Supplemental Standards of Ethical Conduct for Employees of the Department of Housing and Urban Development, 46601-46606 [2012-19150]
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46601
Rules and Regulations
Federal Register
Vol. 77, No. 151
Monday, August 6, 2012
AGENCY:
clearly describes the role and
responsibility of the HUD Office of
Inspector General in the agency’s ethics
program. This rule follows publication
of a March 14, 2012, proposed rule and
considers public comment on the
proposed rule, but makes no changes at
this final rule stage.
DATES: Effective Date: September 5,
2012.
FOR FURTHER INFORMATION CONTACT:
Robert H. Golden, Assistant General
Counsel, Ethics Law Division, telephone
number 202–402–6334, or Peter J.
Constantine, Associate General Counsel
for Ethics and Personnel Law, Office of
General Counsel, Department of
Housing and Urban Development, 451
7th Street SW., Washington, DC 20410,
telephone number 202–402–2377.
Persons with hearing or speech
impairments may access this number
through TTY by calling the toll-free
Federal Relay Service at 800–877–8339.
SUPPLEMENTARY INFORMATION:
The Department of Housing
and Urban Development (HUD), with
the concurrence of the Office of
Government Ethics (OGE), is finalizing
the proposed rule to amend its existing
Supplemental Standards of Ethical
Conduct, which are regulations for HUD
officers and employees that supplement
OGE’s Standards of Ethical Conduct for
Employees of the Executive Branch
(Standards). To ensure a comprehensive
and effective ethics program at HUD,
and to address ethical issues unique to
HUD, this final rule reflects statutory
changes that were enacted subsequent to
the codification of HUD’s Supplemental
Standards of Conduct regulation in
1996. Significantly, this final rule
reflects the transfer of general regulatory
authority over the Federal National
Mortgage Association and the Federal
Home Loan Mortgage Corporation from
HUD to the Federal Housing Finance
Agency (FHFA). This final rule also
revises definitions used in HUD’s
Supplemental Standards of Conduct to
reflect updated titles and positions and
clarifies existing prohibitions on certain
financial interests and outside
employment to better guide employee
conduct, while upholding the integrity
of HUD in the administration of its
programs. Finally, this final rule more
I. Background
On March 14, 2012 (77 FR 14977,
republished on March 22, 2012, at 77 FR
16761), HUD, with OGE’s concurrence,
published for comment a proposed rule
to amend its Supplemental Standards of
Ethical Conduct for Employees of the
Department of Housing and Urban
Development (Supplemental Standards
of Conduct), codified at 5 CFR part
7501. The HUD Supplemental
Standards of Conduct supplement
OGE’s government-wide Standards of
Ethical Conduct for Employees of the
Executive Branch (Standards), codified
at 5 CFR part 2635, and addresses
ethical issues unique to HUD officers
and employees. HUD published its
March 14, 2012, proposed rule to
strengthen the integrity of the
Department in the operation and
administration of its program by
ensuring that its ethics program
reflected significant statutory changes to
HUD’s programs and operations enacted
subsequent to the codification of its
current Supplemental Standards of
Conduct in 1996.
In this regard, one significant
statutory change to HUD programs and
operations was made by the Housing
and Economic Recovery Act of 2008
(HERA) (Pub. L. 110–289, approved July
30, 2008). HERA transferred regulatory
authority over the Federal National
Mortgage Association (Fannie Mae) and
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DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
5 CFR Part 7501
[Docket No. FR–5542–F–02]
RIN 2501–AD55
Supplemental Standards of Ethical
Conduct for Employees of the
Department of Housing and Urban
Development
Office of the Secretary,
Department of Housing and Urban
Development.
ACTION: Final rule.
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SUMMARY:
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the Federal Home Loan Mortgage
Corporation (Freddie Mac) (collectively
referred to as the Government
Sponsored Enterprises, or GSEs) from
HUD to the Federal Housing Finance
Agency (FHFA). Based on this transfer
of regulatory authority, HUD proposed
removing provisions of its
Supplemental Standards of Conduct
that prohibit all HUD employees from
owning certain financial interests issued
by the GSEs. In addition, HUD proposed
removing § 7501.106 entitled,
‘‘Additional rules for certain
Department employees involved in the
regulation or oversight of Government
sponsored enterprises,’’ which prohibits
employees whose duties involve the
regulation or oversight of the GSEs from,
among other things, owning financial
interests in certain mortgage institutions
and from performing any work, either
compensated or uncompensated, for or
on behalf of a mortgage institution. The
removal of these sections was based on
HUD’s determination that they were no
longer necessary to ensuring the
impartiality and integrity in the
administration of HUD’s programs.
In addition, the proposed rule revised
definitions used in HUD’s Supplemental
Standards of Conduct to reflect updated
titles and positions and clarify existing
prohibitions on certain financial
interests and outside employment to
better guide employee conduct, while
upholding the integrity of HUD in the
administration of its programs. The rule
also proposed to add a new § 7501.106
to clarify the authority of the HUD
Office of Inspector General (OIG) in the
agency’s ethics program and establishes
it as a separate component as provided
by 5 CFR 2635.203(a).
II. Public Comment on the Proposed
Rule
By the close of the public comment
period on May 14, 2012, HUD received
one public comment on the proposed
rule. The commenter, a member of the
public, expressed a concern regarding
the removal of § 7501.106, the provision
that prohibits covered HUD employees
from owning financial interests in or
engaging in outside employment or
certain other dealings with mortgage
companies doing business with HUD.
The commenter stated that such
employees are in positions to possess
insider information concerning the
dealings of these companies and that the
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removal of the ethics provision against
dealings and ownership creates a
circumstance where personal interests
can easily cloud regulatory judgment.
The commenter also stated that the
removal of § 7501.106 opens the risk
that these HUD employees could be
charged with insider trading, creating a
preventable public relations situation
that would drain already strained
budgets.
HUD appreciates the commenter’s
insightful consideration of its proposed
rule. HUD has considered the comment
but has decided, however, not to accept
the comment or change the proposal to
remove § 7501.106. As discussed in the
proposed rule preceding the
codification of § 7501.106 (60 FR 34420,
July 30, 1995), the need for the
provision resulted from the Federal
Housing Enterprises Financial Safety
and Soundness Act of 1992 (12 U.S.C.
4501, et seq.) (FHEFSSA), which
significantly expanded HUD’s authority
to regulate Fannie Mae and Freddie
Mac. Specifically, FHEFSSA provided
broad regulatory authority to a newly
established Office of Federal Housing
Enterprise Oversight within HUD to
ensure the financial safety and
soundness of the GSEs. Based on this
authority, § 7501.106 was designed to
protect against potential conflicts of
interest and the appearance of conflicts
of interest for HUD employees whose
official duties involved the oversight or
regulation of the GSEs, by prohibiting
these employees from acquiring or
obtaining the financial interests of
certain mortgage institutions that
conducted business with, or relied upon
the GSEs. As stated in HUD’s March 14,
2012, proposed rule, Title I of the
Housing and Economic Recovery Act of
2008 (Pub. L. 110–289, approved July
30, 2008) amended FHEFSSA to transfer
regulatory authority over the GSEs from
HUD to FHFA. As a result, HUD
believes that the continued need for
§ 7501.106, as well as the general
prohibition on directly receiving,
acquiring, or owning securities issued
by the GSEs, no longer exists.
While the purpose of § 7501.106
related to HUD’s regulatory authority
over the GSEs, other ethical
requirements protect against the
commenter’s broader point regarding
insider trading and insider information
as it relates to mortgage companies with
which a HUD employee may work.
These requirements include 18 U.S.C.
208, a federal criminal statute, which
prohibits employees from participating
personally and substantially in any
particular matters that will have a direct
and predictable effect on the employee’s
financial interests, and 5 CFR 2635.502,
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which provides that an employee
should not participate in a particular
matter when the employee or the agency
designee determines that the
circumstances may cause a reasonable
person with knowledge of the relevant
facts to question his or her impartiality
in the matter. Additionally, the
Supplemental Standards of Conduct at
§ 7501.105 specifically prohibit HUD
employees from outside employment
with businesses related to real estate,
which includes mortgage companies.
Finally, the Stop Trading on
Congressional Knowledge Act of 2012
(STOCK Act) (Pub. L. 112–105) also
prohibits certain executive branch
employees in senior positions from
purchasing securities that are the
subject of an initial public offering in
any manner other than is available to
members of the public generally. HUD
believes that these provisions are
sufficient to ensure the integrity of HUD
in the operation and administration of
its programs.
III. Final Rule
At this final rule stage, HUD adopts
the March 14, 2012, proposed rule
without change. Significantly, HUD is
removing provisions from its
Supplemental Standards of Conduct
that prohibit all HUD employees from
owning certain financial interests issued
by the GSEs. In addition, HUD is
removing § 7501.106 entitled,
‘‘Additional rules for certain
Department employees involved in the
regulation or oversight of Government
sponsored enterprises.’’ HUD’s action is
based on its determination that these
provisions are no longer necessary to
ensure public confidence in the
impartiality and objectivity with which
HUD programs are administered.
IV. Analysis of the Regulation
The following is a section-by-section
overview of the significant amendments
made by this final rule. Members of the
public are invited to review the
preamble to HUD’s March 14, 2012,
proposed rule for a fuller discussion of
the revisions made by this final rule.
Section 7501.102 Definitions
Section 7501.102 updates and
clarifies key terms used in the
Supplemental Standard of Conduct.
Specifically, the definitions of ‘‘Agency
designee’’ and ‘‘Designated Agency
Ethics Official (DAEO)’’ are revised to
reflect updated office names and titles
within the current HUD organization.
Additionally, the reference to the
Inspector General (IG) is removed from
the definition of ‘‘agency designee’’ in
favor of adding definitions for
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‘‘Bureau,’’ ‘‘Bureau Ethics Counselor,’’
and ‘‘Deputy Bureau Ethics Counselor.’’
‘‘Bureau’’ is defined to mean the Office
of the Inspector General (OIG). ‘‘Bureau
Ethics Counselor’’ and ‘‘Deputy Bureau
Ethics Counselor’’ are defined to mean,
respectively, the General Counsel for
OIG and the OIG employees to whom
the OIG General Counsel delegates
responsibility to make determinations,
issue explanatory guidance, or establish
procedures necessary to implement this
part, subpart I of 5 CFR 2634, and 5 CFR
part 2635 for Bureau employees. The
definition of ‘‘employment’’ is also
revised to provide that employment
includes uncompensated activity, such
as volunteer work for others while offduty.
Section 7501.103 Waivers
Section 7501.103 is revised to codify
HUD practice that a waiver request must
be in writing, and to guide employees
on what should be included in a waiver
request. It also confirms HUD practice
that hardship and other exigent
circumstances are legitimate reasons for
a waiver request, and such a request
will be considered in light of HUD’s
need to ensure public confidence in the
impartiality and objectivity with which
HUD programs are administered. This
section also delegates authority to the
Bureau Ethics Counselor to waive
provisions of this part.
Section 7501.104 Prohibited Financial
Interests
This final rule removes from
§ 7501.104(a) the reference to covered
employees. This reflects HUD’s decision
to remove § 7501.106, which provided
rules for employees involved in the
regulation or oversight of GSEs. Section
7501.104(a) is also revised by removing
provisions prohibiting HUD employees
from receiving, acquiring, or owning
securities issued by Fannie Mae or
Freddie Mac and securities
collateralized by Fannie Mae or Freddie
Mac. HUD has determined that these
prohibitions are no longer necessary
based on the transfer of regulatory
authority from HUD under HERA.
This final rule revises
§ 7501.104(a)(2), the provision
prohibiting employees, their spouses,
and minor children from holding stock
or another financial interest ‘‘in a
multifamily project or single family
dwelling, cooperative unit, or
condominium unit’’ that is owned or
subsidized by the Department, by
removing that term and replacing it with
the term ‘‘project.’’ The final rule also
removes the term ‘‘stock or other
financial interest,’’ substitutes the term
‘‘financial interest,’’ and references
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OGE’s regulations at 5 CFR 2635.403(c)
for a complete definition of the term
‘‘financial interest,’’ including
examples. These changes provide clarity
to the prohibition and will continue to
prohibit HUD employees from holding
ownership interests in all HUDsubsidized or -insured projects that exist
or may come to exist in the future.
Section 7501.104(a)(3) continues to
permit HUD employees to receive, on
behalf of a tenant, a Section 8 subsidy
under certain conditions. A new
exception permits all new HUD
employees who already have a tenant
receiving Section 8 subsidies to retain
that tenant until the tenant terminates
his or her lease. In addition,
§ 7501.104(a)(3)(i)(E) adds a new
exception that permits HUD employees
to receive a Section 8 subsidy for the
rental of properties located in areas of
Presidentially declared emergency or
natural disaster with prior written
approval from an agency designee.
Section 7501.104(b) provides
exceptions to § 7501.104(a). This final
rule expands the exceptions by
removing a prohibition on owning
investment funds that concentrate in
residential mortgages or mortgagebacked securities. HUD has determined
that this prohibition is no longer needed
in light of the fact that HUD no longer
has regulatory authority over Fannie
Mae and Freddie Mac.
This final rule continues to permit
HUD employee to own homes financed
with mortgages insured under programs
of the Federal Housing Administration
(FHA), and continues to permit the
purchase by HUD employees of HUDowned homes. The provisions
permitting HUD employees to own or
acquire these assets are established as
exceptions to § 7501.104(a) at
§§ 7501.104(b)(2) and (b)(3),
respectively. In both sections, this final
rule provides that employees must
adhere to the procedures established by
the Assistant Secretary for Housing–
FHA Commissioner in order to obtain
FHA insurance or to purchase a HUDheld property.
Section 7501.104(b)(4) provides that
the employment compensation and
benefits package for an employee’s
spouse is not a prohibited financial
interest even if the employee’s spouse is
employed by an entity that has interests
in HUD projects prohibited under
§ 7501.104(a)(2). Finally,
§ 7501.104(b)(5) continues to permit
employees, or their spouses or minor
children, to hold Government National
Mortgage Association (GNMA)
securities.
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Section 7501.105 Outside Activities
Section 7501.105 governs the outside
activities of HUD employees. HUD has
determined that maintaining the policy
against employment in businesses
related to real estate or manufactured
housing is necessary to protect against
questions regarding the impartiality and
objectivity of employees in the
administration of HUD programs.
Allowing such activity would hinder
HUD in meeting its missions if members
of the public question whether HUD
employees are using their public
positions or HUD connections to
advance their outside real estate-related
employment. To clarify the intent of this
prohibition and support its consistent
application, this final rule amends
§ 7501.105(a)(1) by removing the phrase
‘‘involving active participation’’ with a
real estate-related business.
Additionally, this final rule separates
the prohibition against the ownership
activities of operating and managing a
real estate-related business involving
investment properties from the
employment prohibition by adding
§ 7501.105(a)(2), which prohibits the
operation or management of investment
properties to the extent that doing so
rises to the level of a real estate
business. To make the prohibition more
transparent, HUD is also codifying
longstanding policy by listing several
factors that it uses to consider whether
the employee’s actions of operating or
managing investment properties rise to
the level of a real estate business that
falls within the prohibition. These
changes do not change the application
of the prohibition.
This final rule also removes the
specific restriction on employees having
outside positions with Fannie Mae and
Freddie Mac. As previously discussed,
HUD no longer has general regulatory
authority over Fannie Mae and Freddie
Mac. HUD employees, under
§ 7501.105(a)(1), continue to be
prohibited from employment with a
business related to real estate. This
prohibition also covers employment
with Fannie Mae and Freddie Mac.
This final rule adds § 7501.105(b)(2),
which codifies HUD’s longstanding
policy that employees with a real estate
agent’s license may continue to hold
such license. An employee may only
use his or her license in relation to
purchasing or selling a single-family
property for use as the employee’s
primary residence, or for the primary
residence of an immediate family of the
employee. Employees seeking to use
their real estate license for this purpose,
however, must obtain the prior written
approval of an agency ethics official.
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Section 7501.105(c) is revised to add the
requirement for prior written approval
from an agency ethics official for
employees seeking to use their real
estate license for this purpose.
Section 7501.105(c)(1) requires an
employee to receive written approval
prior to accepting a position of authority
with a prohibited source. This section
has been expanded to include all
prohibited sources because HUD has
determined that taking a position of
authority with any prohibited source,
not just those that receive HUD funding,
creates the appearance of a conflict of
interest and should therefore be
examined by an agency ethics official.
As discussed in this preamble, HUD has
added the requirement at
§ 7501.105(c)(1)(iv) for prior written
approval from an agency ethics official
for employees seeking to use their real
estate license in relation to purchasing
or selling a single-family property for
use as the employee’s primary residence
or as the primary residence of an
immediate family member of the
employee.
Finally, this final rule adds
§ 7501.105(d) to incorporate HUD’s
policy regarding liaison representatives,
which was previously provided as a
Note. This change will avoid any
confusion over the concept and its
authority.
Section 7501.106 Bureau Instructions
and Designation of Separate Agency
Components
Former § 7501.106 entitled,
‘‘Additional rules for certain
Department employees involved in the
regulation or oversight of Government
sponsored enterprises,’’ is removed. As
previously discussed in this preamble,
HUD no longer has regulatory authority
over Fannie Mae and Freddie Mac and
has determined that removing this
provision would not compromise the
integrity of HUD’s programs and
operations.
In its place, HUD is adding a new
§ 7501.106 that clarifies the authority of
the OIG in the agency’s ethics program
and establishes it as a separate
component as provided for by 5 CFR
2635.203(a). Specifically, new
§ 7501.106(a) delegates to the Bureau
Ethics Counselor the authority to
designate Deputy Bureau Ethics
Counselors to make determinations,
issue explanatory guidance, and
establish procedures necessary to
implement this part, subpart I of 5 CFR
2634, and 5 CFR part 2635 for their
bureau. In addition, new § 7501.106(b)
designates the OIG as a separate agency
component.
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V. Matters of Regulatory Procedure
Executive Order 12866 and Executive
Order 13563
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if the regulation is
necessary, to select the regulatory
approach that maximizes net benefits.
Because this rule relates solely to the
internal operations of HUD, this rule
was determined to be not a significant
regulatory action under section 3(f) of
Executive Order 12866, Regulatory
Planning and Review, and therefore was
not reviewed by the Office of
Management and Budget (OMB).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) generally requires an
agency to conduct a regulatory
flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities. This rule
would not have a significant economic
impact on a substantial number of small
entities because this rule pertains only
to HUD employees.
Information Collection Requirements
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) does not apply to
this regulation because it does not
contain information collection
requirements subject to the approval of
OMB.
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Environmental Impact
In accordance with 40 CFR 1508.4 of
the regulations of the Council on
Environmental Quality and 24 CFR
50.20(k) of HUD regulations, the
policies and procedures contained in
this rule relate only to internal
administrative procedures whose
content does not constitute a
development decision nor affect the
physical condition of project areas or
building sites, and therefore, are
categorically excluded from the
requirements of the National
Environmental Policy Act.
Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits, to the extent
practicable and permitted by law, an
agency from promulgating a regulation
that has federalism implications and
either imposes substantial direct
compliance costs on state and local
governments and is not required by
statute or preempts state law, unless the
relevant requirements of section 6 of the
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Executive Order are met. This rule does
not have federalism implications and
does not impose substantial direct
compliance costs on state and local
governments or preempt state law
within the meaning of the Executive
Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (2 U.S.C. 1531–
1538) (UMRA) establishes requirements
for federal agencies to assess the effects
of their regulatory actions on state,
local, and tribal governments, and on
the private sector. Since it is only
directed toward HUD employees, this
rule would not impose any federal
mandates on any state, local, or tribal
governments, or on the private sector,
within the meaning of the UMRA.
List of Subjects in 5 CFR Part 7501
Conflicts of interests.
Accordingly, for the reasons described
in the preamble, HUD, with the
concurrence of OGE, revises 5 CFR part
7501 to read as follows:
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 activities.
7501.106 Bureau instructions and
designation of separate agency
component.
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.
§ 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.
§ 7501.102
Definitions.
For purposes of this part, and
otherwise as indicated, the following
definitions shall apply:
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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 Ethics and
Personnel Law, the Assistant General
Counsel for the Ethics Law Division,
and the HUD Regional Counsels.
Agency ethics official, as used also in
5 CFR part 2635, means the agency
designees as specified above.
Bureau means the Office of the
Inspector General.
Bureau Ethics Counselor means the
General Counsel for the Bureau.
Deputy Bureau Ethics Counselor
means the Bureau employee or
employees who the Bureau Ethics
Counselor has delegated responsibility
to act under § 7501.106 for the Bureau.
Designated Agency Ethics Official
(DAEO) means the General Counsel of
HUD or the Deputy General Counsel for
Operations in the absence of the General
Counsel.
Employment means any compensated
or uncompensated (including volunteer
work for others while off-duty) form of
non-federal activity or business
relationship, including selfemployment, that involves 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.
§ 7501.103
Waivers.
The Designated Agency Ethics
Official, or the Bureau Ethics Counselor
for a Bureau employee may waive any
provision of this part upon finding that
the waiver will not result in conduct
inconsistent with 5 CFR part 2635 and
is not otherwise prohibited by law and
that application of the provision is not
necessary to ensure public confidence
in the Department’s impartial and
objective administration of its programs.
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. A waiver will be considered
only in response to a written waiver
request submitted to an agency ethics
official. The waiver request should
include:
(a) The requesting employee’s Branch,
Unit, and a detailed description of his
or her official duties;
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(b) The nature and extent of the
proposed waiver;
(c) A detailed statement of the facts
supporting the request; and
(d) The basis for the request, such as
undue hardship or other exigent
circumstances.
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§ 7501.104
Prohibited financial interests.
(a) General requirement. This section
applies to all HUD employees except
special Government employees. Except
as provided in paragraph (b) of this
section, the employee, or the employee’s
spouse or minor child, shall not directly
or indirectly receive, acquire, or own:
(1) Federal Housing Administration
(FHA) debentures or certificates of
claim;
(2) A financial interest in a project,
including any single family dwelling or
unit, which is subsidized by the
Department, or which is subject to a
note or mortgage or other security
interest insured by the Department. The
definition of ‘‘financial interest’’ is
found at 5 CFR 2635.403(c);
(3)(i) 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 or the employee’s spouse
or minor child. However, such subsidy
is permitted when:
(A) The employee, or the employee’s
spouse or minor child acquires, without
specific intent as through inheritance, a
property in which a tenant receiving
such a subsidy already resides;
(B) The tenant receiving such a
subsidy lived in the rental property
before the employee worked for the
Department;
(C) The tenant receiving such a
subsidy is a parent, child, grandchild, or
sibling of the employee;
(D) The employee’s, or the employee’s
spouse or minor child’s, rental property
has an incumbent tenant who has not
previously received such a subsidy and
becomes the beneficiary thereof; or
(E) The location of the rental property
is in a Presidentially declared
emergency or natural disaster area and
the employee receives prior written
approval from an agency designee.
(ii) The exception provided by
paragraph (a)(3)(i) of this section
continues only as long as:
(A) The tenant continues to reside in
the property; and
(B) There is no increase in that
tenant’s rent upon the commencement
of subsidy payments other than normal
annual adjustments under the Section 8
program.
(b) Exception to prohibition for
certain interests. Nothing in this section
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14:44 Aug 03, 2012
Jkt 226001
prohibits the employee, or the
employee’s spouse or minor child from
directly or indirectly receiving,
acquiring, or owning:
(1) A financial interest in a publicly
available or publicly traded investment
fund that includes financial interests
prohibited by paragraph (a)(2) of this
section, so long as the employee neither
exercises control nor has the ability to
exercise control over the fund or the
financial interests held in the fund;
(2) 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.
Employees must adhere to the
procedures established by the Assistant
Secretary for Housing—FHA
Commissioner in order to obtain FHA
insurance;
(3) Department-owned single family
property. Employees must adhere to the
procedures established by the Assistant
Secretary for Housing—FHA
Commissioner in order to purchase a
HUD-held property;
(4) Employment compensation and
benefit packages provided by the
employer of an employee’s spouse that
include financial interests prohibited by
paragraph (a)(2) of this section; or
(5) Government National Mortgage
Association (GNMA) securities.
(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 date of 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 § 7501.103.
§ 7501.105
Outside activities.
(a) Prohibited outside activities.
Subject to the exceptions set forth in
paragraph (b) of this section, HUD
employees, except special Government
employees, shall not engage in:
(1) Employment with a business
related to real estate or manufactured
housing including, but not limited to,
real estate brokerage, management and
sales, architecture, engineering,
mortgage lending, property insurance,
appraisal services, title search services,
construction, construction financing,
land planning, or real estate
development;
(2) The operation or management of
investment properties to the extent that
PO 00000
Frm 00005
Fmt 4700
Sfmt 4700
46605
it rises to the level of a real estaterelated business. HUD will determine
whether an employee is operating or
managing investment properties to an
extent that it rises to the level of a real
estate business based on the totality of
the circumstances, and will consider
whether the employee maintains an
office; advertises or otherwise solicits
clients or business; hires staff or
employees; uses business stationary or
other similar materials; files the
business as a corporation, limited
liability company, partnership, or other
type of business association with a state
government; establishes a formal or
informal association with an existing
business; hires a management company;
and the nature and number of its
investment properties;
(3) Employment with a person or
entity who registered as a lobbyist or
lobbyist organization pursuant to 2
U.S.C 1603(a) and engages in lobbying
activity concerning the Department;
(4) Employment as an officer or
director with a Department-approved
mortgagee, a lending institution, or an
organization that services securities for
the Department; or
(5) Employment with 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:
(1) Serving as an officer or a member
of the Board of Directors of:
(i) A Federal Credit Union;
(ii) A cooperative, condominium
association, or homeowners association
for a housing project that is not subject
to regulation by the Department or, if so
regulated, in which the employee
personally resides; or
(iii) An entity designated in writing
by the Designated Agency Ethics
Official.
(2) Holding a real estate agent’s
license; however, use of the license is
limited as provided by paragraph (c) of
this section.
(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 a prohibited
source, as defined at 5 CFR 2635.203(d);
(ii) With a state or local government;
(iii) In the same professional field as
that of the employee’s official position;
or
(iv) As a real estate agent in relation
to purchasing or selling a single family
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46606
Federal Register / Vol. 77, No. 151 / Monday, August 6, 2012 / Rules and Regulations
property for use as the employee’s
primary residence, or the primary
residence of the employee’s immediate
family member.
(2) Approval shall be granted unless
the conduct is inconsistent with 5 CFR
part 2635 or this part.
(d) Liaison representative. An
employee designated 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 designated to serve as the
Department’s liaison representative only
as authorized by law, and as approved
by the Department under applicable
procedures.
§ 7501.106 Bureau instructions and
designation of separate agency component.
(a) Bureau instructions. With the
concurrence of the Designated Agency
Ethics Official, the Bureau Ethics
Counselor is authorized, consistent with
5 CFR 2635.105(c), to designate Deputy
Bureau Ethics Counselors, to make a
determination, issue explanatory
guidance, and establish procedures
necessary to implement this part,
subpart I of 5 CFR part 2634, and 5 CFR
part 2635 for the Bureau.
(b) Designation of separate agency
component. Pursuant to 5 CFR
2635.203(a), the Office of the Inspector
General is designated as a separate
agency for purposes of the regulations
contained in subpart B of 5 CFR part
2635, governing gifts from outside
sources; and 5 CFR 2635.807, governing
teaching, speaking, or writing.
Dated: July 18, 2012.
Shaun Donovan,
Secretary.
Don W. Fox,
Acting Director, Office of Government Ethics.
[FR Doc. 2012–19150 Filed 8–3–12; 8:45 am]
BILLING CODE 4210–67–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1072
emcdonald@gpo.gov on DSK67QTVN1PROD with RULES
[Docket No. CFPB–2012–0025]
Enforcement of Nondiscrimination on
the Basis of Disability in Programs and
Activities Conducted by the Bureau of
Consumer Financial Protection
Bureau of Consumer Financial
Protection.
ACTION: Interim final rule with request
for public comment.
AGENCY:
This interim final rule
provides for the enforcement of section
SUMMARY:
VerDate Mar<15>2010
14:44 Aug 03, 2012
Jkt 226001
504 of the Rehabilitation Act of 1973, as
amended, which prohibits
discrimination on the basis of disability
in programs or activities conducted by
the Bureau of Consumer Financial
Protection. It sets forth standards for
what constitutes discrimination on the
basis of mental or physical disability,
provides a definition for ‘‘individual
with a disability’’ and ‘‘qualified
individual with a disability,’’ and
establishes a complaint mechanism for
resolving allegations of discrimination.
The rule further clarifies that the
complaint mechanism is also available
for processing complaints that the
agency has failed to meet accessibility
standards for electronic and information
technology, in violation of section 508
of the Rehabilitation Act of 1973.
This interim final rule is
effective August 6, 2012. Written
comments must be submitted by
October 5, 2012.
DATES:
You may submit comments,
identified by Docket No. CFPB–2012–
0025, by any of the following methods:
• Electronic: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail or Hand Delivery/Courier:
Monica Jackson, Office of the Executive
Secretary, Consumer Financial
Protection Bureau, 1700 G Street NW.,
Washington, DC 200552.
Instructions: All submissions must
include the agency name and docket
number for this rulemaking. In general,
all comments received will be posted
without change to https://
www.regulations.gov. In addition,
comments will be available for public
inspection and copying at 1700 G Street,
NW., Washington, DC 20552, on official
business days between the hours of 10
a.m. and 5 p.m. Eastern Time. You can
make an appointment to inspect the
documents by telephoning (202) 435–
7275.
All comments, including attachments
and other supporting materials, will
become part of the public record and
subject to public disclosure. Sensitive
personal information, such as account
numbers or social security numbers,
should not be included. Comments will
not be edited to remove any identifying
or contact information.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Monica Jackson, Office of the Executive
Secretary, Consumer Financial
Protection Bureau, 1700 G Street NW.,
Washington, DC 20552 at 202–435–
7275.
SUPPLEMENTARY INFORMATION:
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
I. Background
On July 21, 2010, the President signed
into law the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(Pub. L. 111–203). Title X of that law is
the Consumer Financial Protection Act
of 2010 (the ‘‘Act’’), which created the
Bureau of Consumer Financial
Protection (the ‘‘Bureau’’). Pursuant to
the provisions of the Act, the Bureau
began to exercise its authorities to
regulate the offering and provision of
consumer financial products and
services under the federal consumer
financial laws on July 21, 2011.
II. Summary of Interim Final Rule
This interim final rule establishes
procedures for the Bureau that are
necessary to implement section 504 of
the Rehabilitation Act of 1973, 29 U.S.C.
794, as amended by the Rehabilitation,
Comprehensive Services, and
Developmental Disabilities
Amendments of 1978, § 119 (Pub. L. 95–
602, 92 Stat. 2982), the Rehabilitation
Act Amendments of 1986 (Pub. L. 99–
506, 100 Stat. 1810), the Workforce
Investment Act of 1998 (Pub. L. 105–
220, 112 Stat. 936), and the Americans
with Disabilities Act Amendments of
2008 (Pub. L. 110–325, 122 Stat. 3553).
It is an adaptation of the model rule
prepared by the Department of Justice in
1980 under Executive Order 12250, 45
FR 72995, 3 CFR, 1980 Comp., p. 298.
The Bureau invites public comment
on all aspects of this interim final rule
and will take those comments into
account before publishing a final rule.
Section-by-Section Analysis
Section 1072.101 Purpose
Section 1072.101 states that the
purpose of the rule is to effectuate
section 119 of the Rehabilitation,
Comprehensive Services, and
Developmental Disabilities
Amendments of 1978, which amended
section 504 of the Rehabilitation Act of
1973 to prohibit discrimination on the
basis of disability in programs or
activities conducted by Executive
agencies or the United States Postal
Service.
Section 1072.102 Application
The regulation applies to all programs
or activities conducted by the Bureau.
Section 1072.103 Definitions
Section 1072.103 defines terms that
are utilized elsewhere in the rule.
Several of these terms warrant brief
discussion. The Bureau has modified
the language of the Department of
Justice model to replace the terms
‘‘handicap,’’ ‘‘individual with a
E:\FR\FM\06AUR1.SGM
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]]>Agencies
[Federal Register Volume 77, Number 151 (Monday, August 6, 2012)]
[Rules and Regulations]
[Pages 46601-46606]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19150]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 77, No. 151 / Monday, August 6, 2012 / Rules
and Regulations
[[Page 46601]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
5 CFR Part 7501
[Docket No. FR-5542-F-02]
RIN 2501-AD55
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.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Housing and Urban Development (HUD), with
the concurrence of the Office of Government Ethics (OGE), is finalizing
the proposed rule to amend its existing Supplemental Standards of
Ethical Conduct, which are regulations for HUD officers and employees
that supplement OGE's Standards of Ethical Conduct for Employees of the
Executive Branch (Standards). To ensure a comprehensive and effective
ethics program at HUD, and to address ethical issues unique to HUD,
this final rule reflects statutory changes that were enacted subsequent
to the codification of HUD's Supplemental Standards of Conduct
regulation in 1996. Significantly, this final rule reflects the
transfer of general regulatory authority over the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation
from HUD to the Federal Housing Finance Agency (FHFA). This final rule
also revises definitions used in HUD's Supplemental Standards of
Conduct to reflect updated titles and positions and clarifies existing
prohibitions on certain financial interests and outside employment to
better guide employee conduct, while upholding the integrity of HUD in
the administration of its programs. Finally, this final rule more
clearly describes the role and responsibility of the HUD Office of
Inspector General in the agency's ethics program. This rule follows
publication of a March 14, 2012, proposed rule and considers public
comment on the proposed rule, but makes no changes at this final rule
stage.
DATES: Effective Date: September 5, 2012.
FOR FURTHER INFORMATION CONTACT: Robert H. Golden, Assistant General
Counsel, Ethics Law Division, telephone number 202-402-6334, or Peter
J. Constantine, Associate General Counsel for Ethics and Personnel Law,
Office of General Counsel, Department of Housing and Urban Development,
451 7th Street SW., Washington, DC 20410, telephone number 202-402-
2377. Persons with hearing or speech impairments may access this number
through TTY by calling the toll-free Federal Relay Service at 800-877-
8339.
SUPPLEMENTARY INFORMATION:
I. Background
On March 14, 2012 (77 FR 14977, republished on March 22, 2012, at
77 FR 16761), HUD, with OGE's concurrence, published for comment a
proposed rule to amend its Supplemental Standards of Ethical Conduct
for Employees of the Department of Housing and Urban Development
(Supplemental Standards of Conduct), codified at 5 CFR part 7501. The
HUD Supplemental Standards of Conduct supplement OGE's government-wide
Standards of Ethical Conduct for Employees of the Executive Branch
(Standards), codified at 5 CFR part 2635, and addresses ethical issues
unique to HUD officers and employees. HUD published its March 14, 2012,
proposed rule to strengthen the integrity of the Department in the
operation and administration of its program by ensuring that its ethics
program reflected significant statutory changes to HUD's programs and
operations enacted subsequent to the codification of its current
Supplemental Standards of Conduct in 1996.
In this regard, one significant statutory change to HUD programs
and operations was made by the Housing and Economic Recovery Act of
2008 (HERA) (Pub. L. 110-289, approved July 30, 2008). HERA transferred
regulatory authority over the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac) (collectively referred to as the Government Sponsored Enterprises,
or GSEs) from HUD to the Federal Housing Finance Agency (FHFA). Based
on this transfer of regulatory authority, HUD proposed removing
provisions of its Supplemental Standards of Conduct that prohibit all
HUD employees from owning certain financial interests issued by the
GSEs. In addition, HUD proposed removing Sec. 7501.106 entitled,
``Additional rules for certain Department employees involved in the
regulation or oversight of Government sponsored enterprises,'' which
prohibits employees whose duties involve the regulation or oversight of
the GSEs from, among other things, owning financial interests in
certain mortgage institutions and from performing any work, either
compensated or uncompensated, for or on behalf of a mortgage
institution. The removal of these sections was based on HUD's
determination that they were no longer necessary to ensuring the
impartiality and integrity in the administration of HUD's programs.
In addition, the proposed rule revised definitions used in HUD's
Supplemental Standards of Conduct to reflect updated titles and
positions and clarify existing prohibitions on certain financial
interests and outside employment to better guide employee conduct,
while upholding the integrity of HUD in the administration of its
programs. The rule also proposed to add a new Sec. 7501.106 to clarify
the authority of the HUD Office of Inspector General (OIG) in the
agency's ethics program and establishes it as a separate component as
provided by 5 CFR 2635.203(a).
II. Public Comment on the Proposed Rule
By the close of the public comment period on May 14, 2012, HUD
received one public comment on the proposed rule. The commenter, a
member of the public, expressed a concern regarding the removal of
Sec. 7501.106, the provision that prohibits covered HUD employees from
owning financial interests in or engaging in outside employment or
certain other dealings with mortgage companies doing business with HUD.
The commenter stated that such employees are in positions to possess
insider information concerning the dealings of these companies and that
the
[[Page 46602]]
removal of the ethics provision against dealings and ownership creates
a circumstance where personal interests can easily cloud regulatory
judgment. The commenter also stated that the removal of Sec. 7501.106
opens the risk that these HUD employees could be charged with insider
trading, creating a preventable public relations situation that would
drain already strained budgets.
HUD appreciates the commenter's insightful consideration of its
proposed rule. HUD has considered the comment but has decided, however,
not to accept the comment or change the proposal to remove Sec.
7501.106. As discussed in the proposed rule preceding the codification
of Sec. 7501.106 (60 FR 34420, July 30, 1995), the need for the
provision resulted from the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (12 U.S.C. 4501, et seq.) (FHEFSSA),
which significantly expanded HUD's authority to regulate Fannie Mae and
Freddie Mac. Specifically, FHEFSSA provided broad regulatory authority
to a newly established Office of Federal Housing Enterprise Oversight
within HUD to ensure the financial safety and soundness of the GSEs.
Based on this authority, Sec. 7501.106 was designed to protect against
potential conflicts of interest and the appearance of conflicts of
interest for HUD employees whose official duties involved the oversight
or regulation of the GSEs, by prohibiting these employees from
acquiring or obtaining the financial interests of certain mortgage
institutions that conducted business with, or relied upon the GSEs. As
stated in HUD's March 14, 2012, proposed rule, Title I of the Housing
and Economic Recovery Act of 2008 (Pub. L. 110-289, approved July 30,
2008) amended FHEFSSA to transfer regulatory authority over the GSEs
from HUD to FHFA. As a result, HUD believes that the continued need for
Sec. 7501.106, as well as the general prohibition on directly
receiving, acquiring, or owning securities issued by the GSEs, no
longer exists.
While the purpose of Sec. 7501.106 related to HUD's regulatory
authority over the GSEs, other ethical requirements protect against the
commenter's broader point regarding insider trading and insider
information as it relates to mortgage companies with which a HUD
employee may work. These requirements include 18 U.S.C. 208, a federal
criminal statute, which prohibits employees from participating
personally and substantially in any particular matters that will have a
direct and predictable effect on the employee's financial interests,
and 5 CFR 2635.502, which provides that an employee should not
participate in a particular matter when the employee or the agency
designee determines that the circumstances may cause a reasonable
person with knowledge of the relevant facts to question his or her
impartiality in the matter. Additionally, the Supplemental Standards of
Conduct at Sec. 7501.105 specifically prohibit HUD employees from
outside employment with businesses related to real estate, which
includes mortgage companies. Finally, the Stop Trading on Congressional
Knowledge Act of 2012 (STOCK Act) (Pub. L. 112-105) also prohibits
certain executive branch employees in senior positions from purchasing
securities that are the subject of an initial public offering in any
manner other than is available to members of the public generally. HUD
believes that these provisions are sufficient to ensure the integrity
of HUD in the operation and administration of its programs.
III. Final Rule
At this final rule stage, HUD adopts the March 14, 2012, proposed
rule without change. Significantly, HUD is removing provisions from its
Supplemental Standards of Conduct that prohibit all HUD employees from
owning certain financial interests issued by the GSEs. In addition, HUD
is removing Sec. 7501.106 entitled, ``Additional rules for certain
Department employees involved in the regulation or oversight of
Government sponsored enterprises.'' HUD's action is based on its
determination that these provisions are no longer necessary to ensure
public confidence in the impartiality and objectivity with which HUD
programs are administered.
IV. Analysis of the Regulation
The following is a section-by-section overview of the significant
amendments made by this final rule. Members of the public are invited
to review the preamble to HUD's March 14, 2012, proposed rule for a
fuller discussion of the revisions made by this final rule.
Section 7501.102 Definitions
Section 7501.102 updates and clarifies key terms used in the
Supplemental Standard of Conduct. Specifically, the definitions of
``Agency designee'' and ``Designated Agency Ethics Official (DAEO)''
are revised to reflect updated office names and titles within the
current HUD organization. Additionally, the reference to the Inspector
General (IG) is removed from the definition of ``agency designee'' in
favor of adding definitions for ``Bureau,'' ``Bureau Ethics
Counselor,'' and ``Deputy Bureau Ethics Counselor.'' ``Bureau'' is
defined to mean the Office of the Inspector General (OIG). ``Bureau
Ethics Counselor'' and ``Deputy Bureau Ethics Counselor'' are defined
to mean, respectively, the General Counsel for OIG and the OIG
employees to whom the OIG General Counsel delegates responsibility to
make determinations, issue explanatory guidance, or establish
procedures necessary to implement this part, subpart I of 5 CFR 2634,
and 5 CFR part 2635 for Bureau employees. The definition of
``employment'' is also revised to provide that employment includes
uncompensated activity, such as volunteer work for others while off-
duty.
Section 7501.103 Waivers
Section 7501.103 is revised to codify HUD practice that a waiver
request must be in writing, and to guide employees on what should be
included in a waiver request. It also confirms HUD practice that
hardship and other exigent circumstances are legitimate reasons for a
waiver request, and such a request will be considered in light of HUD's
need to ensure public confidence in the impartiality and objectivity
with which HUD programs are administered. This section also delegates
authority to the Bureau Ethics Counselor to waive provisions of this
part.
Section 7501.104 Prohibited Financial Interests
This final rule removes from Sec. 7501.104(a) the reference to
covered employees. This reflects HUD's decision to remove Sec.
7501.106, which provided rules for employees involved in the regulation
or oversight of GSEs. Section 7501.104(a) is also revised by removing
provisions prohibiting HUD employees from receiving, acquiring, or
owning securities issued by Fannie Mae or Freddie Mac and securities
collateralized by Fannie Mae or Freddie Mac. HUD has determined that
these prohibitions are no longer necessary based on the transfer of
regulatory authority from HUD under HERA.
This final rule revises Sec. 7501.104(a)(2), the provision
prohibiting employees, their spouses, and minor children from holding
stock or another financial interest ``in a multifamily project or
single family dwelling, cooperative unit, or condominium unit'' that is
owned or subsidized by the Department, by removing that term and
replacing it with the term ``project.'' The final rule also removes the
term ``stock or other financial interest,'' substitutes the term
``financial interest,'' and references
[[Page 46603]]
OGE's regulations at 5 CFR 2635.403(c) for a complete definition of the
term ``financial interest,'' including examples. These changes provide
clarity to the prohibition and will continue to prohibit HUD employees
from holding ownership interests in all HUD-subsidized or -insured
projects that exist or may come to exist in the future.
Section 7501.104(a)(3) continues to permit HUD employees to
receive, on behalf of a tenant, a Section 8 subsidy under certain
conditions. A new exception permits all new HUD employees who already
have a tenant receiving Section 8 subsidies to retain that tenant until
the tenant terminates his or her lease. In addition, Sec.
7501.104(a)(3)(i)(E) adds a new exception that permits HUD employees to
receive a Section 8 subsidy for the rental of properties located in
areas of Presidentially declared emergency or natural disaster with
prior written approval from an agency designee.
Section 7501.104(b) provides exceptions to Sec. 7501.104(a). This
final rule expands the exceptions by removing a prohibition on owning
investment funds that concentrate in residential mortgages or mortgage-
backed securities. HUD has determined that this prohibition is no
longer needed in light of the fact that HUD no longer has regulatory
authority over Fannie Mae and Freddie Mac.
This final rule continues to permit HUD employee to own homes
financed with mortgages insured under programs of the Federal Housing
Administration (FHA), and continues to permit the purchase by HUD
employees of HUD-owned homes. The provisions permitting HUD employees
to own or acquire these assets are established as exceptions to Sec.
7501.104(a) at Sec. Sec. 7501.104(b)(2) and (b)(3), respectively. In
both sections, this final rule provides that employees must adhere to
the procedures established by the Assistant Secretary for Housing-FHA
Commissioner in order to obtain FHA insurance or to purchase a HUD-held
property.
Section 7501.104(b)(4) provides that the employment compensation
and benefits package for an employee's spouse is not a prohibited
financial interest even if the employee's spouse is employed by an
entity that has interests in HUD projects prohibited under Sec.
7501.104(a)(2). Finally, Sec. 7501.104(b)(5) continues to permit
employees, or their spouses or minor children, to hold Government
National Mortgage Association (GNMA) securities.
Section 7501.105 Outside Activities
Section 7501.105 governs the outside activities of HUD employees.
HUD has determined that maintaining the policy against employment in
businesses related to real estate or manufactured housing is necessary
to protect against questions regarding the impartiality and objectivity
of employees in the administration of HUD programs. Allowing such
activity would hinder HUD in meeting its missions if members of the
public question whether HUD employees are using their public positions
or HUD connections to advance their outside real estate-related
employment. To clarify the intent of this prohibition and support its
consistent application, this final rule amends Sec. 7501.105(a)(1) by
removing the phrase ``involving active participation'' with a real
estate-related business. Additionally, this final rule separates the
prohibition against the ownership activities of operating and managing
a real estate-related business involving investment properties from the
employment prohibition by adding Sec. 7501.105(a)(2), which prohibits
the operation or management of investment properties to the extent that
doing so rises to the level of a real estate business. To make the
prohibition more transparent, HUD is also codifying longstanding policy
by listing several factors that it uses to consider whether the
employee's actions of operating or managing investment properties rise
to the level of a real estate business that falls within the
prohibition. These changes do not change the application of the
prohibition.
This final rule also removes the specific restriction on employees
having outside positions with Fannie Mae and Freddie Mac. As previously
discussed, HUD no longer has general regulatory authority over Fannie
Mae and Freddie Mac. HUD employees, under Sec. 7501.105(a)(1),
continue to be prohibited from employment with a business related to
real estate. This prohibition also covers employment with Fannie Mae
and Freddie Mac.
This final rule adds Sec. 7501.105(b)(2), which codifies HUD's
longstanding policy that employees with a real estate agent's license
may continue to hold such license. An employee may only use his or her
license in relation to purchasing or selling a single-family property
for use as the employee's primary residence, or for the primary
residence of an immediate family of the employee. Employees seeking to
use their real estate license for this purpose, however, must obtain
the prior written approval of an agency ethics official. Section
7501.105(c) is revised to add the requirement for prior written
approval from an agency ethics official for employees seeking to use
their real estate license for this purpose.
Section 7501.105(c)(1) requires an employee to receive written
approval prior to accepting a position of authority with a prohibited
source. This section has been expanded to include all prohibited
sources because HUD has determined that taking a position of authority
with any prohibited source, not just those that receive HUD funding,
creates the appearance of a conflict of interest and should therefore
be examined by an agency ethics official. As discussed in this
preamble, HUD has added the requirement at Sec. 7501.105(c)(1)(iv) for
prior written approval from an agency ethics official for employees
seeking to use their real estate license in relation to purchasing or
selling a single-family property for use as the employee's primary
residence or as the primary residence of an immediate family member of
the employee.
Finally, this final rule adds Sec. 7501.105(d) to incorporate
HUD's policy regarding liaison representatives, which was previously
provided as a Note. This change will avoid any confusion over the
concept and its authority.
Section 7501.106 Bureau Instructions and Designation of Separate Agency
Components
Former Sec. 7501.106 entitled, ``Additional rules for certain
Department employees involved in the regulation or oversight of
Government sponsored enterprises,'' is removed. As previously discussed
in this preamble, HUD no longer has regulatory authority over Fannie
Mae and Freddie Mac and has determined that removing this provision
would not compromise the integrity of HUD's programs and operations.
In its place, HUD is adding a new Sec. 7501.106 that clarifies the
authority of the OIG in the agency's ethics program and establishes it
as a separate component as provided for by 5 CFR 2635.203(a).
Specifically, new Sec. 7501.106(a) delegates to the Bureau Ethics
Counselor the authority to designate Deputy Bureau Ethics Counselors to
make determinations, issue explanatory guidance, and establish
procedures necessary to implement this part, subpart I of 5 CFR 2634,
and 5 CFR part 2635 for their bureau. In addition, new Sec.
7501.106(b) designates the OIG as a separate agency component.
[[Page 46604]]
V. Matters of Regulatory Procedure
Executive Order 12866 and Executive Order 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if the
regulation is necessary, to select the regulatory approach that
maximizes net benefits. Because this rule relates solely to the
internal operations of HUD, this rule was determined to be not a
significant regulatory action under section 3(f) of Executive Order
12866, Regulatory Planning and Review, and therefore was not reviewed
by the Office of Management and Budget (OMB).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally
requires an agency to conduct a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements, unless the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities. This rule would not
have a significant economic impact on a substantial number of small
entities because this rule pertains only to HUD employees.
Information Collection Requirements
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) does not
apply to this regulation because it does not contain information
collection requirements subject to the approval of OMB.
Environmental Impact
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20(k) of HUD regulations, the
policies and procedures contained in this rule relate only to internal
administrative procedures whose content does not constitute a
development decision nor affect the physical condition of project areas
or building sites, and therefore, are categorically excluded from the
requirements of the National Environmental Policy Act.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on state and local governments and
is not required by statute or preempts state law, unless the relevant
requirements of section 6 of the Executive Order are met. This rule
does not have federalism implications and does not impose substantial
direct compliance costs on state and local governments or preempt state
law within the meaning of the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments, and on the private sector. Since it is only
directed toward HUD employees, this rule would not impose any federal
mandates on any state, local, or tribal governments, or on the private
sector, within the meaning of the UMRA.
List of Subjects in 5 CFR Part 7501
Conflicts of interests.
Accordingly, for the reasons described in the preamble, HUD, with
the concurrence of OGE, revises 5 CFR part 7501 to read as follows:
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 activities.
7501.106 Bureau instructions and designation of separate agency
component.
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 Ethics and Personnel Law, the Assistant
General Counsel for the Ethics Law Division, and the HUD Regional
Counsels.
Agency ethics official, as used also in 5 CFR part 2635, means the
agency designees as specified above.
Bureau means the Office of the Inspector General.
Bureau Ethics Counselor means the General Counsel for the Bureau.
Deputy Bureau Ethics Counselor means the Bureau employee or
employees who the Bureau Ethics Counselor has delegated responsibility
to act under Sec. 7501.106 for the Bureau.
Designated Agency Ethics Official (DAEO) means the General Counsel
of HUD or the Deputy General Counsel for Operations in the absence of
the General Counsel.
Employment means any compensated or uncompensated (including
volunteer work for others while off-duty) form of non-federal activity
or business relationship, including self-employment, that involves 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.
Sec. 7501.103 Waivers.
The Designated Agency Ethics Official, or the Bureau Ethics
Counselor for a Bureau employee may waive any provision of this part
upon finding that the waiver will not result in conduct inconsistent
with 5 CFR part 2635 and is not otherwise prohibited by law and that
application of the provision is not necessary to ensure public
confidence in the Department's impartial and objective administration
of its programs. 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. A waiver will be
considered only in response to a written waiver request submitted to an
agency ethics official. The waiver request should include:
(a) The requesting employee's Branch, Unit, and a detailed
description of his or her official duties;
[[Page 46605]]
(b) The nature and extent of the proposed waiver;
(c) A detailed statement of the facts supporting the request; and
(d) The basis for the request, such as undue hardship or other
exigent circumstances.
Sec. 7501.104 Prohibited financial interests.
(a) General requirement. This section applies to all HUD employees
except special Government employees. Except as provided in paragraph
(b) of this section, the employee, or the employee's spouse or minor
child, shall not directly or indirectly receive, acquire, or own:
(1) Federal Housing Administration (FHA) debentures or certificates
of claim;
(2) A financial interest in a project, including any single family
dwelling or unit, which is subsidized by the Department, or which is
subject to a note or mortgage or other security interest insured by the
Department. The definition of ``financial interest'' is found at 5 CFR
2635.403(c);
(3)(i) 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 or the
employee's spouse or minor child. However, such subsidy is permitted
when:
(A) The employee, or the employee's spouse or minor child acquires,
without specific intent as through inheritance, a property in which a
tenant receiving such a subsidy already resides;
(B) The tenant receiving such a subsidy lived in the rental
property before the employee worked for the Department;
(C) The tenant receiving such a subsidy is a parent, child,
grandchild, or sibling of the employee;
(D) The employee's, or the employee's spouse or minor child's,
rental property has an incumbent tenant who has not previously received
such a subsidy and becomes the beneficiary thereof; or
(E) The location of the rental property is in a Presidentially
declared emergency or natural disaster area and the employee receives
prior written approval from an agency designee.
(ii) The exception provided by paragraph (a)(3)(i) of this section
continues only as long as:
(A) The tenant continues to reside in the property; and
(B) There is no increase in that tenant's rent upon the
commencement of subsidy payments other than normal annual adjustments
under the Section 8 program.
(b) Exception to prohibition for certain interests. Nothing in this
section prohibits the employee, or the employee's spouse or minor child
from directly or indirectly receiving, acquiring, or owning:
(1) A financial interest in a publicly available or publicly traded
investment fund that includes financial interests prohibited by
paragraph (a)(2) of this section, so long as the employee neither
exercises control nor has the ability to exercise control over the fund
or the financial interests held in the fund;
(2) 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. Employees must
adhere to the procedures established by the Assistant Secretary for
Housing--FHA Commissioner in order to obtain FHA insurance;
(3) Department-owned single family property. Employees must adhere
to the procedures established by the Assistant Secretary for Housing--
FHA Commissioner in order to purchase a HUD-held property;
(4) Employment compensation and benefit packages provided by the
employer of an employee's spouse that include financial interests
prohibited by paragraph (a)(2) of this section; or
(5) Government National Mortgage Association (GNMA) securities.
(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 date of
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 activities.
(a) Prohibited outside activities. Subject to the exceptions set
forth in paragraph (b) of this section, HUD employees, except special
Government employees, shall not engage in:
(1) Employment with a business related to real estate or
manufactured housing including, but not limited to, real estate
brokerage, management and sales, architecture, engineering, mortgage
lending, property insurance, appraisal services, title search services,
construction, construction financing, land planning, or real estate
development;
(2) The operation or management of investment properties to the
extent that it rises to the level of a real estate-related business.
HUD will determine whether an employee is operating or managing
investment properties to an extent that it rises to the level of a real
estate business based on the totality of the circumstances, and will
consider whether the employee maintains an office; advertises or
otherwise solicits clients or business; hires staff or employees; uses
business stationary or other similar materials; files the business as a
corporation, limited liability company, partnership, or other type of
business association with a state government; establishes a formal or
informal association with an existing business; hires a management
company; and the nature and number of its investment properties;
(3) Employment with a person or entity who registered as a lobbyist
or lobbyist organization pursuant to 2 U.S.C 1603(a) and engages in
lobbying activity concerning the Department;
(4) Employment as an officer or director with a Department-approved
mortgagee, a lending institution, or an organization that services
securities for the Department; or
(5) Employment with 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:
(1) Serving as an officer or a member of the Board of Directors of:
(i) A Federal Credit Union;
(ii) A cooperative, condominium association, or homeowners
association for a housing project that is not subject to regulation by
the Department or, if so regulated, in which the employee personally
resides; or
(iii) An entity designated in writing by the Designated Agency
Ethics Official.
(2) Holding a real estate agent's license; however, use of the
license is limited as provided by paragraph (c) of this section.
(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 a prohibited source, as defined at
5 CFR 2635.203(d);
(ii) With a state or local government;
(iii) In the same professional field as that of the employee's
official position; or
(iv) As a real estate agent in relation to purchasing or selling a
single family
[[Page 46606]]
property for use as the employee's primary residence, or the primary
residence of the employee's immediate family member.
(2) Approval shall be granted unless the conduct is inconsistent
with 5 CFR part 2635 or this part.
(d) Liaison representative. An employee designated 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 designated 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 Bureau instructions and designation of separate agency
component.
(a) Bureau instructions. With the concurrence of the Designated
Agency Ethics Official, the Bureau Ethics Counselor is authorized,
consistent with 5 CFR 2635.105(c), to designate Deputy Bureau Ethics
Counselors, to make a determination, issue explanatory guidance, and
establish procedures necessary to implement this part, subpart I of 5
CFR part 2634, and 5 CFR part 2635 for the Bureau.
(b) Designation of separate agency component. Pursuant to 5 CFR
2635.203(a), the Office of the Inspector General is designated as a
separate agency for purposes of the regulations contained in subpart B
of 5 CFR part 2635, governing gifts from outside sources; and 5 CFR
2635.807, governing teaching, speaking, or writing.
Dated: July 18, 2012.
Shaun Donovan,
Secretary.
Don W. Fox,
Acting Director, Office of Government Ethics.
[FR Doc. 2012-19150 Filed 8-3-12; 8:45 am]
BILLING CODE 4210-67-P
