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

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Rules and Regulations Federal Register

25015 

Vol. 77, No. 82 

Friday, April 27, 2012 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

5 CFR Chapter LXXXIV 

[Docket No. CFPB–2012–0016] 

RIN 3209–AA15 

Supplemental Standards of Ethical 

Conduct for Employees of the Bureau 

of Consumer Financial Protection 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Interim final rule with request 

for public comment. 

SUMMARY: The Bureau of Consumer 

Financial Protection (CFPB or Bureau), 

with the concurrence of the Office of 

Government Ethics (OGE), is issuing 

this interim final rule for employees of 

the Bureau. This rule supplements the 

Standards of Ethical Conduct for 

Employees of the Executive Branch 

(OGE Standards) issued by OGE and is 

necessary because it addresses ethical 

issues unique to the Bureau. The rule 

establishes restrictions on outside 

employment and business activities; 

prohibitions on the ownership of certain 

financial interests; restrictions on 

seeking, obtaining or renegotiating 

credit and indebtedness; prohibitions on 

recommendations concerning debt and 

equity interests; disqualification 

requirements based on credit or 

indebtedness; prohibitions on 

purchasing certain assets; and 

restrictions on participating in 

particular matters involving outside 

entities. 

DATES: This interim final rule is 

effective June 26, 2012. Written 

comments are invited and must be 

received on or before June 26, 2012. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2012– 

0016, by any of the following methods: 

• Electronic: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail/Hand Delivery/Courier: 

Monica Jackson, Office of the Executive 

Secretary, Consumer Financial 

Protection Bureau, 1700 G Street NW., 

Washington, DC 20552. 

Instructions: All submissions must 

include the agency name and docket 

number or Regulatory Information 

Number (RIN) for this rulemaking. In 

general, all comments received will be 

posted without change to http:// 

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. 

FOR FURTHER INFORMATION CONTACT: 

Amber Vail at (202) 435–7305 or Amy 

Mertz Brown at (202) 435–7256 at the 

Office of General Counsel, Consumer 

Financial Protection Bureau. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On August 7, 1992, OGE published 

the OGE Standards. See 57 FR 35006– 

35067, as corrected at 57 FR 48557, 57 

FR 52483, and 60 FR 51167, with 

additional grace period extensions for 

certain existing provisions at 59 FR 

4779–4780, 60 FR 6390–6391, and 60 

FR 66857–66858. The OGE Standards, 

codified at 5 CFR part 2635, effective 

February 3, 1993, established uniform 

standards of ethical conduct that apply 

to all executive branch personnel. 

Section 2635.105 of the OGE 

Standards authorizes an agency, with 

the concurrence of OGE, to adopt 

agency-specific supplemental 

regulations that are necessary to 

properly implement its ethics program. 

The Bureau, with OGE’s concurrence, 

has determined that the following 

supplemental regulations are necessary 

for successful implementation of its 

ethics program in light of the Bureau’s 

unique programs and operations. 

II. Analysis of the Regulations 

Section 9401.101 General 

Section 9401.101 explains that the 

regulations contained in part 9401 

(CFPB Ethics Regulations) apply to 

employees of the Bureau and 

supplement the OGE Standards. The 

section also includes cross-references to 

other ethics restrictions applicable to 

employees—including the regulations 

concerning executive branch financial 

disclosure, financial interests, postGovernment restrictions, outside earned 

income and employment and affiliation 

limitations, and employee 

responsibilities and conduct—as well as 

implementing Bureau guidance and 

procedures issued in accordance with 

the OGE Standards. 

Section 9401.102 Definitions 

Section 9401.102 defines terms and 

phrases used throughout these 

supplemental regulations. Many of the 

definitions reference terms defined in 

the OGE Standards or in the Consumer 

Financial Protection Act of 2010 (CFPA) 

(12 U.S.C. 5301 et seq.). 

The terms ‘‘credit’’ and ‘‘Director’’ are 

statutory terms taken from the CFPA. 

See 12 U.S.C. 5481(7), 5481(10). 

This regulation broadly defines the 

term ‘‘debt or equity interest’’ to include 

without limitation, ‘‘secured and 

unsecured bonds, debentures, notes, 

securitized assets, commercial papers, 

and preferred and common stock.’’ It 

extends to any right to acquire or 

dispose of any such debt or equity 

interest and to beneficial or legal 

interests derived from a trust. However, 

the term does not include deposit 

accounts (e.g., savings accounts, 

checking accounts, certificates of 

deposit, money market accounts), credit 

union shares, future interests created by 

someone other than the employee or the 

employee’s spouse or dependent child, 

or a right as a beneficiary of an estate 

that has not been settled. 

The term ‘‘dependent child’’ has the 

same meaning as in OGE’s financial 

disclosure regulations at 5 CFR 

2634.105(d). 

The term ‘‘Designated Agency Ethics 

Official’’ (DAEO) means the individual 

appointed by the Director to coordinate 

and manage the ethics program. It also 

includes the Alternate DAEO and a 

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25016 Federal Register / Vol. 77, No. 82 / Friday, April 27, 2012 / Rules and Regulations 

designee of the DAEO or Alternate 

DAEO, unless a particular provision in 

these supplemental regulations states 

otherwise. 

The term ‘‘domestic partner’’ includes 

an individual with whom an employee 

has a close, committed, personal, and 

financially interdependent relationship 

in which both parties have agreed to be 

responsible for each other’s common 

welfare and share financial obligations, 

and who for at least six months have 

shared the same regular and permanent 

residence and intend to do so 

indefinitely, or would have a common 

residence but for an assignment abroad 

or other employment-related, financial 

or similar obstacle. The definition of 

‘‘domestic partner’’ in these 

supplemental regulations is the same as 

the one used to determine whether an 

individual is eligible to receive benefits 

under the Bureau’s Domestic Partner 

Health Insurance Subsidy Program. 

The term ‘‘employee’’ includes all 

Bureau employees, including special 

Government employees. 

The phrase ‘‘entity supervised by the 

Bureau’’ means a person that is subject 

to the Bureau’s supervision authority 

pursuant to 12 U.S.C. 5514(a)(1) or 

5515(a) and in regulations promulgated 

thereunder, as identified on a list to be 

maintained and regularly updated by 

the Bureau. 

The terms ‘‘indebted’’ and 

‘‘indebtedness’’ refer to a legal 

obligation under which an individual or 

borrower received money or assets on 

credit, and now owes payment. 

The term ‘‘indebted to an entity’’ 

means an obligation to make payments 

to that entity as a result of an 

indebtedness, whether originally made 

with that entity or with another entity. 

This includes without limitation a 

servicer on a mortgage to whom 

payments are made. 

The term ‘‘participate’’ means to 

participate personally and substantially 

and has the meaning set forth in the 

OGE Standards at 5 CFR 2635.402(b)(4). 

The terms ‘‘particular matter,’’ 

‘‘particular matter involving specific 

parties,’’ ‘‘person,’’ and ‘‘special 

Government employee’’ have the same 

meanings as in the OGE Standards and 

in OGE’s regulations on postemployment conflict of interest at 5 CFR 

2635.402(b)(3), 2641.201(h), 2635.102(k) 

and 2635.102(l), respectively. 

The term ‘‘spouse’’ means an 

employee’s husband or wife by lawful 

marriage, but does not include a legally 

separated spouse when the employee 

and spouse live apart, there is an 

intention to end the marriage or separate 

permanently, and the employee has no 

control over the legally separated 

spouse’s debt or equity interests. 

Section 9401.103 Prior Approval for 

Outside Employment 

This section requires employees to 

obtain written approval prior to 

engaging in certain outside employment 

and activities. This prior approval 

requirement will be an integral part of 

the Bureau’s ethics program. The prior 

approval requirement is necessary to 

ensure that an employee’s participation 

in certain outside employment or 

activities does not adversely affect 

Bureau operations or place the 

employee at risk of violating applicable 

Federal conduct statutes and 

regulations. In addition, prior approval 

is necessary to avoid the appearance 

that an outside employment or activity 

was obtained through a misuse of the 

employee’s official position and to 

address a number of other ethics 

concerns. 

Because the Bureau engages in 

enforcement, supervisory and regulatory 

functions across the consumer financial 

services sector, requiring prior approval 

is necessary to ensure that a reasonable 

person will not question the integrity of 

Bureau programs and operations. The 

Bureau would be hindered in fulfilling 

its mission if members of the public did 

not have confidence in employees’ 

ability to act impartially while 

performing their official duties. 

Paragraph (a) requires that an 

employee obtain prior written approval 

from the employee’s supervisor and the 

concurrence of the DAEO before 

engaging in outside employment, except 

to the extent the Bureau has issued an 

instruction or internal directive 

exempting an activity or class of 

activities from this requirement. Under 

paragraph (d), an employee must submit 

a new request for approval when the 

scope of the approved activity changes 

or when the employee’s position 

changes. 

Paragraph (b) broadly defines 

‘‘employment’’ to include any form of 

non-Federal employment or business 

relationship involving the provision of 

personal services other than in the 

discharge of official duties, regardless of 

whether the services are compensated. It 

includes outside teaching, speaking, or 

writing. 

A note following paragraph (b) 

pertains to the special approval 

requirement in both 18 U.S.C. 203(d) 

and 205(e) for certain representational 

activities otherwise covered by the 

conflict of interest restrictions on 

compensation and activities of 

employees in claims against and other 

matters affecting the Government. The 

note explains that in addition to the 

regulatory approval required in this 

section, an employee who wishes to act 

as agent or attorney for or otherwise 

represent his or her parents, spouse, 

child, or a person for whom or for an 

estate for which he or she is serving as 

guardian, executor, administrator, 

trustee, or other personal fiduciary in 

such matters must obtain the approval 

of the Government official responsible 

for the employee’s appointment to the 

federal service. 

Paragraph (c) sets out the standard to 

be applied by the employee’s supervisor 

and the DAEO in acting on requests for 

prior approval of outside employment. 

Approval will be granted only upon a 

determination that the outside 

employment is not expected to involve 

conduct prohibited by statute, the OGE 

Standards, or these supplemental 

regulations. 

Under paragraph (e), the DAEO may 

issue instructions or internal directives 

governing the submission of requests for 

approval of outside employment that 

may exempt categories of employment 

from the prior approval requirement of 

this section based on a determination 

that employment within those 

categories generally would be approved 

and is not likely to involve prohibited 

conduct or create an appearance of lack 

of impartiality. 

Section 9401.104 Additional Rules 

Concerning Outside Employment for 

Covered Employees 

This section supplements § 2635.802 

of the OGE Standards by prohibiting 

covered employees from engaging in 

compensated outside employment for 

any entity supervised by the Bureau or 

for an officer, director, or employee of 

such entity. This regulation addresses 

situations unique to covered employees, 

including those who are involved in the 

supervision of entities offering or 

providing a consumer financial product 

or service, and prohibits activity that 

may interfere with the objective and 

impartial performance of an employee’s 

official duties. This regulation is based 

in part on 18 U.S.C. 1909, which 

prohibits national bank examiners from 

performing any service for 

compensation for any bank or banking 

or loan association, or any officer, 

director, or employee thereof. 

For purposes of this section, the term 

‘‘covered employee’’ means all 

employees serving in an examiner or 

attorney position, specified persons 

within the Office of Research and the 

Office of Enforcement, all Public 

Financial Disclosure Report filers, and 

other employees specified in a Bureau 

order or directive who the DAEO 

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determines should be covered by the 

rule. 

Section 9401.105 Additional Rules 

Concerning Outside Employment for 

Bureau Attorneys 

Employees serving in an attorney 

position are subject to restrictions in 

addition to the prior approval of outside 

employment requirement in § 9401.103 

and the prohibited outside employment 

restriction in § 9401.104. This section 

prohibits all such individuals from 

practicing law outside of their official 

duties where they may in fact or in 

appearance take a legal position in 

conflict with the interests of the Bureau. 

Bureau attorneys are prohibited from 

interpreting a statute, regulation, or rule 

administered by the Bureau as part of 

the outside practice of law. The 

regulation in this section is consistent 

with the rules of professional conduct 

governing the attorney-client 

relationship. It is a necessary 

supplement to the OGE Standards 

because it specifically addresses the 

unique and sensitive relationship 

between an attorney and a client, which 

for Bureau attorneys is the Bureau. 

Paragraph (b) contains an exemption 

allowing an employee to represent 

himself or herself unless the employee 

participated personally and 

substantially in the matter as part of his 

or her official duties or the matter is the 

subject of the employee’s official 

responsibility. 

Section 9401.106 Prohibited Financial 

Interests 

Paragraph (a) prohibits an employee 

or the employee’s spouse or minor child 

from owning or controlling a debt or 

equity interest in an entity supervised 

by the Bureau. As set forth in Section 

9401.102, the term ‘‘supervised by the 

Bureau’’ refers to the Bureau’s authority 

under the CFPA to supervise and 

examine certain financial institutions 

and other providers of consumer 

financial products and services. Under 5 

CFR 2635.403(a), an agency may, by 

supplemental regulation, prohibit or 

restrict the holding of a financial 

interest by its employees and the 

spouses and minor children of those 

employees based on the agency’s 

determination that the acquisition or 

holding of such financial interest would 

cause a reasonable person to question 

the impartiality and objectivity with 

which agency programs are 

administered. 

The Bureau has determined that in 

light of the Bureau’s sensitive 

supervisory functions, the restriction is 

necessary to: (1) Maintain public 

confidence in the impartiality and 

objectivity with which the Bureau 

executes its supervisory functions; (2) 

eliminate any concern that sensitive 

information provided to the Bureau 

might be misused for private gain; and 

(3) avoid the widespread 

disqualification of employees from 

official matters that might impair the 

Bureau’s ability to fulfill its mission. 

The prohibition in paragraph (a) also 

applies to the spouse and minor 

children of an employee. Under 5 CFR 

2635.403(a), a restriction on the 

holdings of financial interests by 

spouses or minor children of agency 

employees must be based on the 

agency’s determination that there is a 

direct and appropriate nexus between 

the restriction as applied to spouses and 

minor children and the efficiency of the 

service. The Bureau has determined that 

such a nexus exists and is adopting this 

provision to avoid the need to disqualify 

employees from official matters to 

prevent violations of criminal law (18 

U.S.C. 208), to maintain public 

confidence in the objectivity and 

impartiality of the Bureau’s 

administration of its programs, and to 

avoid the potential appearance that an 

employee’s spouse could trade on 

information obtained through the 

employee’s official position. 

The scope of this prohibition extends 

only to those entities supervised by the 

Bureau that are identified on a list 

maintained by the Bureau for the 

purposes of easing administration of 

this provision and minimizing 

inadvertent violations. The Bureau’s 

regulatory and enforcement authority 

under the CFPA may extend beyond 

those entities supervised by the Bureau 

that are identified on the list. However, 

the regulation limits the prohibition on 

ownership of debt and equity interests 

to only those entities identified on the 

list, in order to establish a bright-line 

test and enable employees to easily 

identify prohibited interests. 

Paragraph (b) sets forth several 

exceptions intended to ease the 

restrictions on the financial interests of 

employees and their spouses and minor 

children to permit interests of a 

character unlikely to raise questions 

regarding the objective and impartial 

performance of employees’ official 

duties or the possible misuse of their 

positions. The exceptions permit 

employees and their spouses and minor 

children to own or control interests in 

entities supervised by the Bureau 

through investments in a publicly 

traded or available mutual fund (as long 

as the fund does not have a stated policy 

of concentrating in the financial services 

industry or the banking industry), a 

widely held and diversified pension 

plan, or a fund administered by a 

Federal government agency. 

Paragraph (c) requires employees to 

immediately disqualify themselves if 

they own or control a prohibited interest 

and consult with the DAEO concerning 

a potential waiver under paragraph (d). 

Paragraph (d) authorizes the DAEO, in 

consultation with senior management in 

the Division in which the employee 

works, to waive under certain limited 

circumstances on a case-by-case basis 

the prohibition in paragraph (a). In 

general, a request for a waiver will be 

considered if mitigating circumstances 

exist due to how the employee or the 

employee’s spouse or minor child 

acquired ownership or control, the 

employee makes a prompt and complete 

written disclosure of the debt or equity 

interest to the DAEO, and the 

employee’s disqualification from 

matters involving the entity in which 

the prohibited interest is held would not 

unduly interfere with the full 

performance of the employee’s duties. If 

owning or controlling the debt or equity 

interest would raise financial conflict of 

interest concerns under 18 U.S.C. 

208(a), the DAEO will consult with OGE 

prior to authorizing the employee to 

own or control the debt or equity 

interest. The DAEO also will consult 

with OGE prior to authorizing an 

employee to work on a particular matter 

that would raise financial conflict of 

interest concerns under 18 U.S.C. 

208(a). 

Paragraph (e) attributes to an 

employee a debt or equity interest held 

by entities described in this subsection 

(e.g., trusts, partnerships, closely held 

corporations). An employee who has 

knowledge of an attributed interest that 

would violate subparagraph (a) of this 

section is required to report the interest 

in writing to the DAEO. The DAEO may 

require the employee to terminate the 

relationship with the third party entity, 

disqualify himself or herself from 

participating in a matter, or take other 

appropriate action as determined by the 

DAEO to avoid a violation of the 

conflict of interest statutes, the OGE 

Standards or these supplemental 

regulations, or an appearance of misuse 

of position or loss of impartiality. 

Section 9401.107 Prohibition on 

Acceptance of Credit on Preferential 

Terms From an Entity Supervised by the 

Bureau 

Section 9401.107 prohibits employees 

or the employee’s spouse or minor child 

from accepting credit from or entering 

into a financial relationship with an 

entity supervised by the Bureau if the 

relationship is based on terms more 

favorable than those offered in 

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comparable circumstances to the public. 

This provision is intended to reinforce 

the general principle that employees 

may not use their public office for 

private gain and the requirement that 

employees have a responsibility to 

avoid receiving preferential treatment in 

their personal dealings with entities 

supervised by the Bureau. 

Section 9401.108 Restrictions on 

Seeking, Obtaining, or Renegotiating 

Credit From an Entity That Is or 

Represents a Party to a Matter to Which 

an Employee Is Assigned or May Be 

Assigned 

Section 9401.108 prohibits an 

employee from seeking, obtaining, or 

renegotiating credit from an entity, 

while the employee is assigned to 

participate in a particular matter 

involving specific parties in which the 

entity is or represents a party to the 

matter. The prohibition also extends to 

those matters to which the employee is 

not currently assigned, but the 

employee is aware of the pendency of 

the matter and believes it is likely that 

he or she will participate in the matter. 

This prohibition also applies for two 

years after the employee’s participation 

in the matter has ended. 

This prohibition applies equally to 

the employee’s spouse or minor 

children, unless the credit or 

indebtedness is supported exclusively 

by the income or independent means of 

the spouse or minor child and is 

obtained on terms and conditions no 

more favorable than those offered to the 

public, and the employee does not 

participate in the negotiations for the 

credit or indebtedness or serve as a comaker, endorser, or guarantor of the 

loan. 

The prohibition on seeking, obtaining, 

or renegotiating credit is necessary for 

several reasons. Under 5 CFR 

2635.403(a), the Bureau may prohibit or 

restrict the acquisition or holding of a 

financial interest or class of financial 

interests by employees, and the spouses 

and minor children of those employees, 

when the Bureau has determined that 

the acquisition or holding of such 

financial interests would cause a 

reasonable person to question the 

impartiality and objectivity with which 

the Bureau programs are administered. 

‘‘Financial interest’’ may include an 

indebtedness relationship, under 5 CFR 

2635.403(c). This prohibition is 

necessary to prevent the loss of public 

confidence in the integrity of Bureau 

programs and to prevent the appearance 

of loss of impartiality. These concerns 

might arise if an employee appears to be 

using his or her official position or 

contacts with an entity resulting from 

the employee’s work on a matter to 

obtain loans or extensions of credit on 

favorable terms, or to be benefitting 

from his or her official position through 

possible forbearance by the lender in 

collecting on the indebtedness. This 

section also will strengthen public 

confidence in the Bureau’s integrity by 

limiting the ability of employees to 

engage in financial transactions with 

entities that are or represent a party to 

a particular matter involving specific 

parties to which the employee is 

assigned. 

Under paragraph (c), an employee 

must immediately disqualify himself or 

herself from participating in a particular 

matter involving specific parties after 

the employee becomes aware that 

certain identified persons are seeking, 

obtaining, or renegotiating credit or 

indebtedness with an entity that is or 

represents a party to the matter, while 

the matter is pending before the Bureau. 

The Bureau does not intend to impose 

an affirmative duty on the part of the 

employee to investigate or inquire 

whether the persons identified in this 

section are seeking, obtaining, or 

renegotiating credit. 

Because this section supplements 

§ 2635.502 of the OGE Standards, the 

list of persons identified in paragraph 

(c) of this section are defined broadly 

and include the employee’s spouse, 

domestic partner, and dependent child, 

and other related entities. This section 

is designed to ensure that employees 

and persons associated with employees 

in a non-governmental capacity do not 

benefit or appear to benefit from the 

employees’ official positions and that 

employees do not lose or appear to lose 

their impartiality. 

Paragraph (d) provides exemptions to 

the prohibition in paragraphs (a) and (b) 

and the disqualification requirement in 

paragraph (c), for two forms of credit: 

borrowing through the use of a credit or 

charge card and borrowing through 

overdraft protection, on terms and 

conditions available to the public. The 

need for regulation is diminished 

because these forms of credit are 

typically fairly standardized and low 

credit amounts are customary. The 

Bureau has determined permitting 

employees to have adequate access to 

sources of credit to meet their 

individual financial needs outweighs 

the incremental benefit that may be 

gained by extending the rule to cover 

these forms of credit. 

The DAEO may grant a waiver under 

paragraph (e) based on a determination 

that the participation in matters 

otherwise prohibited by this section is 

not prohibited by law and would not 

create an appearance of loss of 

impartiality or use of public office for 

private gain. 

Section 9401.109 Disqualification of 

Employees From Particular Matters 

Involving Creditors 

Section 9401.109(a) prohibits an 

employee from participating in a 

particular matter involving specific 

parties if the employee is aware that the 

employee, the employee’s spouse, 

domestic partner, or dependent child, or 

a specified related entity has credit with 

or is indebted to an entity that is or 

represents a party to the matter. 

This section supplements § 2635.502 

of the OGE Standards. The 

disqualification requirement is designed 

to ensure that employees and persons 

and entities related to employees do not 

benefit or appear to benefit from 

employees’ official positions and the 

employees do not lose or appear to lose 

their impartiality when taking official 

action. 

Paragraph (b) exempts certain forms 

of credit and indebtedness from the 

disqualification requirement in 

paragraph (a) as long as the person with 

the credit or indebtedness is not in an 

adversarial position with the entity that 

extended the credit or to which the 

indebtedness is owed, and the credit or 

indebtedness was offered on terms and 

conditions no more favorable than those 

offered to the general public. The 

exemptions include revolving consumer 

credit and charge cards; overdraft 

protection on checking and similar 

accounts; amortizing indebtedness on 

consumer goods (e.g., automobiles); 

educational loans (e.g., student loans; 

loans taken out by a parent or guardian 

to pay for a child’s education costs); and 

loans on residential homes (e.g., 

mortgages, home equity lines of credit). 

Paragraph (c) allows an employee to 

participate in a matter from which they 

would be disqualified under paragraph 

(a), if the credit or indebtedness is the 

sole responsibility of a person listed in 

paragraphs (a)(2) through (a)(8), and 

other conditions are met. The exception 

is intended to address situations where 

the credit or indebtedness is unlikely to 

raise ethics concerns regarding the 

motivation of the lender or the 

impartiality of an employee’s 

performance of official duties because 

the connection between the employee 

and that credit or indebtedness is 

attenuated. 

Despite the general disqualification 

requirement in paragraph (a) of this 

section, the DAEO may authorize an 

employee to participate in the matter 

using the authorization process set forth 

in 5 CFR 2635.502(d) of the OGE 

Standards. 

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Federal Register / Vol. 77, No. 82 / Friday, April 27, 2012 / Rules and Regulations 25019 

Section 9401.110 Prohibited 

Recommendations 

This section prohibits employees from 

making any recommendation or 

suggestion regarding the acquisition, 

sale, or other divestiture of a debt or 

equity interest of an entity supervised 

by the Bureau or of an entity that is or 

represents a party to a particular matter 

involving specific parties to which the 

employee is assigned. This rule is 

intended in part to eliminate any 

misunderstanding or harm that could 

result from such a recommendation. For 

example, an investor should not be 

misled into believing that an equity 

interest in a particular entity supervised 

by the Bureau is a good investment 

because the investor believes that the 

employee from whom the investor 

receives a recommendation may have 

access to inside information concerning 

that entity. This provision also 

supplements 5 CFR 2635.704 with a 

provision designed specifically to 

prohibit employees from using or 

creating the appearance of using 

information unavailable to the general 

public to further a private interest. 

Section 9401.111 Restrictions on 

Participating in Matters Involving 

Covered Entities 

This section disqualifies an employee 

from participating in a particular matter 

involving specific parties if a covered 

entity is or represents a party to the 

matter. For purposes of this 

disqualification requirement, the term 

‘‘covered entity’’ includes a person for 

whom the employee is aware that his or 

her spouse, domestic partner, fiance ́, 

child, parent, sibling, or member of the 

employee’s household is serving or 

seeking to serve as an officer, director, 

trustee, general partner, agent, attorney, 

consultant, contractor, or employee. 

Disqualification of the employee 

eliminates the potential for an 

appearance of preferential treatment in 

those instances where the employee’s 

connection to a covered entity would 

likely raise questions regarding the 

appropriateness of actions taken by the 

employee or the Bureau. This section is 

not intended to impose an affirmative 

duty on the part of the employee to 

investigate or inquire as to whether 

these individuals have these 

relationships with covered entities. 

The DAEO may authorize an 

employee to participate in the matter 

using the authorization process set forth 

in 5 CFR 2635.502(d) of the OGE 

Standards. 

Section 9401.112 Prohibited Purchase 

of Assets 

This section prohibits employees, or 

their spouse and minor children, from 

purchasing real or personal property 

from an entity supervised by the Bureau 

unless it is sold at public auction or by 

other means that assures that the selling 

price of the property is the asset’s fair 

market value. For example, fixed price 

retail transactions from an entity 

supervised by the Bureau would be 

excluded from this prohibition. This 

section is proposed to maintain public 

confidence in the impartiality and 

objectivity with which the Bureau 

executes its supervisory functions and 

as a supplement to the general 

prohibition in 5 CFR 2635.702 against 

the use of public office for private gain. 

Section 9401.113 Waivers 

This section authorizes the DAEO to 

grant a written waiver of any provision 

of this part based upon a determination 

that the waiver will not result in 

conduct inconsistent with the OGE 

Standards or otherwise prohibited by 

law. Under this section, the DAEO may 

grant a written waiver but require the 

employee to take further action. This 

provision is intended, in appropriate 

cases, to lessen the burden that these 

supplemental regulations may impose 

on employees while ensuring that 

employees do not engage in actions or 

hold financial interests that may 

interfere with the objective and 

impartial performance of their official 

duties. 

III. Matters of Regulatory Procedure 

Administrative Procedure Act 

Under 5 U.S.C. 553(a)(2), rules 

relating to agency management or 

personnel are exempt from the notice 

and comment rulemaking requirements 

of the Administrative Procedure Act 

(APA). In addition, under 5 U.S.C. 

553(b)(3)(A), notice and comment 

rulemaking requirements do not apply 

to rules concerning matters of agency 

organization, procedure, or practice. 

Given that the rule concerns matters of 

agency management or personnel, and 

organization, procedure, or practice, the 

notice and comment requirements of the 

APA do not apply here. Furthermore, 

under 5 U.S.C. 553(b)(3)(B), the Bureau 

finds that good cause exists to waive the 

proposed rulemaking requirements 

under the APA because the notice and 

comment procedures would be contrary 

to the public interest. The Bureau began 

exercising certain of its supervision, 

enforcement, and regulatory authorities 

on July 21, 2011. Given the Bureau’s 

newly acquired authorities, it is 

necessary to promptly establish 

supplemental ethics rules that will: (1) 

Maintain public confidence in the 

impartiality and objectivity with which 

the Bureau executes its regulatory and 

supervisory functions; (2) eliminate 

concerns that sensitive information 

provided to the Bureau might be 

misused for private gain; and (3) ensure 

that employees are not disqualified from 

participating in official matters that 

might result in the Bureau’s inability to 

fulfill its mission. The absence of such 

rules may adversely affect the public’s 

confidence and may call into question 

the impartiality with which Bureau 

programs are carried out. For these 

reasons, the Bureau finds good cause to 

issue this regulation as an Interim Final 

Rule effective 60 days after publication. 

The Bureau is issuing this interim 

final rule for comment and welcomes 

comments from the public on all aspects 

of the rule. The Bureau will consider 

comments as appropriate. Comments 

may be submitted in accordance with 

the instructions in the ADDRESSES

section of these supplemental 

regulations. 

Regulatory Flexibility Act 

Because no notice of proposed 

rulemaking is required, the provisions 

of the Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) do not apply. 

List of Subjects in 5 CFR Part 9401 

Conflict of interests, Government 

employees. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Bureau, in concurrence 

with OGE, is amending title 5 of the 

Code of Federal Regulations by adding 

a new chapter LXXXIV, consisting of 

part 9401, to read as follows: 

TITLE 5—ADMINISTRATIVE 

PERSONNEL 

CHAPTER LXXXIV—BUREAU OF 

CONSUMER FINANCIAL PROTECTION 

PART 9401—SUPPLEMENTAL 

STANDARDS OF ETHICAL CONDUCT 

FOR EMPLOYEES OF THE BUREAU 

OF CONSUMER FINANCIAL 

PROTECTION 

Sec. 

9401.101 General. 

9401.102 Definitions. 

9401.103 Prior approval for outside 

employment. 

9401.104 Additional rules concerning 

outside employment for covered 

employees. 

9401.105 Additional rules concerning 

outside employment for Bureau 

attorneys. 

9401.106 Prohibited financial interests. 

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9401.107 Prohibition on acceptance of 

credit on preferential terms from an 

entity supervised by the Bureau. 

9401.108 Restrictions on seeking, obtaining, 

or renegotiating credit from an entity that 

is or represents a party to a matter to 

which an employee is assigned or may 

be assigned. 

9401.109 Disqualification of employees 

from particular matters involving 

creditors. 

9401.110 Prohibited recommendations. 

9401.111 Restriction on participating in 

matters involving covered entities. 

9401.112 Prohibited purchase of assets. 

9401.113 Waivers. 

Authority: 5 U.S.C. 7301; 5 U.S.C. App. 

(Ethics in Government Act of 1978); E.O. 

12674, 54 FR 15159; 3 CFR, 1898 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. 

§ 9401.101 General. 

(a) Purpose. In accordance with 5 CFR 

2635.105, the regulations in this part 

supplement the Standards of Ethical 

Conduct for Employees of the Executive 

Branch contained in 5 CFR part 2635 

(OGE Standards) and prescribe the 

standards of ethical conduct applicable 

to employees of the Bureau of Consumer 

Financial Protection (Bureau). 

(b) Other regulations, guidance and 

procedures. Employees are required to 

comply with the OGE Standards and the 

CFPB Ethics Regulations, as well as 

with guidance and procedures issued by 

the Bureau pursuant to 5 CFR 

2635.105(c). Employees also are subject 

to all other government-wide 

regulations concerning executive branch 

ethics including without limitation, 

financial disclosure regulations 

contained in 5 CFR part 2634, 

regulations concerning financial 

interests contained in 5 CFR part 2640, 

post-employment conflict of interest 

restrictions contained in 5 CFR part 

2641, outside earned income limitations 

and employment and affiliation 

restrictions applicable to certain 

noncareer employees contained in 5 

CFR part 2636, and the regulations 

concerning executive branch employee 

responsibilities and conduct contained 

in 5 CFR part 735. 

§ 9401.102 Definitions. 

For purposes of this part: 

CFPB Ethics Regulations means the 

supplemental ethics standards set forth 

in this part. 

Control means the possession, direct 

or indirect, of the power or authority to 

manage, direct, or oversee. 

Credit has the meaning set forth in 12 

U.S.C. 5481(7) and as further defined in 

regulations promulgated by the Bureau 

to implement that statute. A person may 

have credit without any outstanding 

balance owed. 

Debt or equity interest includes 

without limitation, secured and 

unsecured bonds, debentures, notes, 

securitized assets, commercial papers, 

and preferred and common stock. The 

term encompasses both current and 

contingent ownership interests; a 

beneficial or legal interest derived from 

a trust; a right to acquire or dispose of 

any long or short position in debt or 

equity interests; interests convertible 

into debt or equity interests; and 

options, rights, warrants, puts, calls, 

straddles, derivatives, and other similar 

interests. It does not include deposits; 

credit union shares; a future interest 

created by someone other than the 

employee or the employee’s spouse or 

dependent child; or a right as a 

beneficiary of an estate that has not been 

settled. 

Dependent child has the meaning set 

forth in 5 CFR 2634.105(d). It includes 

an employee’s son, daughter, stepson, or 

stepdaughter if: 

(1) Unmarried, under the age of 21, 

and living in the employee’s household; 

or 

(2) Claimed as a ‘‘dependent’’ on the 

employee’s income tax return. 

Designated Agency Ethics Official 

(DAEO) means the official within the 

Bureau that the Director has appointed 

to coordinate and manage the ethics 

program at the Bureau, under 5 CFR 

2638.202(b). For purposes of this part, 

the term ‘‘DAEO’’ also includes the 

Alternate DAEO appointed under 5 CFR 

2638.202(b), and a designee of the 

DAEO or Alternate DAEO unless a 

particular provision says an authority is 

reserved to the DAEO. 

Director means the Director of the 

Bureau. 

Domestic partner means a person 

with whom a Bureau employee: 

(1) Has a close and committed 

personal relationship and both parties 

are at least 18 years of age, are each 

other’s sole domestic partner, and 

intend to remain in the relationship 

indefinitely, and neither is married to, 

in a civil union with, or partnered with 

any other spouse or domestic partner; 

(2) Is not related by blood in a manner 

that would bar marriage under the laws 

of the jurisdiction in which the 

employee resides; 

(3) Is in a financially interdependent 

relationship in which both agree to be 

responsible for each other’s common 

welfare and share in financial 

obligations; and 

(4) Has shared for at least six months 

the same regular and permanent 

residence in a committed relationship 

and both parties intend to do so 

indefinitely, or would maintain a 

common residence but for an 

assignment abroad or other 

employment-related, financial, or 

similar obstacle. 

Employee means an employee of the 

Bureau, including a special Government 

employee. 

Entity supervised by the Bureau 

means a person that is subject to the 

Bureau’s supervision authority pursuant 

to 12 U.S.C. 5514(a)(1) or 5515(a) and in 

regulations promulgated thereunder, as 

identified on a list to be maintained by 

CFPB. 

Indebted or indebtedness means a 

legal obligation under which an 

individual or borrower received money 

or assets on credit, and currently owes 

payment. 

Indebted to an entity means an 

obligation to make payments to an 

entity as a result of an indebtedness, 

whether originally made with that entity 

or with another entity. This includes 

without limitation, a servicer on a 

mortgage to whom payments are made. 

OGE Standards mean the Standards of 

Ethical Conduct for Employees of the 

Executive Branch contained in 5 CFR 

part 2635. 

Participate means personal and 

substantial participation and has the 

meaning set forth in 5 CFR 

2635.402(b)(4). An employee 

participates when, for example, he or 

she makes a decision, gives approval or 

disapproval, renders advice, provides a 

recommendation, conducts an 

investigation or examination, or takes an 

official action in a particular matter, and 

such involvement is of significance to 

the matter. It requires more than official 

responsibility, knowledge, perfunctory 

involvement, or involvement on an 

administrative or peripheral issue. 

Particular matter has the meaning set 

forth in 5 CFR 2635.402(b)(3). The term 

includes a matter that involves 

deliberation, decision, or action and is 

focused upon the interests of specific 

persons or a discrete and identifiable 

class of persons. It may include 

governmental action such as legislation, 

regulations, or policy-making that is 

narrowly focused on the interest of a 

discrete and identifiable class of 

persons. 

Particular matter involving specific 

parties has the meaning set forth in 5 

CFR 2641.201(h). Such a matter 

typically involves a specific proceeding 

affecting the legal rights of the parties or 

an isolatable transaction or related set of 

transactions between identified parties. 

The term includes without limitation, a 

contract, audit, enforcement action, 

examination, investigation, litigation 

proceeding, or request for a ruling. 

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Person has the same meaning set forth 

in 5 CFR 2635.102(k). It includes 

without limitation, an individual, 

corporation and subsidiaries it controls, 

company, association, firm, partnership, 

society, joint stock company, or any 

other organization or institution. 

Special Government employee has the 

meaning set forth in 5 CFR 2635.102(l). 

Spouse means an employee’s husband 

or wife by lawful marriage, but does not 

include an employee’s spouse if: 

(1) The employee and the employee’s 

spouse are legally separated; 

(2) The employee and the employee’s 

spouse live apart; 

(3) There is an intention to end the 

marriage or separate permanently; and 

(4) The employee has no control over 

the legally separated spouse’s debt or 

equity interests. 

§ 9401.103 Prior approval for outside 

employment. 

(a) General requirement. Before 

engaging in outside employment, an 

employee must obtain written approval 

from the employee’s supervisor and the 

concurrence of the DAEO, except to the 

extent that the Bureau has issued an 

instruction or internal directive 

pursuant to paragraph (e) of this section 

exempting an activity or class of 

activities from this requirement. 

(b) Definition of employment. For 

purposes of this section, ‘‘employment’’ 

means any form of non-Federal 

employment, business relationship, or 

activity involving the provision of 

personal services by the employee, 

regardless of whether the services are 

compensated. It includes without 

limitation, personal services as an 

officer, director, employee, agent, 

advisor, attorney, consultant, contractor, 

general partner, trustee, teacher, 

speaker, or writer. 

Note to § 9401.103(b): Both 18 U.S.C. 

203(d) and 205(e) require special approval for 

certain representational activities in claims 

against and other matters affecting the 

interests of the Government. Thus, an 

employee who wishes to act as agent or 

attorney for or otherwise represent his or her 

parents, spouse, child, or a person for whom 

or for an estate for which he or she is serving 

as guardian, executor, administrator, trustee, 

or other personal fiduciary in such matters as 

described in those statutes shall obtain the 

approval of the Government official 

responsible for the employee’s appointment 

in addition to the regulatory approval 

required in this section. 

(c) Standard for approval. Approval 

will be granted only upon a 

determination that the outside 

employment is not expected to involve 

conduct prohibited by statute, the OGE 

Standards, or the CFPB Ethics 

Regulations in this part. 

(d) Renewed request for approval. 

Upon a significant change in either the 

nature, scope, or duties of the 

employee’s outside employment or in 

the employee’s official Bureau position, 

the employee shall submit a new 

request for approval. 

(e) DAEO responsibilities. The DAEO 

may issue instructions or internal 

directives governing the submission of 

requests for approval of outside 

employment and designating 

appropriate officials to act on such 

requests. The instructions or internal 

directives may exempt categories of 

employment from the prior approval 

requirement of this section based on a 

determination that employment within 

those categories generally would be 

approved and is not likely to involve 

prohibited conduct or create an 

appearance of lack of impartiality. 

§ 9401.104 Additional rules concerning 

outside employment for covered 

employees. 

(a) Prohibited outside employment. A 

covered employee shall not engage in 

compensated outside employment for 

an entity supervised by the Bureau or 

for an officer, director, or employee of 

such entity. 

(b) Definition of employment. For 

purposes of this section, ‘‘employment’’ 

has the same meaning as set forth in 

§ 9401.103(b) of this part. 

(c) Definition of covered employee. 

For purposes of this section, ‘‘covered 

employee’’ means: 

(1) An employee serving in an 

examiner position; 

(2) An employee serving in an 

attorney position; 

(3) An employee in the Office of 

Research, serving as a section chief at 

CFPB pay band 71 or above or as a 

senior economist in the Compliance 

Analysis Section; 

(4) An employee serving in an 

investigator, paralegal, or financial 

analyst position in the Office of 

Enforcement; 

(5) An employee required to file a 

Public Financial Disclosure Report 

(OGE Form 278) under 5 CFR part 2634; 

or 

(6) Any other Bureau employee 

specified in a Bureau order or directive 

whose duties and responsibilities, as 

determined by the DAEO, require 

application of the prohibition on 

outside employment contained in this 

section to ensure public confidence that 

the Bureau’s programs are conducted 

impartially and objectively. 

§ 9401.105 Additional rules concerning 

outside employment for Bureau attorneys. 

(a) Prohibited outside practice of law. 

In addition to the prior approval 

requirements under § 9401.103 and the 

outside employment restrictions under 

§ 9401.104 of this part, an employee 

serving in an attorney position shall not 

engage in the practice of law outside his 

or her official Bureau duties that might 

require the attorney to: 

(1) Take a position that is or appears 

to be in conflict with the interests of 

CFPB; or 

(2) Interpret any statute, regulation, or 

rule administered or issued by the 

Bureau. 

(b) Exemption for self representation. 

Nothing in this section prevents a 

Bureau attorney from acting as an agent 

or attorney for or otherwise representing 

himself or herself in the outside practice 

of law, except: 

(1) In those matters in which the 

employee has participated personally 

and substantially as a Government 

employee; or 

(2) In those matters which are the 

subject of the employee’s official 

responsibility. 

§ 9401.106 Prohibited financial interests. 

(a) Prohibited interests. Except as 

permitted by this section, an employee 

or an employee’s spouse or minor child 

shall not own or control a debt or equity 

interest in an entity supervised by the 

Bureau. 

(b) Exceptions. Interests prohibited in 

paragraph (a) of this section do not 

include the ownership or control of a 

debt or equity interest in: 

(1) Mutual funds. A publicly traded or 

publicly available mutual fund or other 

collective investment fund if: 

(i) The fund does not have a stated 

policy of concentration in the financial 

services industry or the banking 

industry; and 

(ii) Neither the employee nor the 

employee’s spouse exercises or has the 

ability to exercise control over or 

selection of the financial interests held 

by the fund. 

(2) Pension plans. A widely held, 

diversified pension or other retirement 

fund that is administered by an 

independent trustee or custodian. Such 

a fund is diversified if it holds no more 

than 5% of the value of its portfolio in 

the securities of any one issuer (other 

than the United States Government) and 

no more than 20% in any particular 

economic or geographic sector (other 

than the United States). 

(3) Federal retirement and thrift 

savings plans. Funds administered by 

the Thrift Plan for Employees of the 

Federal Reserve System, the Retirement 

Plan for Employees of the Federal 

Reserve System, the Thrift Savings Plan, 

or a Federal government agency. 

(c) Disqualification. If an employee or 

an employee’s spouse or minor child 

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owns or controls a debt or equity 

interest that is prohibited under 

paragraph (a) of this section, the 

employee shall immediately disqualify 

himself or herself from participating in 

all particular matters involving an entity 

with which the employee or the 

employee’s spouse or minor child has a 

debt or equity interest, unless and until 

the employee is granted a waiver 

pursuant to paragraph (d) of this section 

and the waiver includes an 

authorization allowing the employee to 

participate in such matters. 

(d) Waivers. Upon request by the 

employee, the DAEO has the authority 

to grant an individual waiver under this 

paragraph, which authority may be 

delegated only to the Alternate DAEO. 

The DAEO, in consultation with senior 

management in the Division in which 

the employee works, may issue a 

written waiver permitting the employee 

or the employee’s spouse or minor child 

to own or control a particular debt or 

equity interest that otherwise would be 

prohibited by this section, if: 

(1) Mitigating circumstances exist due 

to the way the employee or the 

employee’s spouse or minor child 

acquired ownership or control of the 

debt or equity interest. Mitigating 

circumstances may include, but are not 

limited to: 

(i) The employee or the employee’s 

spouse or minor child acquired the debt 

or equity interest through inheritance, 

gift, merger, acquisition, or other change 

in corporate structure, or otherwise 

without specific intent on the part of the 

employee or the employee’s spouse or 

minor child; or 

(ii) The employee’s spouse received 

the debt or equity interest as part of a 

compensation package in connection 

with employment or prior to marriage to 

the employee; 

(2) The employee makes a prompt and 

complete written disclosure of the debt 

or equity interest to the DAEO; and 

(3) The disqualification of the 

employee from participating in 

particular matters involving an entity 

with which the employee or the 

employee’s spouse or minor child has a 

debt or equity interest, as specified in 

the written waiver, would not unduly 

interfere with the full performance of 

the employee’s duties. 

(e) Covered third party entities. 

Immediately after becoming aware that 

a covered third party entity owns or 

controls a debt or equity interest that an 

employee would be prohibited from 

owning or controlling under paragraph 

(a) of this section, the employee shall 

report the interest in writing to the 

DAEO. The DAEO may require the 

employee to terminate the relationship 

with the covered third party entity, 

disqualify himself or herself from 

certain particular matters, or take other 

action as necessary to avoid a statutory 

violation, or a violation of the OGE 

Standards or the CFPB Ethics 

Regulations, including an appearance of 

misuse of position or loss of 

impartiality. For purposes of this 

paragraph (e), ‘‘covered third party 

entity’’ includes: 

(1) A partnership in which the 

employee or the employee’s spouse or 

minor child is a general partner; 

(2) A partnership or closely held 

corporation in which the employee or 

the employee’s spouse or minor child 

individually or jointly holds more than 

a 10 percent equity interest; 

(3) A trust in which the employee or 

the employee’s spouse or minor child 

has a legal or beneficial interest; 

(4) An investment club or similar 

informal investment arrangement 

between the employee or the employee’s 

spouse or minor child, and others; 

(5) A qualified profit sharing, 

retirement, or similar plan in which the 

employee or the employee’s spouse or 

minor child has an interest; or 

(6) An entity in which the employee 

or the employee’s spouse or minor child 

individually or jointly holds more than 

a 25 percent equity interest. 

§ 9401.107 Prohibition on acceptance of 

credit on preferential terms from an entity 

supervised by the Bureau. 

An employee, and the employee’s 

spouse or minor child, may not accept 

credit from or enter into any other 

financial relationship with an entity 

supervised by the Bureau, if the credit 

or financial relationship contains terms 

that are more favorable than those 

offered to the public in comparable 

circumstances. 

§ 9401.108 Restrictions on seeking, 

obtaining, or renegotiating credit from an 

entity that is or represents a party to a 

matter to which an employee is assigned or 

may be assigned. 

(a) Prohibition on employee seeking, 

obtaining, or renegotiating credit or 

indebtedness. (1) While an employee is 

assigned to participate in a particular 

matter involving specific parties, the 

employee shall not seek, obtain, or 

renegotiate credit or indebtedness with 

an entity that is or represents a party to 

the matter. This prohibition also applies 

to a particular matter involving specific 

parties pending at the Bureau in which 

the employee is not currently 

participating but of which the employee 

is aware and believes it is likely that he 

or she will participate. 

(2) The prohibition in paragraph (a)(1) 

of this section continues for two years 

after the employee’s participation in the 

particular matter has ended. 

(b) Prohibition on employee’s spouse 

or minor child seeking, obtaining, or 

renegotiating credit or indebtedness. 

The prohibition in paragraph (a) of this 

section shall apply to the spouse or 

minor child of an employee unless: 

(1) The credit or indebtedness is 

supported only by the income or 

independent means of the spouse or 

minor child; 

(2) The credit or indebtedness is 

obtained on terms and conditions no 

more favorable than those offered to the 

general public; and 

(3) The employee does not participate 

in the negotiation for the credit or 

indebtedness or serve as co-maker, 

endorser, or guarantor of the credit or 

indebtedness. 

(c) Disqualification requirement for 

credit sought by person related to an 

employee. An employee shall disqualify 

himself or herself from participating in 

a particular matter involving specific 

parties as soon as he or she learns that 

any of the following persons are 

seeking, obtaining, or renegotiating 

credit or indebtedness with an entity 

that is or represents a party to the 

matter: 

(1) The employee’s spouse, domestic 

partner, or dependent child; 

(2) A partnership in which the 

employee or the employee’s spouse, 

domestic partner, or dependent child is 

a general partner; 

(3) A partnership or closely held 

corporation in which the employee or 

the employee’s spouse, domestic 

partner, or dependent child individually 

or jointly owns or controls more than a 

10 percent equity interest; 

(4) A trust in which the employee or 

the employee’s spouse, domestic 

partner, or dependent child has a legal 

or beneficial interest; 

(5) An investment club or similar 

informal investment arrangement 

between the employee or the employee’s 

spouse, domestic partner, or dependent 

child, and others; 

(6) A qualified profit sharing, 

retirement, or similar plan in which the 

employee or the employee’s spouse, 

domestic partner, or dependent child 

has an interest; or 

(7) An entity in which the employee 

or the employee’s spouse, domestic 

partner, or dependent child individually 

or jointly holds more than a 25 percent 

equity interest. 

(d) Exemptions. The following forms 

of credit are exempted from the 

prohibition in paragraphs (a) and (b) of 

this section and the disqualification 

requirement in paragraph (c) of this 

section: 

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(1) Revolving consumer credit or 

charge cards issued by insured 

depository institutions or insured credit 

unions on terms and conditions no more 

favorable than those offered to the 

general public; and 

(2) Overdraft protection on checking 

accounts and similar accounts at 

insured depository institutions or 

insured credit unions on terms and 

conditions no more favorable than those 

offered to the general public. 

(e) Waivers. The DAEO, after 

consultation with senior management in 

the Division in which the employee 

works, may grant a written waiver from 

the prohibition in paragraphs (a) or (b) 

of this section or the disqualification 

requirement in paragraph (c) of this 

section, based on a determination that 

participation in matters otherwise 

prohibited by this section would not be 

prohibited by law (18 U.S.C. 208) or 

create an appearance of loss of 

impartiality or use of public office for 

private gain, and would not otherwise 

be inconsistent with the OGE Standards 

or the CFPB Ethics Regulations. 

§ 9401.109 Disqualification of employees 

from particular matters involving creditors. 

(a) Disqualification required. Absent 

an authorization pursuant to paragraph 

(d) of this section, an employee shall not 

participate in a particular matter 

involving specific parties if the 

employee is aware that any of the 

following have credit with or are 

indebted to an entity that is or 

represents a party to the matter: 

(1) The employee; 

(2) The employee’s spouse, domestic 

partner, or dependent child; 

(3) A partnership in which the 

employee or the employee’s spouse, 

domestic partner, or dependent child is 

a general partner; 

(4) A partnership or closely held 

corporation in which the employee or 

the employee’s spouse, domestic 

partner, or dependent child individually 

or jointly owns or controls more than 10 

percent of its equity; 

(5) A trust in which the employee or 

the employee’s spouse, domestic 

partner, or dependent child has a legal 

or beneficial interest; 

(6) An investment club or similar 

informal investment arrangement 

between the employee or the employee’s 

spouse, domestic partner, or dependent 

child, and others; 

(7) A qualified profit sharing, 

retirement, or similar plan in which the 

employee or the employee’s spouse, 

domestic partner, or dependent child 

has an interest; or 

(8) An entity in which the employee 

or the employee’s spouse, domestic 

partner, or dependent child individually 

or jointly holds more than a 25 percent 

equity interest. 

(b) Forms of credit and indebtedness 

exempted. The following forms of credit 

and indebtedness are exempted from the 

disqualification requirement in 

paragraph (a) of this section, as long as 

the person listed in paragraphs (a)(1) 

through (a)(8) of this section is not in an 

adversarial position (e.g., delinquent in 

payments; disputing the terms or 

conditions of the account; subject to 

debt collection measures like wage 

garnishment; involved in any 

disagreement that may cast doubt on the 

employee’s ability to remain impartial) 

with the entity that extended the credit 

or to which the indebtedness is owed, 

and the credit or indebtedness was 

offered on terms and conditions no 

more favorable than those offered to the 

general public: 

(1) Revolving consumer credit or 

charge cards issued by insured 

depository institutions or insured credit 

unions; 

(2) Overdraft protection on checking 

accounts and similar accounts at 

insured depository institutions or 

insured credit unions; 

(3) Amortizing indebtedness on 

consumer goods (e.g., automobiles); 

(4) Educational loans (e.g., student 

loans; loans taken out by a parent or 

guardian to pay for a child’s education 

costs); and 

(5) Loans on residential homes (e.g., 

home mortgages; home equity lines of 

credit). 

(c) Credit or indebtedness of 

employee’s spouse, domestic partner, 

dependent child, or other specified 

persons. An employee’s disqualification 

under paragraph (a) of this section is not 

required if: 

(1) The credit or indebtedness is 

solely the responsibility of the person 

listed in paragraphs (a)(2) through (a)(8) 

of this section; and 

(2) The credit or the liability for 

repayment of the indebtedness is not 

dependent on, attributable to, or derived 

from the employee’s income, assets, or 

activities. 

(d) Authorization to participate. The 

DAEO may authorize an employee to 

participate in a matter that would 

require disqualification under paragraph 

(a) of this section, using the 

authorization process set forth in 5 CFR 

2635.502(d) of the OGE Standards. The 

DAEO will consult with senior 

management in the Division in which 

the employee works before issuing such 

an authorization. 

§ 9401.110 Prohibited recommendations. 

An employee shall not make 

recommendations or suggestions, 

directly or indirectly, concerning the 

acquisition or sale or other divestiture of 

a debt or equity interest of an entity 

supervised by the Bureau, or an entity 

that is or represents a party to a 

particular matter involving specific 

parties to which the employee is 

assigned. 

§ 9401.111 Restriction on participating in 

matters involving covered entities. 

(a) An employee shall not participate 

in a particular matter involving specific 

parties if a covered entity is or 

represents a party to the matter, unless 

the employee receives authorization 

from the DAEO. For purposes of this 

paragraph, a ‘‘covered entity’’ is a 

person for whom the employee is aware 

the employee’s spouse, domestic 

partner, fiance ́, child, parent, sibling, or 

member of the employee’s household is 

serving or seeking to serve as an officer, 

director, trustee, general partner, agent, 

attorney, consultant, contractor, or 

employee. 

(b) The DAEO may authorize the 

employee to participate in the matter 

using the authorization process set forth 

in 5 CFR 2635.502(d) of the OGE 

Standards. The DAEO will consult with 

senior management in the Division in 

which the employee works before 

issuing such an authorization. 

§ 9401.112 Prohibited purchase of assets. 

An employee, or an employee’s 

spouse or minor child, shall not 

purchase, directly or indirectly, any real 

or personal property from an entity 

supervised by the Bureau, unless it is 

sold at public auction or by other means 

which assures that the selling price 

reflects the asset’s fair market value. 

§ 9401.113 Waivers. 

The DAEO may grant a written waiver 

from any provision of this part where 

the DAEO finds good cause to do so; 

provided, however, that the DAEO will 

not do so unless the DAEO finds that 

the waiver is not inconsistent with the 

OGE Standards or otherwise prohibited 

by law and that, under the particular 

circumstances, application of the 

provision being waived is not necessary 

in order to avoid a violation of an ethics 

rule. Each waiver must be in writing 

and supported by a statement of facts 

and findings and may impose 

appropriate conditions, such as 

requiring the employee to execute a 

written disqualification statement. 

mstockstill on DSK4VPTVN1PROD with RULES

25024 Federal Register / Vol. 77, No. 82 / Friday, April 27, 2012 / Rules and Regulations 

Dated: April 16, 2012. 

Richard Cordray, 

Director, Bureau of Consumer Financial 

Protection. 

Don Fox, 

Principal Deputy Director, Office of 

Government Ethics. 

[FR Doc. 2012–10122 Filed 4–26–12; 8:45 am] 

BILLING CODE 4810–AM–P 

DEPARTMENT OF AGRICULTURE 

Food and Nutrition Service 

7 CFR Part 210 

[FNS–2011–0025] 

RIN 0584–AE15 

Certification of Compliance With Meal 

Requirements for the National School 

Lunch Program Under the Healthy, 

Hunger-Free Kids Act of 2010 

AGENCY: Food and Nutrition Service, 

USDA. 

ACTION: Interim final rule. 

SUMMARY: This interim rule amends 

National School Lunch Program 

regulations to conform to requirements 

contained in the Healthy, Hunger-Free 

Kids Act of 2010 regarding performancebased cash assistance for school food 

authorities certified compliant with 

meal pattern and nutrition standards. 

This rule requires State agencies to 

certify participating school food 

authorities (SFAs) that are in 

compliance with meal pattern and 

nutrition standard requirements as 

eligible to receive performance-based 

cash assistance for each reimbursable 

lunch served (an additional six cents 

per lunch available beginning October 1, 

2012 and adjusted annually thereafter). 

This rule also requires State agencies to 

disburse performance-based cash 

assistance to certified SFAs, and 

withhold the performance-based cash 

assistance if the SFA is determined to be 

out of compliance with meal pattern or 

nutrition standards during a subsequent 

administrative review. The intended 

effect of this rule is to provide 

additional funding for SFAs to 

implement new meal pattern 

requirements, thus increasing the 

healthfulness of meals served to school 

children. 

DATES: Effective date: This interim rule 

is effective July 1, 2012. 

Comment dates: Comments on rule 

provisions: Mailed comments on the 

provisions in this rule must be 

postmarked on or before July 26, 2012; 

emailed or faxed comments must be 

submitted by 11:59 p.m. on July 26, 

2012; and hand-delivered comments 

must be received by 5 p.m. July 26, 2012 

to be assured of consideration. 

Comments on Paperwork Reduction 

Act requirements: Comments on the 

information collection requirements 

associated with this rule must be 

received by June 26, 2012. 

ADDRESSES: The Food and Nutrition 

Service (FNS) invites interested persons 

to submit comments on this interim 

rule. Comments may be submitted by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

• Mail: Julie Brewer, Chief, Policy 

and Program Development Branch, 

Child Nutrition Division, FNS, 

Department of Agriculture, 3101 Park 

Center Drive, Room 640, Alexandria, 

Virginia 22302–1594. 

• Hand Delivery or Courier: Deliver 

comments to 3101 Park Center Drive, 

Room 640, Alexandria, Virginia 22302– 

1594, during normal business hours of 

8:30 a.m.–5 p.m. All submissions 

received in response to this interim rule 

will be included in the record and will 

be available to the public. Please be 

advised that the substance of the 

comments and the identity of the 

individuals or entities submitting 

comments will be subject to public 

disclosure. FNS will also make the 

comments publicly available by posting 

a copy of all comments on 

http://www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: Julie 

Brewer, Chief, Policy and Program 

Development Branch, Child Nutrition 

Division, FNS, 3101 Park Center Drive, 

Alexandria, Virginia 22302, or by 

telephone at (703) 305–2590. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The National School Lunch Program 

(NSLP) provides cash assistance to 

States to assist schools in providing 

nutritious lunches for school children. 

In order to receive reimbursement, 

schools must serve lunches that meet 

program requirements, including 

statutory and regulatory nutrition 

standards. 

Prior to the enactment of the Healthy, 

Hunger-Free Kids Act of 2010 (Pub. L. 

111–296), on December 13, 2010, the 

Richard B. Russell National School 

Lunch Act (NSLA) (42 U.S.C. 1751 et 

al.) authorized only general and special 

cash assistance for lunches served in the 

NSLP. Section 4 of the NSLA authorizes 

the Secretary to provide two levels of 

general cash assistance for all lunches 

served, including lunches to children 

whose family income is above 185 

percent of the Federal poverty 

guidelines. The lower cash assistance 

level applies to lunches served by SFAs 

in which less than 60 percent of the 

lunches served in the school lunch 

program during the second preceding 

school year were served free or at a 

reduced price. The higher payment level 

applies to lunches served by SFAs in 

which 60 percent or more of the lunches 

served during the second preceding 

school year were served free or at a 

reduced price. 

To supplement the general cash 

assistance payments, section 11 of the 

NSLA (42 U.S.C. 1759a) authorizes the 

Secretary to provide special cash 

assistance payments to schools 

providing free and reduced price meals. 

Children from families with income at 

or below 130 percent of the Federal 

poverty level are eligible for free meals, 

while those from families with incomes 

between 130 and 185 percent are 

eligible for reduced price meals. As a 

result, lunches served to those students 

are reimbursable at a higher, special 

assistance rate. 

In accordance with section 11 of the 

NSLA, both the general and special cash 

assistance reimbursement rates are 

adjusted annually on July 1 of each year. 

Annual adjustments reflect changes in 

the cost of operating the NSLP, as 

indicated by the change in the Food 

Away From Home series of the 

Consumer Price Index for All Urban 

Consumers, published by the Bureau of 

Labor Statistics of the Department of 

Labor. Each year, the Department of 

Agriculture (the Department) publishes 

a Notice specifying the annual 

adjustments. 

The Healthy, Hunger-Free Kids Act of 

2010 

The Healthy, Hunger-Free Kids Act of 

2010 (the HHFKA) made significant 

changes to the NSLA. Section 201 of the 

HHFKA amended section 4(b) of the 

NSLA, 42 U.S.C. 1753(b), by requiring 

the Secretary to update the meal 

patterns and nutrition standards for the 

NSLP and School Breakfast Program 

(SBP) and to issue regulations requiring 

all SFAs to comply with the updated 

meal patterns and nutrition standards. 

On January 13, 2011, the Department 

published a proposed rule, Nutrition 

Standards in the National School Lunch 

and School Breakfast Programs (76 FR 

2494), which proposed to update the 

meal patterns and nutrition 

requirements for the NSLP and SBP, as 

required by the NSLA. The Department 

received over 132,000 comments from 

the public on the proposed rule. 

Subsequently, on January 26, 2012, the 

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