July 2, 1996.
    Stephen D. Potts,
    Director, Office of Government Ethics.
    
        For the reasons set forth in the preamble, the Department of 
    Housing and Urban Development, with the concurrence of the Office of 
    Government Ethics, is amending title 5 and title 24, subtitle A, of the 
    Code of Federal Regulations as follows:
    
    TITLE 5--[AMENDED]
    
        1. A new chapter LXV, consisting of part 7501, is added to 5 CFR to 
    read as follows:
    
    CHAPTER LXV--DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
    
    PART 7501--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES 
    OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
    
    Sec.
    7501.101  Purpose.
    7501.102  Definitions.
    7501.103  Waivers.
    7501.104  Prohibited financial interests.
    7501.105  Outside employment.
    7501.106  Additional rules for certain Department employees involved 
    in the regulation or oversight of Government sponsored enterprises.
    
        Authority: 5 U.S.C. 301, 7301, 7351, 7353; 5 U.S.C. App. (Ethics 
    in Government Act of 1978); E.O. 12674, 54 FR 15159, 3 CFR, 1989 
    Comp., p. 215, as modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 
    Comp., p. 306; 5 CFR 2635.105, 2635.203(a), 2635.403(a), 2635.803, 
    2635.807.
    
    
    Sec. 7501.101  Purpose.
    
        In accordance with 5 CFR 2635.105, the regulations in this part 
    apply to employees of the Department of Housing and Urban Development 
    (HUD or Department) and supplement the Standards of Ethical Conduct for 
    Employees of the Executive Branch contained in 5 CFR part 2635. 
    Employees are required to comply with 5 CFR part 2635, this part, and 
    any additional rules of conduct that the Department is authorized to 
    issue.
    
    
    Sec. 7501.102  Definitions.
    
        For purposes of this part, and otherwise as indicated, the 
    following definitions shall apply:
        Affiliate means any entity that controls, is controlled by, or is 
    under common control with another entity.
        Agency designee, as used also in 5 CFR part 2635, means the 
    Associate General Counsel for Human Resources Law, the Assistant 
    General Counsel,
    
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    Ethics Law Division, and the HUD Field Office Assistant General 
    Counsels; the Inspector General, for employees assigned to the Office 
    of the Inspector General; and the General Counsel, Office of Federal 
    Housing Enterprise Oversight, for employees assigned to the Office of 
    Federal Housing Enterprise Oversight.
        Agency ethics official, as used also in 5 CFR part 2635, means the 
    agency designees as specified above.
        Assistance means any contract, grant, loan, subsidy, guarantee, 
    cooperative agreement or other financial assistance under a program 
    administered by the HUD Secretary, and includes ``assistance'' awarded 
    by the Department that is competitively redistributed to a second tier 
    of applicants or awardees. The term does not include single family 
    mortgage insurance provided under a program administered by the 
    Secretary.
        Designated Agency Ethics Official (DAEO) means the General Counsel 
    of HUD or the Deputy General Counsel (Operations) in the absence of the 
    General Counsel.
        Employment means any compensated or uncompensated form of non-
    Federal employment or business relationship, including self employment, 
    involving the provision of personal services by the employee. It 
    includes, but is not limited to, personal services as an officer, 
    director, employee, agent, attorney, consultant, contractor, general 
    partner, trustee, teacher or speaker. It includes writing when done 
    under an arrangement with another person for production or publication 
    of the written product.
        Security means all interests in debt or equity instruments. The 
    term includes, without limitation, secured and unsecured bonds, 
    debentures, notes, securitized assets and commercial paper including 
    loans securitized by mortgages or deeds of trust and securities backed 
    by such instruments, as well as all types of preferred and common 
    stock. The term encompasses current and contingent ownership interests 
    including any beneficial or legal interest derived from a trust. Such 
    interest includes any right to acquire or dispose of any long or short 
    position in such securities and also includes, without limit, interests 
    convertible into such securities, as well as options, rights, warrants, 
    puts, calls and straddles with respect thereto. The term shall not, 
    however, be construed to include deposit accounts.
    
    
    Sec. 7501.103  Waivers.
    
        The Designated Agency Ethics Official may waive any provision of 
    this part upon finding that the waiver will not result in conduct 
    inconsistent with 5 CFR part 2635 or otherwise prohibited by law and 
    that application of the provision is not necessary to ensure public 
    confidence in the impartiality and objectivity with which the 
    Department's programs are administered. Each waiver shall be in writing 
    and supported by a statement of the facts and findings upon which it is 
    based and may impose appropriate conditions, such as requiring the 
    employee's execution of a written disqualification statement.
    
    
    Sec. 7501.104  Prohibited financial interests.
    
        (a) General requirement. This section applies to all HUD employees 
    except special Government employees who are not ``covered employees'' 
    as defined in Sec. 7501.106(b)(1) of this part. Except as provided in 
    paragraph (b) of this section, an employee, or an employee's spouse or 
    minor child, shall not directly or indirectly receive, acquire or own:
        (1) Securities issued by the Federal National Mortgage Association 
    (FNMA) or securities collateralized by FNMA securities;
        (2) Securities issued by the Federal Home Loan Mortgage Corporation 
    (FHLMC) or securities collateralized by FHLMC securities;
        (3) Federal Housing Administration debentures or certificates of 
    claim;
        (4) Stock or another financial interest in a multifamily project or 
    single family dwelling, cooperative unit, or condominium unit, which is 
    owned or subsidized by the Department, or which is subject to a note or 
    mortgage or other security interest insured by the Department, except 
    to the extent that the stock or other interest represents the 
    employee's principal residence. Employees who wish to purchase a 
    Department-held property as a principal residence must adhere to the 
    procedures established by the Assistant Secretary for Housing for the 
    administration of the property disposition program set forth in HUD 
    Handbook 4310.5;
        (5) Any Department subsidy provided pursuant to Section 8 of the 
    United States Housing Act of 1937, as amended, (42 U.S.C. 1437f) to or 
    on behalf of a tenant of property owned by the employee. However, an 
    employee may receive such a subsidy when:
        (i) The employee acquires without specific intent, as through gift 
    or inheritance, a property which at the time of acquisition has a 
    tenant receiving such a subsidy, but only as long as that tenant 
    continues to reside in the property;
        (ii) An incumbent tenant who has not previously received such a 
    subsidy becomes the beneficiary thereof, but only if there is no 
    increase in that tenant's rent upon the commencement of subsidy 
    payments other than normal annual adjustments; or
        (iii) The tenant is the parent, child, grandchild, or sibling of 
    the employee, but only if there is no increase in that tenant's rent 
    upon the commencement of subsidy payments other than normal annual 
    adjustments; or
        (6) Any direct creditor interest in a mortgage insured by the 
    Department.
        (b) Exception to prohibition for certain interests. Nothing in this 
    section prohibits an employee, or the spouse or minor child of an 
    employee, from acquiring, owning, or controlling:
        (1) An interest in a publicly traded or publicly available 
    investment fund which, in its prospectus, does not indicate the 
    objective or practice of concentrating its investments in resi dential 
    mortgages or securities backed by residential mortgages, except those 
    of the Government National Mortgage Association (GNMA), and the 
    employee neither exercises control nor has the ability to exercise 
    control over the financial interests held in the fund;
        (2) A limited partnership interest in a partnership which has at 
    least 5,000 partnership interests, and no more than 25% of the gross 
    value of the partnership interest constitutes projects subject to HUD 
    held or insured mortgages or projects currently receiving the benefit 
    of HUD subsidies; or
        (3) Mortgage insurance provided pursuant to section 203 of the 
    National Housing Act (12 U.S.C. 1709) on the employee's principal 
    residence and any one other single family residence.
        (c) Reporting and divestiture. An employee must report, in writing, 
    to the appropriate agency ethics official, any interest prohibited 
    under paragraph (a) of this section acquired prior to the commencement 
    of employment with the Department or without specific intent, as 
    through gift, inheritance, or marriage, within 30 days from the start 
    of employment or acquisition of such interest. Such interest must be 
    divested within 90 days from the date reported unless waived by the 
    Designated Agency Ethics Official in accordance with Sec. 7501.103.
    
    
    Sec. 7501.105  Outside employment.
    
        (a) Prohibited outside employment. Subject to the exceptions set 
    forth in paragraph (b) of this section, HUD employees, except special 
    Government employees, shall not engage in:
        (1) Employment involving active participation in a business dealing 
    with or related to real estate or manufactured
    
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    housing including but not limited to real estate brokerage, management 
    and sales, architecture, engineering, mortgage lending, property 
    insurance, appraisal services, construction, construction financing, 
    land planning, or real estate development;
        (2) Employment with a person, other than a State or local 
    government, who engages in lobbying activities concerning Department 
    programs or who is required to report expenditures for lobbying 
    activities or register as a lobbyist under 42 U.S.C. 3537b or similar 
    statutes which require the registration of persons who attempt to 
    influence the decisions of officers or employees of the Department;
        (3) Employment as an officer or director of a person who is a 
    Department-approved mortgagee, a lending institution or an organization 
    which services securities for the Department; or
        (4) Employment with the Federal National Mortgage Association, the 
    Federal Home Loan Mortgage Corporation, the Federal Home Loan Bank 
    System or any affiliate thereof.
        (b) Exceptions to employment prohibitions. The prohibitions set 
    forth in paragraph (a) of this section do not apply to serving as an 
    officer or a member of the Board of Directors of:
        (1) A Federal Credit Union;
        (2) A cooperative or condominium association for a housing project 
    which is not subject to regulation by the Department or, if so 
    regulated, in which the employee personally resides; or
        (3) An entity designated in writing by the Designated Agency Ethics 
    Official.
        (c) Prior approval requirement. (1) Employees, except special 
    Government employees, shall obtain the prior written approval of an 
    Agency Ethics Official before accepting compensated or uncompensated 
    employment:
        (i) As an officer, director, trustee, or general partner of, or in 
    any other position of authority with, either a for-profit or non profit 
    organization which directly or indirectly receives assistance from the 
    Department.
        (ii) With a State or local government; or
        (iii) In the same professional field as that of the employee's 
    official position.
        (2) Approval shall be granted unless the conduct is inconsisent 
    with 5 CFR part 2635 or this part.
        (d) Voluntary services. Subject to the restrictions and 
    requirements contained in the conflict of interest laws, 5 CFR part 
    2635, and this part, employees are encouraged to volunteer their 
    personal time to nonprofit organizations.
    
        Note to Sec. 75.105: An employee assigned to serve in an 
    official capacity as the Department's liaison representative to an 
    outside organization is not engaged in an outside activity to which 
    this section applies. Notwithstanding, an employee may be assigned 
    to serve as the Department's liaison representative only as 
    authorized by law, and as approved by the Department under 
    applicable procedures.
    
    
    Sec. 7501.106  Additional rules for certain Department employees 
    involved in the regulation or oversight of Government sponsored 
    enterprises.
    
        (a) The following rules apply to certain Department employees whose 
    duties involve the regulation or oversight of Government Sponsored 
    Enterprises, specifically the Federal National Mortgage Association 
    (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). This 
    section is in addition to Secs. 7501.101 to 7501.105.
        (b) Definitions. For purposes of this section, the following 
    definitions are applicable:
        (1) Except as provided in paragraph (b)(2) of this section, 
    ``covered employee'' means all employees in the Office of Federal 
    Housing Enterprise Oversight and employees required to file a public or 
    confidential financial disclosure report under 5 CFR part 2634 in:
        (i) The Office of the HUD Secretary, with the exception of the 
    Office of Lead-Based Paint Abatement and Poisoning Prevention;
        (ii) The Office of the Assistant Secretary for Housing--Federal 
    Housing Commissioner;
        (iii) The Office of Financial Institutions Regulation in the Office 
    of the Assistant Secretary for Policy Development and Research;
        (iv) The Offices of Investigation, Program Standards and 
    Evaluation, and Regulatory Initiatives and Federal Coordination within 
    the Office of the Assistant Secretary for Fair Housing and Equal 
    Opportunity;
        (v) The Office of General Counsel's Offices of Insured Housing, 
    Government Sponsored Enterprises/Real Estate Settlement and Procedures 
    Act Division in Finance and Regulatory Enforcement, Legislation and 
    Regulations, and the Fair Housing Enforcement Division;
        (vi) The Office of Inspector General;
        (vii) The official superiors of the employees listed in paragraphs 
    (b)(1)(iii), (b)(1)(iv) and (b)(1)(v) of this section;
        (viii) Any other employee who is designated in writing by the 
    Secretary, the Designated Agency Ethics Official, or the appropriate 
    individual of Assistant Secretary rank, or his or her designee, to 
    ensure compliance with the principles set forth in 5 CFR 2635.403 and 
    who receives notice of such designation.
        (2) The DAEO, upon recommendation of the appropriate individual of 
    Assistant Secretary rank, may exclude in writing an employee otherwise 
    designated as a ``covered employee'' under Sec. 7501.106(b)(1)(i)-(vii) 
    of this part if the employee's official duties do not substantially 
    involve the regulation or oversight of Government sponsored enterprises 
    and ownership of interests prohibited by Sec. 7501.106(c) would not 
    cause a reasonable person to question the impartiality and objectivity 
    with which the Department's programs are administered.
        (3) Mortgage institution means mortgage bankers, mortgage brokers, 
    banks, savings and loans, and other institutions or entities that 
    originate, insure, or service mortgages that are owned or guaranteed by 
    the Federal National Mortgage Association (FNMA) or the Federal Home 
    Loan Mortgage Corporation (FHLMC).
        (c) Prohibited financial interests. (1) Except as provided in 
    paragraph (c)(2) of this section, a covered employee, or a spouse or 
    minor child of a covered employee, shall not receive, acquire, or own 
    securities of:
        (i) A mortgage institution if more than 20 percent of the 
    institution's assets consist of mortgages;
        (ii) A mortgage institution in which 20 percent or less of the 
    institution's assets consist of mortgages and more than 40 percent of 
    the mortgages originated by the institution are issued, collateralized, 
    sold or guaranteed by FNMA and/or FHLMC; or
        (iii) A mortgage institution which services or insures mortgages if 
    more than 20 percent of the gross income of such institution is derived 
    from either or both of these activities.
        (2) The prohibitions in paragraph (c)(1) of this section do not 
    apply to ownership of securities held in a publicly traded or publicly 
    available investment fund, or profit-sharing, retirement, or similar 
    plan which in its prospectus or governing documents does not indicate 
    the objective or practice of concentrating its investments in the 
    financial services sector, and the employee neither exercises control 
    nor has the ability to exercise control over the financial interests 
    held in the fund.
        (3) The mortgage institution's most recent annual financial 
    statement shall be used in determining the applicability of the 
    prohibitions in paragraph (c)(1) of this section.
        (d) Restrictions arising from third party relationships. If any of 
    the entities listed below has securities that a covered employee would 
    be prohibited from owning by paragraph (c) of this section, the 
    employee shall report such
    
    [[Page 36251]]
    
    interest to the appropriate Agency Ethics Official. The Agency Ethics 
    Official may require the employee to terminate the third party 
    relationship, undertake an appropriate disqualification, or take other 
    appropriate action determined to be necessary consistent with 5 CFR 
    part 2635 and this part. This paragraph applies to a:
        (1) Partnership in which the covered employee, or a spouse or minor 
    child of the employee is a general partner;
        (2) Partnership in which the covered employee, or spouse or minor 
    child of the employee, individually or jointly holds more than a 10 
    percent limited partnership interest;
        (3) Closely held corporation in which the covered employee, or 
    spouse or minor child of the employee, individually or jointly holds 
    more than a 10 percent equity interest;
        (4) Trust in which the covered employee, or spouse or minor child 
    of the employee, has a legal or beneficial interest;
        (5) Investment club or similar informal investment arrangement 
    between the covered employee, or spouse or minor child of the employee, 
    and others; or
        (6) Other entity in which the covered employee, or spouse or minor 
    child of the employee, individually or jointly holds more than a 10 
    percent equity interest.
        (e) Prohibited outside employment. Covered employees shall not 
    engage in employment with or on behalf of the Federal National Mortgage 
    Association, the Federal Home Loan Mortgage Corporation, a mortgage 
    institution, or any of their affiliates.
        (f) Prohibited recommendations. Covered employees shall not make 
    any recommendation or suggestion, directly or indirectly, concerning 
    the acquisition, sale, or divestiture of securities of FHLMC or FNMA.
        (g) Prohibited purchase of assets. Covered employees, their spouses 
    or minor children shall not purchase, directly or indirectly, any real 
    or personal property from FHLMC or FNMA, unless it is sold at public 
    auction or by other means which would assure that the selling price is 
    the asset's fair market value.
        (h) Pre-existing interests. Covered employees must report, in 
    writing, to the appropriate Agency Ethics Official, any interest 
    prohibited under paragraph (c) of this section acquired prior to either 
    the commencement of employment as a covered employee or the effective 
    date of this part, or acquired without specific intent, as through 
    gift, inheritance, or marriage, within 30 days from the start of 
    covered employment or acquisition of such interest. Such interest must 
    be divested within 90 days from the date it is reported unless waived 
    by the Designated Agency Ethics Official in accordance with 
    Sec. 7501.103.
    
    TITLE 24--[AMENDED]
    
    SUBTITLE A--OFFICE OF THE SECRETARY, DEPARTMENT OF HOUSING AND URBAN 
    DEVELOPMENT
    
    PART O--STANDARDS OF CONDUCT
    
        2. In Part 0 of 24 CFR subtitle A, Sec. 0.1 is revised to read as 
    follows:
    
    
    Sec. 0.1  Cross-reference to employees ethical conduct standards and 
    financial disclosure regulations.
    
        Employees of the Department of Housing and Urban Development 
    (Department) are subject to the executive branch-wide standards of 
    ethical conduct at 5 CFR part 2635, the Department's regulation at 5 
    CFR part 7501 which supplements the executive branch-wide standards, 
    and the executive branch-wide financial disclosure regulation at 5 CFR 
    part 2634.
    
        Authority: 5 U.S.C. 301, 7301; 42 U.S.C. 3535(d).
    
    [FR Doc. 96-17450 Filed 7-8-96; 8:45 am]
    BILLING CODE 4210-32-P
    
    
    

Document Information

Effective Date:
8/8/1996
Published:
07/09/1996
Department:
Housing and Urban Development Department
Entry Type:
Rule
Action:
Final rule.
Document Number:
96-17450
Dates:
This rule is effective on August 8, 1996.
Pages:
36246-36251 (6 pages)
Docket Numbers:
Docket No. FR-3331-F-01
RINs:
2501-AB55: Standards of Conduct (FR-3331), 3209-AA15: Executive Agency Supplemental Standards of Ethical Conduct Regulations Issued Jointly With the Concurrence of the Office of Government Ethics
RIN Links:
https://www.federalregister.gov/regulations/2501-AB55/standards-of-conduct-fr-3331-, https://www.federalregister.gov/regulations/3209-AA15/executive-agency-supplemental-standards-of-ethical-conduct-regulations-issued-jointly-with-the-concu
PDF File:
96-17450.pdf
CFR: (17)
24 CFR 7501.104(a)(5)
24 CFR 7501.104(a)(5)(iii)
24 CFR 7501.106(b)(1)
24 CFR 7501.106(b)(1)(viii)
24 CFR 7501.106(c)
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