Supplemental Standards of Ethical Conduct for Employees of the Federal Deposit Insurance Corporation

SUMMARY: The Federal Deposit Insurance Corporation, 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 Corporation to supplement the Standards of Ethical

Conduct for Employees of the Executive Branch (Executive Branch-wide

Standards) issued by OGE. The final rule will become effective 30 days

after the date of publication, and will establish: prohibitions on

borrowing and extensions of credit; prohibitions on the ownership of

certain financial interests; prohibitions on the purchase of property

controlled by the Corporation or the Resolution Trust Corporation

(RTC); limitations on official dealings with former employers and

clients; disqualification requirements relating to employment of family

members outside the Corporation; and limitations on outside employment

activities.

EFFECTIVE DATE: May 25, 1995.

FOR FURTHER INFORMATION CONTACT: Katherine A. Corigliano, Assistant

Executive Secretary (Ethics), (202) 898-7272; Richard M. Handy, Ethics

Program Manager, (202) 898-7271; or Paul A. Jeddeloh, Senior Program

Attorney, (202) 898-7161, in the Office of the Executive Secretary of

the FDIC.

SUPPLEMENTARY INFORMATION:

I. Background

On July 12, 1994, with the concurrence of OGE, the Corporation

published for comment a proposed rule to establish supplemental

standards of ethical conduct for employees of the FDIC (59 FR 35480-

35487). The proposed rule was issued to supplement the Standards of

Ethical Conduct for Employees of the Executive Branch published by OGE

on August 7, 1992, and effective February 3, 1993 (57 FR 35006-35067,

as corrected at 57 FR 48557 and 57 FR 52583, with additional grace

period extensions for certain existing agency standards of conduct at

59 FR 4779-4780 and 60 FR 6390-6391, which grace period expires on

January 3, 1996). The Executive Branch-wide Standards, now 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 and the Resolution Trust Corporation Completion Act (P.L.

103-204) which authorize the Corporation to publish agency-specific

supplemental regulations necessary to implement its ethics program. The

Corporation, with the concurrence of OGE, determined that the

supplemental regulations contained in the proposed rule were necessary

successfully to continue the Corporation's ethics program in light of

the Corporation's unique programs and operations.

The proposed rule prescribed a 60-day comment period and invited

comments from all interested parties. The Corporation received nine

comment letters and, after careful consideration of each comment, has

made appropriate modifications to the rule. Technical changes were made

to accommodate the formation, subsequent to the publication of the

proposed rule, of a new Division within the Corporation--the Division

of Compliance and Consumer Affairs. At the request of the Board of

Directors, a provision was added to the credit restrictions in order to

retain the current restrictions for certain categories of employees of

the Division of Depositor and Asset Services. The Corporation, with the

concurrence of OGE, is now publishing as a final rule the Supplemental

Standards of Conduct for Employees of the Federal Deposit Insurance

Corporation, to be codified in new part 3201 of 5 CFR chapter XXII.

II. Summary of the Comments

The Corporation received comments from eight employees and one

financial institution trade association. The comments from employees

contained both requests for substantive changes and for guidance on the

application of the rule in general or in specific sections. The

comments received from the trade association expressed support for

certain specific sections of the rule and suggested substantive

changes.

III. Analysis of the Comments

Section 3201.101 General

One commenter requested guidance on the meaning of the term

employee as defined in Sec. 3201.101(d) as it would be applied to

employees of contractors doing business with the Corporation. As

required by section 19 of the Resolution Trust Corporation Completion

Act and implemented in the final rule, the term employee includes any

individual who, pursuant to a contract or any other arrangement,

performs functions or activities of the Corporation, under the direct

supervision of an officer or employee of the Corporation. All employees

of contractors who fall under such definition would be subject to the

Executive Branch-wide Standards and specified provisions of part 3201.

Section 3201.102 Extensions of Credit From FDIC-Insured Depository

Institutions

One commenter, in reference to the preamble discussion of

Sec. 3201.102(c) in the proposed rule, asked whether the prohibition on

examiners obtaining extensions of credit from institutions that they

have examined carried a time limitation and expressed concern that the

restriction, if it did not carry a time limitation, was too severe. The

prohibition referred to by the commenter is found at 18 U.S.C. 213, a

criminal statute, and was referenced in the preamble to assist the

reader in understanding part of the basis for the imposition of the

restrictions found at Sec. 3201.102(c). 18 U.S.C. 213 does not carry a

time limitation.

One commenter suggested that, for purposes of Sec. 3201.102(c), an

examiner might not be aware of the identity of the person or company

from whom or which he or she intended to obtain [[Page 20172]] credit.

The Board believes it is reasonable to expect an employee to make

inquiries in order to ascertain the identity of a lender prior to

engaging in a credit transaction. Similarly, the same commenter

suggested that, for purposes of Sec. 3201.102(c)(ii), the headquarters

of a credit card issuer might not be readily apparent. The Board

believes it is also reasonable to expect employees of the Division of

Supervision and the Division of Compliance and Consumer Affairs to make

inquiries to ascertain the location of the headquarters of a credit

card issuer.

The Corporation did not adopt the suggestion of one employee, in

reference to Sec. 3201.102(d) and Sec. 3201.103(c), to restate in part

3201 the text of certain definitions found in the Executive Branch-wide

Standards and referred to in such part. Since part 3201 is a supplement

to the Executive Branch-wide Standards, it is appropriate to make

references to the text of the primary regulation.

The Corporation did not adopt the suggestions of two employees to

narrow or remove the provisions of the regulation found at

Secs. 3201.102(a), as well as at 3201.103(a) and 3201.104(a), under

which the interests of an employee's spouse or minor child are to be

considered as if they were the interests of the employee. The Board

determined that the application of the prohibitions in Secs. 3201.102

to 3201.104 to the interests of a spouse or minor child of an employee

is necessary to avoid the appearance of a lack of impartiality by the

employee in his or her official dealings and to avoid a significant

number of recusals which would hinder program operations. The

application of these provisions to the interests of a spouse or minor

child is consistent with such application in Sec. 2635.403(a) of the

Executive Branch-wide Standards.

The trade association, commenting on the proposed rule, expressed

support for the provisions of Sec. 3201.102 but expressed concern that

an unreasonable recordkeeping burden might result from the two-year

prohibition on acceptance of credit found at Sec. 3201.102(d). The

Board does not believe that compliance with the provision would create

an unreasonable recordkeeping burden since employees have the

responsibility to keep track of matters in which they have participated

and since such requirement imposes no greater burden on an employee

than is imposed by other ethics provisions, such as the statutory post-

employment restrictions found at 18 U.S.C. 207 (a)(1) and (a)(2).

Section 3201.103 Prohibitions on Ownership of Securities of FDIC-

Insured Depository Institutions

One employee and the trade association commented that the exception

dealing with the ownership of interests in investment funds set forth

at Sec. 3201.103(b)(5) was too restrictive since its practical

application would prohibit ownership interests in investment funds

which might not hold interests in FDIC-insured depository institutions.

Based upon the comments, the reference to a fund ``concentrating its

investments in the financial services sector'' was deleted and replaced

with language which prohibits an employee from acquiring an interest in

a fund which, at the time an employee acquires an interest, holds more

than 30 percent of its investments in FDIC-insured depository

institutions or FDIC-insured depository institution holding companies.

Under the revised provision, an employee is required to verify the

holdings of the investment fund at any time the employee acquires an

interest in the fund, unless the acquisition results from the ordinary

reinvestment of earnings the employee has accrued from ownership

interests in the fund. The revised provision addresses the

Corporation's concern over employees holding ownership interests in the

institutions that it insures by prohibiting the acquisition of

interests in banking sector funds and provides employees with broader

investment opportunities than would have been provided by the proposed

rule.

Section 3201.104 Restrictions Concerning the Purchase of Property Held

by the Corporation or the RTC as Conservator, Receiver, or Liquidator

of the Assets of an Insured Depository Institution, or by a Bridge Bank

Organized by the Corporation

One commenter asked whether the term ``property'' as used in

Sec. 3201.104(a) includes furniture, fixtures, equipment, securities

and other items. The term ``property'' is intended to include all of

the items specified as well as other assets held by the Corporation or

the RTC as conservator, receiver, or liquidator of the assets of an

insured depository institution, or by a bridge bank organized by the

Corporation.

One employee suggested that the prohibition on employee purchases

of property held by the FDIC or RTC be expanded to prohibit employees

of FDIC contractors from purchasing such assets. No change was made to

the provision since the application of the rule is limited to FDIC

employees. Employees of contractors would only be covered by the rule

when such contractor employees are considered employees of the FDIC as

delineated in Sec. 3201.101(d)(4).

Section 3201.105 Prohibitions on Dealings With Former Employers,

Associates, and Clients

One employee suggested that the discretionary extension of the one-

year disqualification on dealings with former employers, associates,

and clients at Sec. 3201.105(c) specify that the discretion to impose

the extension would only be applicable after an individual becomes an

employee of the Corporation. No change was made to accommodate this

suggestion since the rule, as proposed, is only applicable to those who

have become Corporation employees.

In response to the suggestion of the trade association that, in the

case of an employee who was unemployed for the one-year period

immediately preceding entry on duty with the Corporation, the

prohibition on dealings with former employers be extended to include a

one-year prohibition on dealings with the last employer of the employee

regardless of when the employee was last employed, Sec. 3201.105(c) was

modified to provide the Corporation with discretion to extend the one-

year period preceding an employee's entrance on duty with the

Corporation, during which extended period employment will trigger

disqualification from matters affecting that former employer. The

interests of the Corporation in avoiding the appearance of a lack of

impartiality by an employee in his or her official dealings is better

served by extending the rule on a case-by-case basis as circumstances

warrant.

Section 3201.106 Employment of Family Members Outside the Corporation

The Board did not adopt the suggestion of one employee to define

separately the terms ``family'' and ``household.'' The term ``family''

is used only in the title of Sec. 3201.106 with specific

classifications of family members set forth in that section. The phrase

``member of the employee's household'' is generally understood, and is

used without specific regulatory definition in the Executive Branch-

wide Standards at Sec. 2635.502. The same employee also commented that

an undue burden would be created by requiring employees to report the

employment of family members not residing with the employee by FDIC-

insured depository institutions. Because the reporting requirement

applies only to the employment of spouses, children, parents, and

siblings, the Board does not [[Page 20173]] share the commenter's view

that the requirement could be onerous and unreasonable. Moreover, the

Corporation's prior regulation at 12 CFR 336.23, containing a

substantially identical reporting requirement, appears to have been

implemented without unduly burdening employees.

Section 3201.107 Outside Employment and Other Activities

The Corporation did not adopt the suggestions of one employee and

the trade association to tailor the application of the prohibition on

outside employment with FDIC-insured depository institutions to the

various positions held by Corporation employees within the Corporation

or to positions held by employees in FDIC-insured depository

institutions. The Corporation's sensitive relationships with FDIC-

insured depository institutions would invariably raise, at a minimum,

the appearance of preferential dealings or treatment whenever an FDIC

employee is provided compensation by such institution. In order to

avoid an adverse public perception and recusals in the operation of the

Corporation's programs, the Board determined that it was appropriate to

prohibit employees from engaging in compensated outside employment with

FDIC-insured depository institutions.

The Board did not adopt the suggestion of one commenter that the

restriction at Sec. 3201.107(b) on the use of real estate licenses by

employees whose duties with the Corporation require involvement in

matters related to real estate be eliminated for purposes of the

purchase and sale of an employee's personal residence or the purchase

and sale of real estate for the employee's personal investment

portfolio. The rule, as proposed and now as being adopted in final, is

intended to balance an employee's right to engage in outside activities

against the interests of the Corporation in protecting against

questions regarding the impartiality and objectivity of employees and

the administration of the Corporation's programs. It would hinder the

Corporation in meeting its missions if members of the public were to

question whether Corporation employees are using their public positions

or official contacts for private gain, including advancing their

personal real estate careers. It is important to note that the

restriction on the use of such licenses specifies that the prohibition

applies only to those situations involving the production of income,

thus targeting those situations most likely to raise questions by

members of the public. The use of a real estate license for the

purchase of a personal residence or vacation home would not ordinarily

be restricted since such transaction normally does not result in the

production of income.

The same commenter also suggested that Sec. 3201.107(b) was vague

and uncertain as written and that it should be re-written to provide

detailed procedural rules and an appeals procedure. The Board did not

share the view of the commenter. As written, the rule clearly prohibits

the use of professional licenses by employees and sets forth a standard

of review for requests for exceptions to the application of the

prohibition.

IV. Other Changes

The Board of Directors, upon reconsideration of the existing FDIC

standards set forth at 12 CFR part 336, requested that the existing

restriction on extensions of credit for field employees of the Division

of Depositor and Asset Services, formerly the Division of Liquidation,

be retained in the final rule in order to eliminate the possibility

that employees who participate in asset disposition activities will be

able to obtain favored treatment from assisted or assuming entities

located in their region of assignment. Therefore, a new

Sec. 3201.102(e) was added which continues to apply the existing

standard as set forth at 12 CFR 336.16(b)(3) to field employees of the

Division of Depositor and Asset Services. To accommodate the added

provision, definitions for assisted entity and assuming entity were

taken from part 336 and added at Sec. 3201.101(d)(3) and

Sec. 3201.101(d)(4), respectively. The existing standard, as set forth

in the final rule, provides that a covered employee in the Division of

Depositor and Asset Services assigned to a service center or other

field office is prohibited from obtaining credit from an assisted or

assuming entity, except for credit extended through the use of a credit

card under the same terms and conditions as are offered to the general

public. An assisted entity is generally defined as an FDIC-insured

depository institution which has received financial assistance from the

FDIC in order to prevent its failure, any FDIC-insured depository

institution resulting from a merger or consolidation with an

institution that has received such assistance, and a holding company of

an institution that has received assistance or has resulted from a

merger or consolidation with such institution. An assisted entity

retains its status as an assisted entity for such time as there is an

ongoing financial relationship with the FDIC.

An assuming entity is generally defined as an FDIC-insured

depository institution which has entered into a transaction to purchase

some or all of the assets and some or all of the liabilities of a

failed FDIC-insured depository institution, any holding company of such

institution, any FDIC-insured depository institution resulting from

such transaction and its wholly owned subsidiaries, and any branches or

wholly owned subsidiaries of the purchaser or its holding company. An

assuming entity retains its status as an assuming entity for a period

of one year after the failure of the FDIC-insured depository

institution.

V. Removal of FDIC Employee Responsibilities and Conduct Regulations

and Related Modifications

On the effective date of the final rule, the Employee

Responsibilities and Conduct regulation, 12 CFR part 336, will be

amended to remove and reserve subparts A, B, C, E, and F, Secs. 336.1-

336.23 and Secs. 336.29-336.37, and remove the appendix to part 336.

Additionally, a new Sec. 336.1 will be added to provide a cross-

reference to the Corporation's supplemental ethical conduct regulation,

to be codified at 5 CFR part 3201, the Corporation's supplemental

financial disclosure regulation at 5 CFR part 3202, and to the

Executive Branch-wide financial disclosure and standards of ethical

conduct regulations at 5 CFR parts 2634 and 2635. 12 CFR part 336,

subpart D, Secs. 336.24 through 336.28, was removed and reserved by

action of the Board of Directors of the Corporation dated November 24,

1992, 57 FR 39628.

VI. Matters of Regulatory Procedure

Regulatory Flexibility Act

The Board of Directors has concluded that the final rule will not

impose a significant economic hardship on small institutions.

Therefore, the Board of Directors hereby certifies pursuant to section

605 of the Regulatory Flexibility Act (5 U.S.C. 605) that the rule will

not have a significant economic impact on a substantial number of small

business entities within the meaning of the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.).

Paperwork Reduction Act

The Board of Directors has determined that this final rule does not

contain any information collection requirements that require the

approval of the Office of Management and Budget [[Page 20174]] pursuant

to the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

List of Subjects

5 CFR Part 3201

Administrative practice and procedure, Conflict of interests,

Government employees, Reporting and recordkeeping requirements.

12 CFR Part 336

Conflict of interests, Government employees.

Dated at Washington, D.C. this 11th day of April, 1995.

By Order of the Board of Directors.

Federal Deposit Insurance Corporation.

Patti C. Fox,

Acting Deputy Executive Secretary.

(SEAL)

Concurred in this 14th day of April, 1995.

Stephen D. Potts,

Director, Office of Government Ethics.

For the reasons set forth in the preamble, the Federal Deposit

Insurance Corporation, with the concurrence of the Office of Government

Ethics, is amending title 5, Chapter XXII, of the Code of Federal

Regulations and title 12, Chapter III, of the Code of Federal

Regulations as follows:

5 CFR CHAPTER XXII--FEDERAL DEPOSIT INSURANCE CORPORATION

1. A new part 3201 is added to 5 CFR chapter XXII to read as

follows:

PART 3201--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES

OF THE FEDERAL DEPOSIT INSURANCE CORPORATION

Sec.

3201.101 General.

3201.102 Extensions of credit from FDIC-insured depository

institutions.

3201.103 Prohibitions on ownership of securities of FDIC-insured

depository institutions.

3201.104 Restrictions concerning the purchase of property held by

the Corporation or the RTC as conservator, receiver, or liquidator

of the assets of an insured depository institution, or by a bridge

bank organized by the Corporation.

3201.105 Prohibition on dealings with former employers, associates,

and clients.

3201.106 Employment of family members outside the Corporation.

3201.107 Outside employment and other activities.

3201.108 Related statutory and regulatory authorities.

3201.109 Provisions of 5 CFR part 2635 not applicable to

Corporation employees.

Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government

Act of 1978); 12 U.S.C. 1819(a), 1822; 26 U.S.C. 1043; 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, 2635.403,

2635.502, and 2635.803.

Sec. 3201.101 General.

(a) Purpose. The regulations in this part apply to employees of the

Federal Deposit Insurance Corporation (Corporation) and supplement the

Standards of Ethical Conduct for Employees of the Executive Branch

contained in 5 CFR part 2635. Where specified, these regulations also

apply to the Comptroller of the Currency and the Director of the Office

of Thrift Supervision in connection with their activities as members of

the Corporation's Board of Directors.

(b) Corporation ethics officials. The Executive Secretary of the

Corporation shall act as the Corporation's Ethics Counselor and as its

Designated Agency Ethics Official under 5 CFR part 2638. The Assistant

Executive Secretary (Ethics) shall act as the Corporation's Alternate

Ethics Counselor and as the Alternate Agency Ethics Official.

(1) The Ethics Counselor or Alternate Ethics Counselor may delegate

authority to one or more employees to serve as Deputy Ethics

Counselors.

(2) The delegation to a Deputy Ethics Counselor shall be in writing

and cannot be redelegated.

(c) Agency designees. The Ethics Counselor and Alternate Ethics

Counselor shall serve as the agency designees for purposes of making

the determinations, granting the approvals, and taking other actions

required by an agency designee under part 2635 and this part. The

Ethics Counselor or Alternate Ethics Counselor may delegate authority

to Deputy Ethics Counselors or to other employees to serve as agency

designees for specified purposes. The delegation to any agency designee

shall be in writing and cannot be redelegated.

(d) Definitions. For purposes of this part:

(1) Affiliate, as defined in 12 U.S.C. 1841(k), means any company

that controls, is controlled by, or is under common control with

another company.

(2) Appropriate director means the head of a Washington office or

division or the highest ranking official assigned to a regional office

in each division or the Ethics Counselor.

(3)(i) Assisted entity means:

(A) Any FDIC-insured depository institution which has received

financial assistance from the FDIC to prevent its failure;

(B) Any FDIC-insured depository institution resulting from a merger

or consolidation with any institution described in paragraph (d)(3)(i)

of this section; and

(C) Any holding company of an FDIC-insured depository institution

described in paragraphs (d)(3)(i) or (d)(3)(ii) of this section.

(ii) An assisted entity retains its status as an assisted entity

for such time as there is an ongoing financial relationship with the

FDIC including, but not limited to, a loan repayment obligation, the

servicing of assets on behalf of the FDIC, or the retention by the FDIC

of stock or stock warrants in the assisted entity.

(4)(i) Assuming entity means:

(A) Any FDIC-insured depository institution or FDIC-insured

depository institution holding company which has entered into a

transaction with the FDIC to purchase some or all of the assets and

assume some or all of the liabilities of a failed FDIC-insured

depository institution;

(B) Any FDIC-insured depository institution resulting from the

transaction described in paragraph (d)(4)(i) of this section and its

wholly owned subsidiaries; and

(C) Any branches and the wholly owned subsidiaries of the

institutions described in paragraph (d)(4)(i) of this section.

(ii) An assuming entity retains its status as an assuming entity

for a period of one year after the failure of the FDIC-insured

depository institution.

(5) Covered employee means an employee of the Corporation required

to file a public or confidential financial disclosure report under 5

CFR part 2634 or 5 CFR part 3202.

(6) Employee means an officer or employee, other than a special

Government employee, of the Corporation including a member of the Board

of Directors appointed under the authority of 12 U.S.C. 1812(a)(1)(C),

and a liquidation graded employee. For purposes of 5 CFR part 2635 and

Secs. 3201.103 and 3201.104, employee includes any individual who,

pursuant to a contract or any other arrangement, performs functions or

activities of the Corporation, under the direct supervision of an

officer or employee of the Corporation.

(7) Security includes an interest in debt or equity instruments.

The term includes, without limitation, a secured or unsecured bond,

debenture, note, securitized assets, commercial paper, and all types of

preferred and common stock. The term includes an interest or right in a

security, whether current or contingent, a beneficial or legal interest

derived from a trust, the right to acquire or dispose of any long or

short position, an interest convertible into a security, and an option,

right, warrant, put, or call with respect to a security. The term

[[Page 20175]] security does not include a deposit account.

(8) State nonmember bank means any State bank as defined in 12

U.S.C. 1813(e) which is not a member of the Federal Reserve System.

(9) Subsidiary, as defined in 12 U.S.C. 1813(w), means any company

which is owned or controlled directly or indirectly by another company.

Sec. 3201.102 Extensions of credit from FDIC-insured depository

institutions.

(a) Credit subject to this section. The prohibition,

disqualification, and retention provisions of this section apply to a

current or contingent financial obligation of the employee. For

purposes of this section, a current or contingent financial obligation

of an employee's spouse or minor child is considered to be an

obligation of the employee.

(b) Prohibition on acceptance of credit from FDIC-insured State

nonmember banks applicable to certain high-level officials. (1) An

employee described in paragraph (b)(2) of this section shall not,

directly or indirectly, accept or become obligated on an extension of

credit from an FDIC-insured State nonmember bank or its subsidiary,

except credit extended through the use of a credit card under the same

terms and conditions as are offered to the general public.

(2) The prohibition in paragraph (b)(1) of this section applies to:

(i) An employee who is a member of the Board of Directors, an

assistant or deputy to the Board of Directors or to an appointed Board

member, and a covered employee who is an assistant to such person; and

(ii) The director of a Washington office or of a division, other

than the Division of Supervision and the Division of Compliance and

Consumer Affairs, and a covered employee who holds a position

immediately subordinate to such director.

(c) Prohibition on acceptance of credit from FDIC-insured State

nonmember banks for employees assigned to the Division of Supervision

and employees assigned to the Division of Compliance and Consumer

Affairs. (1) An employee described in paragraph (c)(2) of this section

shall not, directly or indirectly, accept or become obligated on an

extension of credit from an FDIC-insured State nonmember bank or from

an officer, director, employee, or subsidiary of such bank, except:

(i) For an employee assigned to the Washington office, credit

extended through the use of a credit card on the same terms and

conditions as are offered to the general public; and

(ii) For an employee assigned to other than the Washington office,

credit extended by an FDIC-insured State nonmember bank headquartered

outside the employee's region of official assignment through the use of

a credit card on the same terms and conditions as are offered to the

general public.

(2) The prohibition in paragraph (c)(1) of this section applies to

the Executive Director for Supervision, Resolutions, and Compliance,

the Director of the Division of Supervision, the Director of the

Division of Compliance and Consumer Affairs, a covered employee

immediately subordinate to the Executive Director for Supervision,

Resolutions, and Compliance, the Director of the Division of

Supervision, or the Director of the Division of Compliance and Consumer

Affairs, and the following employees assigned to the Division of

Supervision and the Division of Compliance and Consumer Affairs: an

Assistant Director, Regional Director, Deputy Regional Director,

Assistant Regional Director, Regional Manager, examiner, assistant

examiner, review examiner, compliance examiner, assistant compliance

examiner, and a covered employee.

(3) Upon accepting credit extended by a credit card in accordance

with paragraph (c)(1)(i) or (c)(1)(ii) of this section, the employee

shall be disqualified in accordance with paragraph (f)(1) of this

section, and, within 30 days of accepting such credit, shall file with

the appropriate director a Statement of Credit Card Obligation in

Insured State Nonmember Bank and Acknowledgement of Conditions for

Retention--Notice of Disqualification.

(d) Two-year prohibition on acceptance of credit from FDIC-insured

depository institutions. (1) An employee described in paragraph (d)(2)

of this section shall not, directly or indirectly, accept or become

obligated on an extension of credit from an FDIC-insured depository

institution or its subsidiary for a period of two years from the date

of the employee's last personal and substantial participation in an

audit, resolution, liquidation, supervisory proceeding, or internal

agency deliberation affecting that particular institution, its

predecessor or successor, or any subsidiary of such institution. This

prohibition does not apply to credit obtained through the use of a

credit card under the same terms and conditions as are offered to the

general public.

(2) The prohibition in paragraph (d)(1) of this section applies to

an employee in the Division of Finance, Division of Depositor and Asset

Services, Division of Resolutions, Legal Division, or who is a member

of a standing committee of the Board of Directors whose official duties

include:

(i) Audit of insured depository institutions for deposit insurance

assessment purposes;

(ii) Resolution or liquidation of failed or failing insured

depository institutions;

(iii) Participation in the supervision of insured depository

institutions or enforcement proceedings under the Federal Deposit

Insurance Act; or

(iv) Internal agency deliberations affecting a particular insured

depository institution, its predecessor or successor, or a subsidiary

of such institution.

(e) Prohibition on acceptance of credit from an assisted or

assuming entity for employees of the Division of Depositor and Asset

Services. (1) An employee described in paragraph (e)(2) of this section

shall not, directly or indirectly, accept or become obligated on any

extension of credit from an assisted or assuming entity located in the

employee's region of official assignment. This prohibition does not

apply to credit obtained through the use of a credit card under the

same terms and conditions as are offered to the general public.

(2) The prohibition in paragraph (e)(1) of this section applies to

a regional director, deputy regional director, and any other covered

employee in the Division of Depositor and Asset Services assigned to a

service center or other field office.

(f) Employee disqualification. (1) An employee described in

paragraph (c)(2) of this section shall not participate in an

examination, audit, visitation, review, or investigation, or other

particular matter involving an FDIC-insured depository institution or

other person with whom the employee has an outstanding extension of

credit.

(2) A covered employee, other than an employee who is described in

paragraph (c)(2) of this section, shall not participate in any

particular matter involving an FDIC-insured depository institution or

other person with whom the employee has an outstanding extension of

credit.

(3) Disqualification is not required under paragraph (f)(2) of this

section:

(i) If the credit was extended through the use of a credit card on

the same terms and conditions as are offered to the general public; or

(ii) When the agency designee, with the concurrence of the

appropriate director, has authorized the employee to participate in the

matter using the standard set forth in 5 CFR 2635.502(d).

(4) The Comptroller of the Currency and the Director of the Office

of Thrift [[Page 20176]] Supervision shall be disqualified from matters

pending before the Board of Directors to the same extent as a covered

employee subject to paragraph (f)(2) of this section.

(g) Retention and renegotiation of pre-existing extensions of

credit. (1) Nothing in this section prohibits the retention of a pre-

existing extension of credit that an employee would be prohibited from

accepting by Sec. 3201.102(b) or (c) if the extension of credit was

permitted to be retained under 12 CFR part 336 prior to the adoption of

this regulation or if the employee's acceptance of the extension of

credit was proper at the time the obligation was incurred, as in the

case of an extension of credit incurred prior to commencement of

employment or reassignment to another division or location. Subsequent

action affecting the status of the creditor, such as merger,

acquisition, or transaction under 12 U.S.C. 1823, does not change the

character of an extension of credit that was proper when incurred. An

employee who retains a pre-existing extension that he or she would be

prohibited from accepting by Sec. 3201.102(b) or (c) shall report the

pre-existing extension of credit to the appropriate director or agency

designee within 30 days from the following event, as appropriate:

(i) Adoption of this part;

(ii) Commencement of employment;

(iii) Assignment to another division or location; or

(iv) Action affecting the status of the creditor.

(2) Any renegotiation of a pre-existing extension of credit shall

be treated as a new extension of credit that is subject to the

prohibitions contained in Sec. 3201.102(b) through (d). An employee may

request that an exception be made to the prohibitions to permit

renegotiation of a pre-existing extension of credit. Any such request

shall be made in writing to the appropriate director and agency

designee, or in the case of an employee described in paragraph

(b)(2)(i) and (ii) of this section, to the Ethics Counselor, stating:

(i) The purpose of the renegotiation;

(ii) The terms and conditions of the original extension of credit;

(iii) The terms and conditions now available to the general public;

(iv) The terms and conditions now offered to the employee;

(v) The action the employee has taken to move the loan to an

institution from which an employee would not be prohibited from

accepting an extension of credit; and

(vi) The financial hardship, if any, denial of the request will

cause.

(3) After submission of the request, the appropriate director and

agency designee, or the Ethics Counselor, may grant the employee's

request based upon a written determination that the request is not

inconsistent with 5 CFR part 2635 or otherwise prohibited by law and

that, under the particular circumstances, application of the

prohibition is not necessary to avoid the appearance of the misuse of

position or loss of impartiality, or otherwise to ensure confidence in

the impartiality and objectivity with which agency programs are

administered.

Sec. 3201.103 Prohibitions on ownership of securities of FDIC-insured

depository institutions.

(a) Prohibition on ownership. Except as permitted by this section,

an employee or the spouse or minor child of an employee, shall not

acquire, own, or control, directly or indirectly, a security of an

FDIC-insured depository institution, or an affiliate of an FDIC-insured

depository institution.

(b) Exception to prohibition for certain interests. Nothing in this

section prohibits an employee, or the spouse or minor child of an

employee, from:

(1) Acquiring, owning or controlling the securities of certain

publicly traded bank holding companies or their nonbank subsidiaries

where the bank holding company is not primarily engaged in banking and

either the bank holding company or the bank it holds is exempt under

the provisions of the Bank Holding Company Act of 1956 and which are

identified as such by the Board of Governors of the Federal Reserve

System (a list of exempt institutions can be obtained from the

Corporation's Ethics Section);

(2) Acquiring, owning, or controlling the securities of certain

nonfinancial savings association holding companies whose principal

business is unrelated to the financial services industry and which are

identified as such by the Office of Thrift Supervision pursuant to 5

CFR 3101.109(b)(3)(ii) (a list of such institutions can be obtained

from the Corporation's Ethics Section);

(3) Retaining a security of an FDIC-insured depository institution

or an affiliate of an FDIC-insured depository institution if the

security was permitted to be retained by the employee under 12 CFR part

336 prior to the adoption of this regulation, was obtained prior to

commencement of employment with the Corporation, or was acquired by a

spouse prior to marriage to the employee;

(4) Acquiring, owning, or controlling a security of an FDIC-insured

depository institution or the affiliate of an FDIC-insured depository

institution where the security was acquired by inheritance, gift, stock

split, involuntary stock dividend, merger, acquisition, or other change

in corporate ownership, exercise of preemptive right, or otherwise

without specific intent to acquire the security. This provision permits

the retention of any such interest only where:

(i) The employee makes full, written disclosure on FDIC form 2410/

07 to the Ethics Counselor within 30 days of commencing employment or

acquiring the interest; and

(ii) The employee is disqualified in accordance with 5 CFR part

2635, subpart D, from participating in any particular matter that

affects his or her financial interests, or that of his or her spouse or

minor child;

(5) Acquiring, owning, or controlling an interest in a publicly

traded or publicly available investment fund provided that, upon

initial or subsequent investment by the employee (excluding ordinary

dividend reinvestment), the fund does not have invested, or indicate in

its prospectus the intent to invest, more than 30 percent of its assets

in the securities of one or more FDIC-insured depository institutions

or FDIC-insured depository institution holding companies and the

employee neither exercises control nor has the ability to exercise

control over the financial interests held in the fund; or

(6) Using an FDIC-insured depository institution or an affiliate of

an FDIC-insured depository institution as custodian or trustee of

accounts containing tax-deferred retirement funds.

(c) Divestiture. Based upon a determination of substantial conflict

under 5 CFR 2635.403(b), the Ethics Counselor may require an employee,

or the spouse or minor child of an employee, to divest a security he or

she is otherwise authorized to retain under paragraph (b) of this

section.

Sec. 3201.104 Restrictions concerning the purchase of property held by

the Corporation or the RTC as conservator, receiver, or liquidator of

the assets of an insured depository institution, or by a bridge bank

organized by the Corporation.

(a) Prohibition on purchase of property. An employee, and an

employee's spouse or minor child shall not, directly or indirectly,

purchase or acquire any property held or managed by the Corporation or

the Resolution Trust Corporation (RTC) as conservator, receiver, or

liquidator of the assets of an insured depository institution, or by a

bridge bank organized by the [[Page 20177]] Corporation, regardless of

the method of disposition of the property.

(b) Disqualification. An employee who is involved in the

disposition of assets held by the Corporation or the RTC as

conservator, receiver, or liquidator of the assets of an insured

depository institution, or by a bridge bank organized by the

Corporation shall not participate in the disposition of assets held in

such capacities when the employee knows that any party with whom the

employee has a covered relationship, as defined in 5 CFR

2635.502(b)(1), is or will be attempting to acquire such assets. The

employee shall provide written notification of the disqualification to

his or her immediate supervisor and the agency designee.

Sec. 3201.105 Prohibition on dealings with former employers,

associates, and clients.

(a) An employee is prohibited for one year from the date of entry

on duty with the Corporation from participating in a particular matter

when an employer, or the successor to the employer, for whom the

employee worked at any time during the one year preceding the

employee's entrance on duty is a party or represents a party to the

matter.

(b) For purposes of this section, the term employer means a person

with whom the employee served as officer, director, trustee, general

partner, agent, attorney, accountant, consultant, contractor, or

employee.

(c) The one-year prohibition imposed by paragraph (a) of this

section, and the one-year period preceding the employee's entrance on

duty specified in paragraph (a) of this section, may each be extended

in an individual case based on a written determination by the agency

designee that, under the particular circumstances, the employee's

participation in the particular matter would cause a reasonable person

with knowledge of the facts to question his or her impartiality.

Sec. 3201.106 Employment of family members outside the Corporation.

(a) Disqualification of employees. An employee shall not

participate in an examination, audit, investigation, application,

contract, or other particular matter if the employer of the employee's

spouse, child, parent, brother, sister, or a member of the employee's

household is a party or represents a party to the matter, unless an

agency designee authorizes the employee to participate using the

standard in 5 CFR 2635.502(d).

(b) Reporting certain relationships. A covered employee shall make

a written report to an agency designee within 30 days of the employment

of the employee's spouse, child, parent, brother, sister, or a member

of the employee's household by:

(1) An FDIC-insured depository institution or its affiliate;

(2) A firm or business with which, to the employee's knowledge, the

Corporation has a contractual or other business or financial

relationship; or

(3) A firm or business which, to the employee's knowledge, is

seeking a business or contractual relationship with the Corporation.

Sec. 3201.107 Outside employment and other activities.

(a) Prohibition on employment with FDIC-insured depository

institutions. An employee shall not provide service for compensation,

in any capacity, to an FDIC-insured depository institution or an

employee or person employed by or connected with such institution.

(b) Use of professional licenses. A covered employee who holds a

license related to real estate, appraisals, securities, or insurance

and whose official duties with the Corporation require personal and

substantial involvement in matters related to, respectively, real

estate, appraisal, securities, or insurance is prohibited from using

such license, other than in the performance of his or her official

duties, for the production of income. The appropriate director, in

consultation with an agency designee, may grant exceptions to this

prohibition based on a finding that the specific transactions which

require use of the license will not create an appearance of loss of

impartiality or use of public office for private gain.

(c) Responsibility to consult with agency designee. An employee who

engages in, or intends to engage in, any outside employment or other

activity that may require disqualification from the employee's official

duties shall consult with an agency designee prior to engaging in or

continuing to engage in the activity.

Sec. 3201.108 Related statutory and regulatory authorities.

(a) 18 U.S.C. 213, which prohibits an examiner from accepting a

loan or gratuity from an FDIC-insured depository institution examined

by him or her or from any person connected with such institution.

(b) 18 U.S.C. 1906, which prohibits disclosure of information from

a bank examination report except as authorized by law.

(c) 17 CFR 240.10b-5 which prohibits the use of manipulative or

deceptive devices in connection with the purchase or sale of any

security.

(d) 18 U.S.C. 1909, which prohibits examiners from providing any

service for compensation for any bank or person connected therewith.

Sec. 3201.109 Provisions of 5 CFR part 2635 not applicable to

Corporation employees.

The following provisions of 5 CFR part 2635 are not applicable to

employees of the Corporation:

(a) Because of the restrictions imposed by 18 U.S.C. 213 on

examiners accepting loans or gratuities, an examiner in the Division of

Supervision or Division of Compliance and Consumer Affairs may not use

any of the gift exceptions at 5 CFR 2635.204 to accept a gift from an

FDIC-insured depository institution examined by him or her or from any

person connected with such institution.

(b) Provisions of 41 U.S.C. 423 (Procurement integrity) and the

implementing regulations at 48 CFR 3.104 (of the Federal Acquisition

Regulation) applicable to procurement officials referred to in:

(1) 5 CFR 2635.202(c)(4)(iii);

(2) The note following 5 CFR 2635.203(b)(7);

(3) Example 5 following 5 CFR 2635.204(a);

(4) Examples 2 and 3 following 5 CFR 2635.703(b)(3);

(5) 5 CFR 2635.902(f), (h), (l), and (bb);

(c) Provisions of 31 U.S.C. 1353 (Acceptance of travel and related

expenses from non-Federal sources) and the implementing regulations at

41 CFR part 304-1 (Acceptance of payment from a non-Federal source for

travel expenses) referred to in 5 CFR 2635.203(b)(8)(i).

(d) Provisions of 41 CFR Chapter 101 (Federal Property Management

Regulations) referred to in 5 CFR 2635.205(a)(4).

(e) Provisions of 41 CFR Chapter 201 (Federal Information Resources

Management Regulation) referred to in Example 1 following 5 CFR

2635.704(b)(2).

12 CFR CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION

PART 336--EMPLOYEE RESPONSIBILITIES AND CONDUCT

2. The authority citation for part 336 is revised to read as

follows:

Authority: 5 U.S.C. 7301; 12 U.S.C. 1819(a).

3. Section 336.1 is revised to read as follows: [[Page 20178]]

Sec. 336.1 Cross-reference to employee ethical conduct standards and

financial disclosure regulations.

Employees of the Federal Deposit Insurance Corporation

(Corporation) are subject to the Executive Branch-wide Standards of

Ethical Conduct at 5 CFR part 2635, the Corporation regulation at 5 CFR

part 3201 which supplements the Executive Branch-wide Standards, the

Executive Branch-wide financial disclosure regulations at 5 CFR part

2634, and the Corporation regulation at 5 CFR part 3202 which

supplements the Executive Branch-wide financial disclosure regulations.

Secs. 336.2-336.23 [Removed]

Secs. 336.29-336.37 [Removed]

Appendix to Part 336 [Removed]

4. Sections 336.2 through 336.23 and 336.29 through 336.37 and all

subpart headings are removed and reserved and the appendix to part 336

is removed.

[FR Doc. 95-9733 Filed 4-24-95; 8:45 am]

BILLING CODE 6714-01-P