March 2021

OVERVIEW OF THE PROHIBITED SECURITIES RULE

AND CERTIFICATES OF DIVESTITURE

Certain NRC employees, as well as their spouses and minor children, are prohibited by 

regulation from owning securities issued by entities on a list published annually by the Office of 

the General Counsel (OGC). 5 C.F.R. 5801.102. The policies and procedures implementing 

this rule are in Management Directive 7.7, “Security Ownership.” 

The prohibited securities rule applies to all senior employees (i.e., Senior Executive Service, 

Senior Level Service, or above). It also covers employees at grade GG-15 or below with 

regulatory responsibilities described in Management Directive 7.7. Members of the NRC 

Advisory Committee on Reactor Safeguards and the Atomic Safety and Licensing Board Panel 

are also subject to this prohibition. (In addition to updating the Prohibited Securities List each 

year, OGC publishes annually a list of all positions that are subject to the prohibited securities 

rule.)

Employees who become subject to the prohibited securities rule upon initial employment or as a 

result of a subsequent assignment to a covered position must certify that they are in compliance 

with the rule. If an employee or the spouse or minor child of an employee covered by the 

prohibition owns any prohibited securities, the employee must notify OGC within 30 days of

appointment. 

The employee has 90 days from the date of appointment to divest those securities. The 

employee should inform OGC when the securities are divested. The NRC’s Chairman may 

extend the 90-day deadline in cases of unusual hardship. The NRC’s Chairman may also waive 

the divestiture requirement under very limited circumstances, such as where legal constraints 

prevent divestiture.

Employees can make these required notifications to OGC ethics officials through Ethics 

Gateway. Employees can also contact an ethics official through Ethics Gateway if they have 

any questions about the prohibited securities rule or need assistance. 

Capital Gains Taxes—Certificate of Divestiture

Employees required to sell prohibited securities to comply with the NRC’s rule may owe capital 

gains taxes if the securities’ sale price exceeds their tax basis. In this situation, obtaining a 

Certificate of Divestiture from the Office of Government Ethics (OGE) allows an employee to 

defer paying capital-gains taxes until a later date.1

1 Special Government employees are not eligible for a Certificate of Divestiture. Special Government 

employees are employees appointed to serve an agency for not more then 130 days during a 365-day 

period. NRC consultants and advisory committee members are generally appointed as Special 

Government employees.
March 2021

If an employee knows that he or she will be selling prohibited securities for a loss, however, 

there is no reason to seek a Certificate of Divestiture (i.e., because the certificate only allows an 

employee to defer taxes on capital gains). There is also typically no reason to seek a Certificate 

of Divestiture if the securities are in a retirement account, such as a 401(k) plan or Individual 

Retirement Account, or other tax-deferred or tax-advantaged account, because an employee 

can usually roll over the proceeds of the sale into the purchase of another asset in the account, 

thereby avoiding capital-gains taxes on the sale. Employees should contact OGC if they have 

questions about whether they are eligible for a Certificate of Divestiture. 

Employees who believe they may be eligible for a Certificate of Divestiture should submit a 

written request to OGC that contains the following information (a sample request can be found 

in Management Directive 7.7)—

• Employee title and general job description;

• Description of the security interest, including the precise number of shares to be 

divested (e.g., 105 shares of General Electric common stock);

• Explanation of the facts and circumstances requiring divestiture, including how 

and when the securities were acquired (e.g., “On July 11, 2012, I was appointed 

a Resident Inspector in Region II, a position subject to the NRC prohibited 

securities restriction. I own 250 shares of Exelon stock through purchase. None 

of these shares is in a retirement account.”)

• A statement of the employee’s understanding that he or she must sell these 

securities no later than 3 months from the date the employee became subject to 

the restriction or obtained the securities.

If OGC determines that the employee may be eligible for a Certificate of Divestiture, OGC will 

submit the employee’s request to OGE. In addition to the employee’s request, OGC will also 

attach the employee’s most recent financial disclosure report to the request (if the employee 

does not occupy a position requiring a financial disclosure report, OGC will provide the filer with 

an OGE Form 450 and instructions on how to complete it). If OGE decides to issue a Certificate 

of Divestiture, they will transmit the certificate to OGC, which will then be forwarded to the 

employee.

An employee should not sell any prohibited securities before obtaining OGE’s decision on the 

employee’s request for a Certificate of Divestiture, because by law OGE is only permitted to 

issue a certificate for property that has not yet been sold.

Regardless of whether OGE issues a Certificate of Divestiture, the employee will need to sell 

the prohibited securities. The employee should notify OGC promptly in writing when the 

prohibited securities are sold.

If OGE issued a Certificate of Divestiture, the employee must invest the proceeds in “permitted 

property” within 60 days of the sale date. “Permitted property” includes (1) obligations of the 

United States Government (e.g., Treasury bonds), and (2) “Diversified investment funds,” (open-
March 2021

ended mutual funds or common trust funds that do not devote their investments to particular or 

limited industrial, economic, or geographic sectors).

To realize the tax benefits of the Certificate of Divestiture, the employee needs to complete the 

appropriate Internal Revenue Service (IRS) form (currently Form 8824, “Like-Kind Exchanges”) 

and attach the form to the employee’s federal income tax return for the year in which the 

prohibited securities were sold. In Part IV of the form, “Deferral of Gain From Section 1043 

Conflict-of-Interest Sales,” the employee provides information regarding the divested securities, 

the reinvested property, and the Certificate of Divestiture issued by OGE.

The above information is intended only as an overview of the rules applying to prohibited 

securities and Certificates of Divestiture. OGC is not providing tax advice, and we strongly 

encourage employees to contact a personal tax advisor it they have questions about the tax 

treatment of asset sales or the completion of tax forms.