This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

52607 

Vol. 75, No. 166 

Friday, August 27, 2010 

1See Division A, titled the ‘‘Federal Housing 

Finance Regulatory Reform Act of 2008,’’ Title I, 

§ 1101 of HERA. 

2See 57 FR 35006–35067, as corrected at 57 FR 

48557 and 57 FR 52583, with additional grace 

period extensions at 59 FR 4779–4780, 60 FR 6390– 

6391, 60 FR 66857–66858, and 61 FR 40950–40952. 

FEDERAL HOUSING FINANCE 

AGENCY 

5 CFR Chapter LXXX 

RIN 2590–AA02, 3209–AA15 

Supplemental Standards of Ethical 

Conduct for Employees of the Federal 

Housing Finance Agency 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Final rule. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is publishing a final 

regulation, with the concurrence of the 

Office of Government Ethics, which 

supplements the Standards of Ethical 

Conduct for Employees of the Executive 

Branch. To ensure a comprehensive and 

effective ethics program at FHFA and to 

address ethical issues unique to FHFA, 

the final regulation establishes 

prohibitions on the ownership of certain 

financial interests and restrictions on 

outside employment and business 

activities. 

DATES: This regulation is effective 

August 27, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Sean Dent, Associate General Counsel, 

(202) 414–3099 (not a toll-free number), 

Federal Housing Finance Agency, 

Fourth Floor, 1700 G Street, NW., 

Washington, DC 20552. The telephone 

number for the Telecommunications 

Device for the Deaf is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Housing and Economic Recovery 

Act of 2008 (HERA), Public Law 110– 

289, 122 Stat. 2654, amended the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 

U.S.C. 4501 et seq.) (Safety and 

Soundness Act), and the Federal Home 

Loan Bank Act (12 U.S.C. 1421–1449) to 

establish FHFA as an independent 

agency of the Federal Government.1

FHFA was established to oversee the 

prudential operations of the Federal 

National Mortgage Association, the 

Federal Home Loan Mortgage 

Corporation (collectively, enterprises), 

and the Federal Home Loan Banks 

(Banks) (collectively, regulated entities) 

and to ensure that they operate in a safe 

and sound manner including being 

capitalized adequately; foster liquid, 

efficient, competitive and resilient 

national housing finance markets; 

comply with the Safety and Soundness 

Act and rules, regulations, guidelines 

and orders issued by the Director of 

FHFA, and the respective authorizing 

statutes of the regulated entities; and 

carry out their missions through 

activities authorized and consistent 

with the Safety and Soundness Act and 

their authorizing statutes; and, that the 

activities and operations of the 

regulated entities are consistent with the 

public interest. 

II. Proposed Regulation; Comments 

Received; Technical Revisions 

Proposed Regulation 

Executive Order 12674, as amended 

by Executive Order 12731, authorized 

the United States Office of Government 

Ethics (OGE) to establish a single, 

comprehensive and clear set of 

executive-branch standards of conduct. 

On August 7, 1992, OGE published the 

Standards of Ethical Conduct for 

Employees of the Executive Branch 

(Standards).2 Codified at 5 CFR part 

2635, the Standards took effect on 

February 3, 1993, and established 

uniform standards of ethical conduct for 

all executive branch employees. 

With the concurrence of OGE, 5 CFR 

2635.105 authorizes executive branch 

agencies to publish agency-specific 

supplemental regulations necessary to 

implement their respective ethics 

programs. With such concurrence, 

FHFA published proposed 

supplemental rules for comment on 

April 16, 2010 (75 FR 19909). 

Comments Received 

FHFA received and considered two 

comments from one member of the 

public. The first comment relates to 

§ 9001.101. That section, as proposed, 

contains cross-references to other 

executive branch ethics regulations and 

a subsequent employment restriction of 

section 1317D of the Safety and 

Soundness Act, 12 U.S.C. 4523, 

applicable to certain highly 

compensated former FHFA officers and 

employees. Section 1317D prohibits 

such highly compensated former FHFA 

officers and employees from accepting 

compensation from an enterprise under 

section 1317D of the Safety and 

Soundness Act for two years after 

leaving FHFA. The commenter believes 

that this statutory restriction is 

inconsistent with the government-wide 

post-employment restrictions of 18 

U.S.C. 207(a)(1) and (2) and 5 CFR 

2635.601. FHFA notes that the section 

1317D statutory restriction is in 

addition to the government-wide postemployment restrictions of 18 U.S.C. 

207(a)(1) and (2) and 5 CFR 2635.601. 

Thus, FHFA has determined that a 

revision to § 9001.101 is not needed. 

The second comment relates to 

§§ 9001.104 and 9001.106. Section 

9001.104(a) prohibits FHFA employees 

and the employees’ spouse and minor 

children from owning or controlling 

certain financial interests that are 

related to or affected by the operations 

of FHFA, such as securities owned, 

issued, guaranteed, securitized, or 

collateralized by the regulated entities. 

Section 9001.106 prohibits an employee 

of FHFA from participating in any 

matter in which a regulated entity is a 

party if the regulated entity employs, as 

an employee or consultant, his or her 

spouse, child, parent, or sibling, or 

member of his or her household unless 

the Designated Agency Ethics Official 

has authorized the employee to 

participate in the matter using the 

standard in 5 CFR 2635.502(d). 

The commenter noted that the 

application of the two sections to family 

members differs. The restriction 

prohibiting the ownership or control of 

certain financial interests applies only 

to the employee’s spouse and minor 

children, while the restriction relating 

to employment by a regulated entity has 

a broader application in that it applies 

to the employee’s spouse, child, or 

sibling, or a member of his or her 

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household. The commenter believes that 

FHFA’s inclusion of family and 

household members in § 9001.106 but 

not in § 9001.104 might lead the public 

to question the different treatment and 

increase public uncertainty and 

confusion and make it more difficult for 

employees to distinguish between the 

restrictions that apply. 

The different application of the two 

sections conforms to law and regulation. 

FHFA notes that the restriction in 

§ 9001.104 prohibiting the ownership or 

control of certain financial interests 

conforms to the scope of the 

government-wide conflicting financial 

interests law at 18 U.S.C. 208, which 

applies to the employee and to the 

employee’s spouse and minor children, 

individuals whose financial interests are 

by law attributed to the employee. The 

requirement to receive prior approval 

before employment by a regulated entity 

of the employee’s spouse, child, sibling, 

or a member of his or her household in 

§ 9001.106 is intended to determine 

whether the employment could raise 

questions about the employee’s 

impartiality in performing his or her 

duties under the Standards. 

Issuance of Final Regulation With 

Technical and Clarifying Revisions; 

Immediate Effective Date 

Section 9001.101 has been revised to 

add a reference to the regulation 

concerning the post-employment 

restriction for senior examiners at 12 

CFR part 1212. Clarifying provisions 

have been added to §§ 9001.104(d) and 

9001.105(b), as discussed below under 

the Section-by-Section Analysis. 

FHFA, with the concurrence of OGE, 

has determined that the following 

supplemental rules that are contained in 

the proposed regulation, which adds a 

new 5 CFR chapter LXXX, consisting of 

part 9001, are necessary to implement 

successfully the ethics program of FHFA 

in light of the unique programs and 

operations of FHFA. Thus, FHFA is 

publishing as final the regulation as 

proposed with the technical revisions 

noted above. The final regulation has an 

immediate effective date for good cause. 

The final regulation, which affects only 

FHFA employees, is necessary to ensure 

the public trust in FHFA operations and 

it provides employees with adequate 

notice and time to report prohibited 

holdings and outside employment. 

III. Section-by-Section Analysis 

The following is a section-by-section 

analysis of the regulation. 

Section 9001.101 General 

Section 9001.101 explains that the 

regulation applies to all employees of 

FHFA and supplements the Standards 

found in 5 CFR part 2635. It also 

requires that employees of FHFA must 

comply with the Standards, this part, 

guidance and procedures established 

pursuant to this part, the regulation 

concerning the post-employment 

restriction for senior examiners at 12 

CFR part 1212, and any additional rules 

of conduct that FHFA is authorized to 

issue. It also notes that employees 

should contact the Designated Agency 

Ethics Official (DAEO) if they have 

questions about any provision of this 

regulation or other ethics-related 

matters. 

The section also contains crossreferences to other executive branch 

ethics regulations and a subsequent 

employment restriction of section 

1317D of the Safety and Soundness Act, 

12 U.S.C. 4523, applicable to certain 

highly compensated former FHFA 

officers and employees, including FHFA 

Director, along with an annual 

employee notification requirement as to 

that statutory restriction. Section 1317D 

prohibits such highly compensated 

former FHFA officers and employees, 

and the Director, from accepting 

compensation from an enterprise under 

section 1317D of the Safety and 

Soundness Act for two years after 

leaving FHFA. 

Section 9001.102 Definitions 

Section 9001.102 defines the key 

terms used in the regulation. 

Affiliate is defined as any entity that 

controls, is controlled by, or is under 

common control with another entity. 

Designated Agency Ethics Official, or 

DAEO, as also used in 5 CFR part 2635, 

and ‘‘alternate DAEO’’ are defined as the 

individuals so designated by the 

Director, FHFA. The DAEO is 

responsible for designating agency 

ethics officials and ethics designees, as 

such terms are used in 5 CFR part 2635. 

The alternate DAEO acts as the DAEO 

in the DAEO’s absence. 

Director is defined to mean the 

Director of FHFA or his or her designee. 

Employee is defined to mean an 

officer or employee of FHFA, including 

a special Government employee. For 

purposes of this part, it also is defined 

as an individual on detail from another 

agency to FHFA for a period of more 

than 30 days. 

Enterprise is defined as the Federal 

National Mortgage Association or the 

Federal Home Loan Mortgage 

Corporation. 

Federal Home Loan Bank or Bank is 

defined to mean a Bank established 

under the Federal Home Loan Bank Act; 

the term ‘‘Federal Home Loan Banks’’ 

means, collectively, all the Federal 

Home Loan Banks. 

Federal Home Loan Bank System is 

defined to mean the Federal Home Loan 

Banks under the supervision of FHFA. 

Regulated entity is defined to mean 

the Federal National Mortgage 

Association and any affiliate thereof; the 

Federal Home Loan Mortgage 

Corporation and any affiliate thereof; or 

any Federal Home Loan Bank; the term 

‘‘regulated entities’’ means, collectively, 

the Federal National Mortgage 

Association and any affiliate thereof; the 

Federal Home Loan Mortgage 

Corporation and any affiliate thereof; 

and the Federal Home Loan Banks. 

Safety and Soundness Act is defined 

to mean the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 (12 U.S.C. 4501 et seq.), as 

amended by the Housing and Economic 

Recovery Act of 2008 (HERA), Public 

Law 110–289, 122 Stat. 2654 (2008). 

Security is defined to mean all 

interests in debt or equity instruments. 

The term includes, without limitation, 

secured and unsecured bonds, 

debentures, notes, securitized assets and 

commercial paper including loans 

securitized by mortgages or deeds of 

trust and securities backed by such 

instruments, as well as all types of 

preferred and common stock. The term 

encompasses current and contingent 

ownership interests including any 

beneficial or legal interest derived from 

a trust. Such interest includes any right 

to acquire or dispose of any long or 

short position in such securities and 

also includes, without limit, interests 

convertible into such securities, as well 

as options, rights, warrants, puts, calls 

and straddles with respect thereto. The 

term shall not, however, be construed to 

include deposit accounts, such as 

checking, savings, or money market 

deposit accounts. 

Section 9001.103 Waivers 

Section 9001.103 authorizes the 

DAEO to grant employees of FHFA 

written waivers of any provision of the 

FHFA regulation based upon a 

determination that the waiver will not 

result in conduct inconsistent with 5 

CFR part 2635 or otherwise prohibited 

by law, and that application of the 

provision is not be necessary to ensure 

public confidence in the impartiality 

and objectivity with which the programs 

of FHFA are administered. In granting a 

waiver under § 9001.103, the DAEO may 

require the employee to take further 

action, including executing a written 

disqualification statement. This 

provision is intended, in appropriate 

cases, to ease the burden that these 

supplemental regulations will impose 

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3The term ‘‘special Government employee’’ is 

defined in 5 CFR 2635.102 to mean ‘‘those executive 

branch officers or employees specified in 18 U.S.C. 

202(a). A special Government employee is retained, 

designated, appointed, or employed to perform 

temporary duties either on a full-time or 

intermittent basis, with or without compensation, 

for a period not to exceed 130 days during any 

consecutive 365-day period.’’ 

on employees of FHFA 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. 

Section 9001.104 Prohibited Financial 

Interests 

Section 9001.104(a) prohibits FHFA 

employees and the employees’ spouse 

and minor children from owning or 

controlling certain financial interests 

that are related to or affected by the 

operations of FHFA, such as securities 

owned, issued, guaranteed, securitized, 

or collateralized by the regulated 

entities. This prohibition does not apply 

to special Government employees.3 The 

prohibition of § 9001.104(a) is based on 

the view of FHFA that permitting FHFA 

employees and their spouse and minor 

children directly or indirectly to own or 

control securities owned, issued, 

guaranteed, securitized, or collateralized 

by the regulated entities would cause a 

reasonable person to question the 

impartiality with which FHFA programs 

are administered. Specifically, FHFA 

believes that there is a direct and 

appropriate nexus between the 

prohibition against owning or 

controlling such securities as applied 

both to employees and to the spouses 

and minor children of employees and 

the efficiency of the service. 

In addition, while Federal conflict of 

interest statutes and the Standards 

prohibit an employee of FHFA from 

participating in matters in which the 

employee or the employee’s spouse or 

minor children have a conflicting 

financial interest, FHFA has determined 

that a broader ban is more effective in 

ensuring that no reasonable person 

could question the impartiality and 

objectivity of the agency’s actions. The 

broader ban of § 9001.104(a) establishes 

a clear prohibition that will be easily 

understood by observers of FHFA. 

Moreover, the prohibition will 

substantially reduce the burden on 

FHFA and FHFA employees to 

determine the scope of the prohibition 

for each employee. By promulgating a 

broad ban that excludes all securities 

owned, issued, guaranteed, securitized, 

or collateralized by the regulated 

entities, § 9001.104(a) will substantially 

reduce the need for FHFA employees, 

the DAEO, and other agency ethics 

officials or counselors to determine the 

financial interests prohibited by each 

employee’s duties. 

Section 9001.104(b) also attributes to 

an FHFA employee, or to the 

employee’s spouse and minor children, 

securities he or she is prohibited from 

holding directly by § 9001.104(a) that 

are held by certain described third-party 

entities. 

Section § 9001.104(c) permits an 

FHFA employee and the employee’s 

spouse and minor children to own 

interests in publicly-traded or publiclyavailable diversified mutual or other 

collective diversified investment funds 

that contain within their portfolios 

interests that they are prohibited from 

holding by § 9001.104(c). Under this 

provision, ownership of such 

investment funds are permitted as long 

as the employee or the employee’s 

spouse or minor children do not have 

the ability to control the fund or its 

portfolio, and the fund does not have an 

objective or practice of concentrating its 

investments in securities of a regulated 

entity or the regulated entities generally, 

and less than 25 percent of the total 

holdings of the fund are comprised of 

securities owned, issued, guaranteed, 

securitized, or collateralized by one or 

more regulated entities. 

This exception to § 9001.104(a) 

reflects the view of FHFA that the 

prohibition on owning or controlling 

securities of the regulated entities 

should not be extended to publiclytraded or publicly-available mutual 

funds or other collective investment 

funds that are diversified and over 

which employees have no control, since 

it would be unreasonable to require 

employees to divest themselves of such 

mutual funds based on investment 

decisions in which they played no role. 

FHFA believes that allowing an FHFA 

employee and the employee’s spouse 

and minor children to own interests in 

publicly-traded or publicly-available 

diversified mutual funds and collective 

investment funds will not endanger the 

impartiality or objectivity of FHFA, 

even if these funds held some limited 

interest in securities owned, issued, 

securitized, guaranteed, or collateralized 

by one or more of the regulated entities. 

Section 9001.104(d) requires 

employees of FHFA, within 30 calendar 

days commencement of employment, to 

report to the DAEO in writing all 

financial interests that they acquired 

prior or the commencement of their 

employment, and that they are 

prohibited from holding by 

§ 9001.104(a). Employees are required to 

divest such interests, within 90 calendar 

days of the date reported, unless they 

receive a written waiver from the DAEO 

in accordance with § 9001.103. The 

section imposes a similar reporting and 

divestiture requirement upon employees 

who acquire, without specific intent, 

financial interests prohibited by 

§ 9001.104(a). Section 9001.104(d) has 

been clarified to provide expressly that 

the reporting and divestiture 

requirements also apply to prohibited 

financial interests acquired prior to the 

effective date of this part. 

Section 9001.105 Outside Employment 

This section is designed to balance 

several important ethical principles 

against an employee’s right to engage in 

outside activities. Paragraph (a) of the 

section prohibits an FHFA employee, 

except for a special Government 

employee, from engaging in paid or 

unpaid employment with (1) a person, 

other than a State or local government, 

who is a registered lobbyist engaged in 

lobbying activities concerning FHFA 

programs; (2) any regulated entity, or 

(3) the Office of Finance of the Federal 

Home Loan Bank System. FHFA is of 

the view that such a policy against 

active participation in such businesses 

is necessary to protect against questions 

regarding the impartiality and 

objectivity of employees and the 

administration of the programs of 

FHFA. FHFA believes that it will hinder 

FHFA in meeting its missions if 

members of the public could question 

whether employees are using their 

public positions or connections at FHFA 

to advance alternate careers. 

Furthermore, in accordance with 5 

CFR 2635.803, FHFA is of the view that 

it is necessary or desirable for the 

purpose of administering its ethics 

program to require FHFA employees to 

obtain approval before engaging in 

outside employment or activities. An 

approval requirement helps ensure that 

potential ethical problems are resolved 

before employees begin outside 

employment or activities that could 

involve a violation of applicable statutes 

and standards of conduct. 

Thus, § 9001.105(b)(1) provides that 

an FHFA employee, other than a special 

Government employee, must obtain 

advance written approval from the 

employee’s supervisor and the 

concurrence of the DAEO before 

engaging in any outside employment. 

FHFA has added clarifying language 

to § 9001.105(b)(2) addressing outside 

employment commenced by employees 

before the effective date of this part. An 

employee who commenced engaging in 

any outside employment not prohibited 

under § 9001.105(a) before the effective 

date of this part must request written 

approval from his or her supervisor and 

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4The term ‘‘entity-affiliated party’’ is defined in 

section 1301(11) of the Safety and Soundness Act 

(12 U.S.C. 4502(11)). 

the concurrence of the DAEO within 30 

calendar days of the effective date. The 

employee may continue engaging in the 

outside employment while the request 

is under review. 

Section 9001.105(b)(2) also addresses 

outside employment by new employees. 

An employee who before being 

employed by FHFA commenced 

engaging in any outside employment 

not prohibited under § 9001.105(a) must 

request written approval from his or her 

supervisor and the concurrence of the 

DAEO within 30 calendar days of 

commencing employment with FHFA. 

The new employee may continue 

engaging in the outside employment 

while the request is under review. 

Paragraph (c) to § 9001.105 broadly 

defines outside employment to cover 

any form of non-Federal employment or 

business relationship involving the 

provision of personal services, whether 

or not for compensation, other than in 

the discharge of official duties. It also 

includes writing when done under an 

arrangement with another person or 

entity for production or publication of 

the written product. It does not, 

however, include participation in the 

activities of nonprofit charitable, 

religious, professional, social, fraternal, 

educational, recreational, public service, 

or civic organizations, unless such 

activities are for (1) compensation other 

than reimbursement of expenses, (2) the 

organization’s activities are devoted 

substantially to matters relating to the 

employee’s official duties as defined in 

5 CFR 2635.807(a)(2)(i)(B) through (E) 

and the employee will serve as officer 

or director of the organization, or (3) the 

activities will involve the provision of 

consultative or professional services. 

Consultative services is defined to mean 

the provision of personal services by an 

employee, including the rendering of 

advice or consultation, which requires 

advanced knowledge in a field of 

science or learning customarily acquired 

by a course of specialized instruction 

and study in an institution of higher 

education, hospital, or similar facility. 

Professional services is defined to mean 

the provision of personal services by an 

employee, including the rendering of 

advice or consultation, which involves 

application of the skills of a profession 

as defined in 5 CFR 2636.305(b)(1) or 

involves a fiduciary relationship as 

defined in 5 CFR 2636.305(b)(2). 

A note following paragraph (c) of 

§ 9001.105 pertains to the special 

approval requirement set out in both 18 

U.S.C. 203(d) and 205(e), respectively, 

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 an 

employee who wishes to act as agent or 

attorney for, or otherwise represent his 

or her parents, spouse, children, or any 

person for whom, or any estate for 

which, he or she is serving as guardian, 

executor, administrator, trustee, or other 

personal fiduciary in such matters must 

obtain the approval required by law of 

the Government official responsible for 

the employee’s appointment in addition 

to the regulatory approval that is 

required in § 9001.105. 

Section 9001.105(d) sets out the 

procedures for requesting prior approval 

to engage in outside employment 

initially, or within seven calendar days 

of a significant change in the nature or 

scope of the outside employment or the 

employee’s official position. Paragraph 

(e) of § 9001.105 provides that the 

concurrence of the DAEO will be 

granted only upon a determination that 

the outside employment is not expected 

to involve conduct prohibited by statute 

or Federal regulation, including 5 CFR 

part 2635 and this part. 

Section 9001.105(f) provides that the 

DAEO may issue written instructions 

governing the submission of requests for 

approval of and concurrence with 

outside employment. The written 

instructions may exempt categories of 

employment from the prior approval 

and concurrence requirement based on 

a determination that employment 

within those categories will generally be 

approved and will likely not involve 

conduct prohibited by Federal law or 

regulation, including 5 CFR part 2635 

and this part. 

Section 9001.106 Restrictions 

Resulting From Employment of Family 

and Household Members 

Section 9001.106 prohibits an 

employee of FHFA from participating in 

any matter in which a regulated entity 

is a party if the regulated entity 

employs, as an employee or consultant, 

his or her spouse, child, parent, or 

sibling, or member of his or her 

household unless the DAEO has 

authorized the employee to participate 

in the matter using the standard in 5 

CFR 2635.502(d). Section 9001.106 

requires such an employee to make a 

written report to the DAEO within 30 

calendar days of employment by a 

regulated entity of the employee’s 

spouse, child, parent, sibling, or 

member of his or her household. This 

requirement is intended to eliminate the 

potential for any appearance of 

preferential treatment in those instances 

where employment of a family member 

or a member of the employee’s 

household would be likely to raise 

questions regarding the appropriateness 

of actions taken by the employee or 

FHFA. 

Section 9001.107 Other Limitations 

Section § 9001.107(a) references the 

statutory restriction on financial 

interests applicable to the Director, the 

Deputy Director of the Division of 

Enterprise Regulation, the Deputy 

Director of the Division of Federal Home 

Loan Bank Regulation, and the Deputy 

Director for Housing Mission and Goals. 

These individuals are subject to 

additional financial interest limitations 

set forth in section 1312(g) of the Safety 

and Soundness Act (12 U.S.C. 4512(g)). 

Section 1312(g) provides that the 

Director and each Deputy Director may 

not— 

(1) Have any direct or indirect 

financial interest in any regulated entity 

or entity-affiliated party; 4

(2) Hold any office, position, or 

employment in any regulated entity or 

entity-affiliated party; or 

(3) Have served as an executive officer 

or director of any regulated entity or 

entity-affiliated party at any time during 

the three-year period preceding the date 

of appointment or designation of such 

individual as Director or Deputy 

Director, as applicable. 

Paragraph (b) of § 9001.107 provides 

that if an employee or the spouse or 

minor children of the employee directly 

or indirectly owns a financial interest in 

a member of a Bank or in a financial 

institution such as a mortgage bank, 

mortgage broker, bank, thrift, or other 

financial institution that originates, 

insures, or services mortgages that are 

owned, issued, guaranteed, securitized, 

or collateralized by a regulated entity, 

the employee is cautioned not to violate 

the statutory prohibition against 

financial conflicts of interest set forth in 

18 U.S.C. 208. The language notes that 

the government-wide de minimis and 

other exceptions set forth in 5 CFR 

2640.202 are applicable to the 

ownership or control of interests in such 

financial institutions. Employees are 

encouraged to seek a determination 

from the DAEO as to whether the 

financial interest in the member of a 

Bank or in the financial institution 

creates a financial conflict of interest or 

an appearance of a conflict of interest 

and whether the employee should 

disqualify himself or herself from 

participating in an official capacity in a 

particular matter involving the financial 

institution. 

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Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 52611 

Section 9001.108 Prohibited 

Recommendations 

Section 9001.108 prohibits an 

employee of FHFA from recommending, 

suggesting, or giving advice to any 

person with respect to financial 

transactions or investment actions 

involving the acquisition, sale, or 

divestiture of securities of a regulated 

entity. The Standards at 5 CFR 2635.703 

prohibit an employee from allowing the 

improper use of nonpublic information 

to further his or her private interest or 

that of another, whether through advice 

or recommendation or by knowing 

unauthorized disclosure. The section 

supplements 5 CFR 2635.703 in that it 

expressly prohibits FHFA employees 

from using or creating the appearance of 

using information that is not available to 

the general public to further a private 

interest. The prohibition is also 

intended to eliminate any 

misunderstanding or harm that could 

result from such a recommendation. For 

example, an investor should not be 

misled into believing, pursuant to the 

recommendation of an FHFA employee, 

that the securities of a particular 

regulated entity regulated by FHFA is a 

sound buy because the investor believes 

that the employee may have access to 

inside information. 

Section 9001.109 Prohibited Purchase 

of Assets 

Section 9001.109 prohibits 

employees, the spouses of employees, 

and the minor children of employees of 

FHFA from purchasing real or personal 

property from the regulated entities 

unless it is sold at public auction or by 

other means that would ensure that the 

selling price of the property is the 

asset’s fair market value. This 

prohibition supplements the general 

prohibition in 5 CFR 2635.702 against 

the use of public office for private gain. 

Regulatory Impacts 

Paperwork Reduction Act 

The regulation does not contain any 

information collection requirement that 

requires the approval of OMB under the 

Paperwork Reduction Act (44 U.S.C. 

3501 et seq.). 

Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.) requires that a 

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations must 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. Such an 

analysis need not be undertaken if the 

agency has certified that the regulation 

does not have a significant economic 

impact on a substantial number of small 

entities. 5 U.S.C. 605(b). FHFA has 

considered the impact of the regulation 

under the Regulatory Flexibility Act. 

FHFA certifies that the regulation is not 

likely to have a significant economic 

impact on a substantial number of small 

business entities because the regulation 

is applicable only to employees of 

FHFA. 

List of Subjects in 5 CFR Part 9001 

Administration, Conflict of interests, 

Ethics, Government employees. 

■ Accordingly, for the reasons stated in 

the preamble, FHFA, with the 

concurrence of OGE, is amending title 5 

of the Code of Federal Regulations by 

adding a new chapter LXXX, consisting 

of part 9001, to read as follows: 

CHAPTER LXXX—FEDERAL HOUSING 

FINANCE AGENCY 

PART 9001—SUPPLEMENTAL 

STANDARDS OF ETHICAL CONDUCT 

FOR EMPLOYEES OF THE FEDERAL 

HOUSING FINANCE AGENCY 

Sec. 

9001.101 General. 

9001.102 Definitions. 

9001.103 Waivers. 

9001.104 Prohibited financial interests. 

9001.105 Outside employment. 

9001.106 Restrictions resulting from 

employment of family and household 

members. 

9001.107 Other limitations. 

9001.108 Prohibited recommendations. 

9001.109 Prohibited purchase of assets. 

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

(Ethics in Government Act of 1978); 12 

U.S.C. 4526; 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, 2635.402(c), 

2635.403(a), 2635.502(e), 2635.604, 2635.702, 

2635.703, 2635.802(a), 2635.803. 

§ 9001.101 General. 

(a) Purpose and scope. In accordance 

with 5 CFR 2635.105, the purpose of 

this regulation is to supplement the 

Standards of Ethical Conduct for 

Employees of the Executive Branch 

contained in 5 CFR part 2635. The 

regulation applies to employees of the 

Federal Housing Finance Agency 

(FHFA). Employees are required to 

comply with 5 CFR part 2635, this part, 

guidance and procedures established 

pursuant to this part, the regulation 

concerning the post-employment 

restriction for senior examiners at 12 

CFR part 1212, and any additional rules 

of conduct that FHFA is authorized to 

issue. Employees should contact the 

DAEO if they have questions about any 

provision of this regulation or other 

ethics-related matters. 

(b) Cross-references—(1) Regulations. 

FHFA employees are also subject to the 

regulations concerning executive branch 

financial disclosure contained in 5 CFR 

part 2634, the regulations concerning 

executive branch financial interests 

contained in 5 CFR part 2640, and the 

regulations concerning executive branch 

employee responsibilities and conduct 

contained in 5 CFR part 735. 

(2)(i) Statutory restriction. Section 

1319D of the Act, 12 U.S.C. 4523, 

prohibits the Director or any former 

officer or employee of FHFA who, while 

employed by FHFA, was compensated 

at a rate in excess of the lowest rate for 

a position classified higher than GS–15 

of the General Schedule under section 

5107 of title 5, United States Code, from 

accepting compensation from an 

enterprise during the two-year period 

beginning on the date of his or her 

separation from employment by FHFA. 

(ii) Notice to employees. The DAEO 

shall notify employees on an annual 

basis of the rate of compensation that 

triggers the subsequent employment 

restriction. 

§ 9001.102 Definitions. 

For purposes of this part, the term: 

Affiliate means any entity that 

controls, is controlled by, or is under 

common control with another entity. 

Designated Agency Ethics Official, or 

DAEO, as also used in 5 CFR part 2635, 

and ‘‘alternate DAEO’’ mean the 

individuals so designated by the 

Director, FHFA. The DAEO is 

responsible for designating agency 

ethics officials and ethics designees, as 

such terms are used in 5 CFR part 2635. 

The alternate DAEO acts as the DAEO 

in the DAEO’s absence. 

Director means the Director of FHFA 

or his or her designee. 

Employee means an officer or 

employee of FHFA, including a special 

Government employee. For purposes of 

this part, it also means an individual on 

detail from another agency to FHFA for 

a period of more than 30 calendar days. 

Enterprise means the Federal National 

Mortgage Association or the Federal 

Home Loan Mortgage Corporation. 

Federal Home Loan Bank or Bank 

means a Bank established under the 

Federal Home Loan Bank Act; the term 

‘‘Federal Home Loan Banks’’ means, 

collectively, all the Federal Home Loan 

Banks. 

Federal Home Loan Bank System 

means the Federal Home Loan Banks 

under the supervision of the Federal 

Housing Finance Agency. 

Regulated entity means the Federal 

National Mortgage Association and any 

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affiliate thereof; the Federal Home Loan 

Mortgage Corporation and any affiliate 

thereof; or any Federal Home Loan 

Bank; the term ‘‘regulated entities’’ 

means, collectively, the Federal 

National Mortgage Association and any 

affiliate thereof; the Federal Home Loan 

Mortgage Corporation and any affiliate 

thereof; and the Federal Home Loan 

Banks. 

Safety and Soundness Act means the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 

U.S.C. 4501 et seq.), as amended by the 

Housing and Economic Recovery Act of 

2008 (HERA), Public Law 110–289, 122 

Stat. 2654 (2008). 

Security means all interests in debt or 

equity instruments. The term includes, 

without limitation, secured and 

unsecured bonds, debentures, notes, 

securitized assets and commercial paper 

including loans securitized by 

mortgages or deeds of trust and 

securities backed by such instruments, 

as well as all types of preferred and 

common stock. The term encompasses 

current and contingent ownership 

interests including any beneficial or 

legal interest derived from a trust. Such 

interest includes any right to acquire or 

dispose of any long or short position in 

such securities and also includes, 

without limit, interests convertible into 

such securities, as well as options, 

rights, warrants, puts, calls and 

straddles with respect thereto. The term 

shall not, however, be construed to 

include deposit accounts, such as 

checking, savings, or money market 

deposit accounts. 

§ 9001.103 Waivers. 

(a) General. The DAEO may waive 

any provision of this part upon finding 

that the waiver will not result in 

conduct inconsistent with 5 CFR part 

2635 or otherwise prohibited by law, 

and that application of the provision is 

not necessary to ensure public 

confidence in the impartiality and 

objectivity with which the programs of 

FHFA are administered. Each waiver 

shall be in writing and supported by a 

statement of the facts and findings upon 

which it is based and may impose 

appropriate conditions, including but 

not limited to requiring the employee to 

execute a written disqualification 

statement or an agreement not to acquire 

additional securities. 

(b) Waiver of prohibitions relating to 

ownership or control of securities. The 

DAEO may grant a waiver permitting 

the employee or the employee’s spouse 

or minor children to own or control, 

directly or indirectly, any security 

prohibited under § 9001.104, if, in 

addition to the standards under 

paragraph (a) of this section: 

(1) Extenuating circumstances exist, 

such as ownership or control of the 

security was acquired: 

(i) Prior to employment with FHFA; 

(ii) Through inheritance, gift, merger, 

acquisition, or other change in corporate 

structure, or otherwise without specific 

intent on the part of the employee, or 

employee’s spouse or minor children, to 

acquire the security; or 

(iii) By an employee’s spouse or 

minor children as part of a 

compensation package in connection 

with employment or prior to marriage to 

the employee; 

(2) The amount of the prohibited 

financial interest has a market value of 

less than the de minimis amount set 

forth in 5 CFR 2640.202(a); 

(3) The employee makes a prompt and 

complete written disclosure of the 

interest; and 

(4) If the employee is required to 

disqualify himself or herself from 

certain assignments, the disqualification 

does not unduly interfere with the full 

performance of the employee’s duties. 

§ 9001.104 Prohibited financial interests. 

(a) General prohibition. This section 

applies to all employees, except special 

Government employees. Except as 

permitted in paragraph (c) of this 

section, an employee or an employee’s 

spouse or minor children, shall not 

directly or indirectly own or control 

securities owned, issued, guaranteed, 

securitized, or collateralized by a 

regulated entity. 

(b) Restrictions arising from thirdparty relationships. If any of the entities 

listed in paragraphs (b)(1) through (6) of 

this section owns securities that an 

employee is prohibited from owning 

directly by paragraph (a) of this section, 

the employee is deemed to hold the 

securities indirectly. The entities are— 

(1) A partnership in which the 

employee or employee’s spouse or 

minor children are general partners; 

(2) A partnership in which the 

employee or employee’s spouse or 

minor children individually or jointly 

hold more than a 10 percent limited 

partnership interest; 

(3) A closely held corporation in 

which the employee or employee’s 

spouse or minor children individually 

or jointly hold more than a 10 percent 

equity interest; 

(4) A trust in which the employee or 

employee’s spouse or minor children 

have a legal or beneficial interest; 

(5) An investment club or similar 

informal investment arrangement 

between the employee or employee’s 

spouse or minor children and others; or 

(6) Any other entity in which the 

employee or employee’s spouse or 

minor children individually or jointly 

hold more than a 10 percent equity 

interest. 

(c) Exceptions to prohibition for 

certain interests. Notwithstanding 

paragraphs (a) and (b) of this section, an 

employee or an employee’s spouse or 

minor children may directly or 

indirectly own or control: 

(1) A security for which a waiver has 

been granted pursuant to § 9001.103; 

and 

(2) An interest in a publicly-traded or 

publicly-available diversified mutual 

fund or other collective diversified 

investment fund, including a widelyheld pension or other retirement fund if: 

(i) Neither the employee, the 

employee’s spouse, nor the employee’s 

minor children exercise or have the 

ability to exercise control over the 

financial interests held by the fund; and 

(ii) The fund does not indicate in its 

prospectus the objective or practice of 

concentrating its investments in 

securities of a regulated entity or 

regulated entities generally, and less 

than 25 percent of the total holdings of 

the fund are comprised of securities 

owned, issued, guaranteed, securitized, 

or collateralized by one or more 

regulated entities. 

(d) Reporting and divestiture. An 

employee must provide, in writing, to 

the DAEO any financial interest 

prohibited under paragraph (a) of this 

section acquired prior to the effective 

date of this part or the commencement 

of employment with FHFA or without 

specific intent, as through gift, 

inheritance, or marriage, within 30 

calendar days from the effective date of 

this part, commencement of 

employment with FHFA, or acquisition 

of such interest. Such financial interest 

must be divested within 90 calendar 

days from the date reported unless a 

waiver is granted in accordance with 

§ 9001.103. 

§ 9001.105 Outside employment. 

(a) Prohibited outside employment. 

Employees, except special Government 

employees, shall not engage in: 

(1) Employment with a person or 

entity, other than a State or local 

government, that is registered as a 

lobbyist under the Lobbying Disclosure 

Act of 1995 (2 U.S.C. chapter 26) and 

engages in lobbying activities 

concerning FHFA programs; or 

(2) Employment with any regulated 

entity or with the Office of Finance of 

the Federal Home Loan Bank System. 

(b) Prior approval for and 

concurrence with other outside 

employment—(1) Except as provided in 

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paragraph (b)(2) of this section, before 

engaging in any outside employment 

that is not prohibited under paragraph 

(a) of this section, with or without 

compensation, an employee, other than 

a special Government employee, must 

obtain written approval from his or her 

supervisor and the concurrence of the 

DAEO. Nonetheless, special 

Government employees remain subject 

to other statutory and regulatory 

provisions governing their outside 

activities, including 18 U.S.C. 203(c) 

and 205(c), as well as applicable 

provisions of 5 CFR part 2635. 

(2) An employee, other than a special 

Government employee, who before the 

effective date of this part or 

commencement of employment with 

FHFA commenced engaging in outside 

employment that is not prohibited 

under paragraph (a) of this section must 

request written approval from his or her 

supervisor and the concurrence of the 

DAEO within 30 calendar days of the 

effective date of this part or 

commencement of employment with 

FHFA. The employee may continue 

engaging in the outside employment 

while the request is under review. 

(c) Definition of outside employment. 

For purposes of paragraph (b) of this 

section, outside employment means any 

form of non-Federal employment or 

business relationship involving the 

provision of personal services, whether 

or not for compensation. It includes, but 

is not limited to, services as an officer, 

director, employee, agent, advisor, 

attorney, consultant, contractor, general 

partner, trustee, teacher, or speaker. It 

includes writing when done under an 

arrangement with another person or 

entity for production or publication of 

the written product. The definition does 

not include positions as trustee for a 

family trust for which the only 

beneficiaries are the employee, the 

employee’s spouse, the employee’s 

minor or dependent children, or any 

combination thereof. The definition also 

does not include participation in the 

activities of a nonprofit charitable, 

religious, professional, social, fraternal, 

educational, recreational, public service 

or civic organization, unless: 

(1) The employee will receive 

compensation other than reimbursement 

of expenses; 

(2) The organization’s activities are 

devoted substantially to matters relating 

to the employee’s official duties as 

defined in 5 CFR 2635.807(a)(2)(i)(B) 

through (E) and the employee will serve 

as officer or director of the organization; 

or 

(3) The activities will involve the 

provision of consultative or professional 

services. Consultative services means 

the provision of personal services by an 

employee, including the rendering of 

advice or consultation, which requires 

advanced knowledge in a field of 

science or learning customarily acquired 

by a course of specialized instruction 

and study in an institution of higher 

education, hospital, or similar facility. 

Professional services means the 

provision of personal services by an 

employee, including the rendering of 

advice or consultation, which involves 

application of the skills of a profession 

as defined in 5 CFR 2636.305(b)(1) or 

involves a fiduciary relationship as 

defined in 5 CFR 2636.305(b)(2). 

Note to § 9001.105(c): There is a special 

approval requirement set out in both 18 

U.S.C. 203(d) and 205(e), respectively, 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. Thus, an employee who 

wishes to act as agent or attorney for, or 

otherwise represent his or her parents, 

spouse, children, or any person for whom, or 

any estate for which, he or she is serving as 

guardian, executor, administrator, trustee, or 

other personal fiduciary in such matters must 

obtain the approval required by law of the 

Government official responsible for the 

employee’s appointment in addition to the 

regulatory approval required in this section. 

(d) Procedure for requesting approval 

and concurrence—(1) The approval 

required by paragraph (b) of this section 

shall be requested by e-mail or other 

form of written correspondence in 

advance of engaging in outside 

employment as defined in paragraph (c) 

of this section. 

(2) The request for approval to engage 

in outside employment shall set forth, at 

a minimum: 

(i) The name of the employer or 

organization; 

(ii) The nature of the activity or other 

work to be performed; 

(iii) The title of the position; and 

(iv) The estimated duration of the 

outside employment. 

(3) Upon a significant change in the 

nature or scope of the outside 

employment or in the employee’s 

official position within FHFA, the 

employee must, within seven calendar 

days of the change, submit a revised 

request for approval and concurrence. 

(e) Standard for concurrence. The 

DAEO may concur with the supervisor’s 

approval required by paragraph (b) of 

this section only upon his or her written 

determination that the outside 

employment is not expected to involve 

conduct prohibited by statute or Federal 

regulation, including 5 CFR part 2635 

and this part. 

(f) Issuance of instructions. The DAEO 

may issue written instructions 

governing the submission of requests for 

approval of and concurrence with 

outside employment under paragraph 

(d) of this section. The instructions may 

exempt categories of employment from 

the prior approval and concurrence 

requirement of paragraph (b) of this 

section based on a determination by the 

DAEO that employment within those 

categories of employment will generally 

be approved and is not likely to involve 

conduct prohibited by Federal law or 

regulation, including 5 CFR part 2635 

and this part. 

§ 9001.106 Restrictions resulting from 

employment of family and household 

members. 

(a) Disqualification of employee. An 

employee may not participate in any 

particular matter in which a regulated 

entity is a party if the regulated entity 

employs as an employee or a consultant 

his or her spouse, child, parent, or 

sibling, or member of his or her 

household unless the DAEO has 

authorized the employee to participate 

in the matter using the standard set 

forth in 5 CFR 2635.502(d). 

(b) Reporting certain relationships. 

Within 30 calendar days of the spouse, 

child, parent, sibling, or member of the 

employee’s household being employed 

by the regulated entity, the employee 

shall provide in writing notice of such 

employment to the DAEO. 

§ 9001.107 Other limitations. 

(a) Director and Deputy Directors. The 

Director, the Deputy Director of the 

Division of Enterprise Regulation, the 

Deputy Director of the Division of 

Federal Home Loan Bank Regulation, 

and the Deputy Director for Housing 

Mission and Goals are subject to 

additional financial interest limitations 

as set forth in section 1312(g) of the 

Safety and Soundness Act, 12 U.S.C. 

4512(g). 

(b) Financial interests in Bank 

members and other financial 

institutions. If an employee or the 

spouse or minor children of the 

employee directly or indirectly owns a 

financial interest in a member of a Bank 

or in a financial institution such as a 

mortgage bank, mortgage broker, bank, 

thrift, or other financial institution that 

originates, insures, or services 

mortgages that are owned, guaranteed, 

securitized, or collateralized by a 

regulated entity, the employee is 

cautioned not to violate the statutory 

prohibition against financial conflicts of 

interest set forth in 18 U.S.C. 208. The 

government-wide de minimis and other 

exceptions set forth in 5 CFR 2640.202 

are applicable to the ownership or 

control of interests in such financial 

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52614 Federal Register / Vol. 75, No. 166 / Friday, August 27, 2010 / Rules and Regulations 

institutions. Employees are encouraged 

to seek a determination from the DAEO 

as to whether the financial interest in 

the member of the Bank or in the 

financial institution creates a financial 

conflict of interest or an appearance of 

a conflict of interest and whether the 

employee should disqualify himself or 

herself from participating in an official 

capacity in a particular matter involving 

the financial institution. 

§ 9001.108 Prohibited recommendations. 

Employees shall not make any 

recommendation or suggestion, directly 

or indirectly, concerning the 

acquisition, sale, or divestiture of 

securities of a regulated entity. 

§ 9001.109 Prohibited purchase of assets. 

An employee or the employee’s 

spouse or minor children shall not 

purchase, directly or indirectly, any real 

or personal property from a regulated 

entity, unless it is sold at public auction 

or by other means which would assure 

that the selling price is the asset’s fair 

market value. 

Dated: August 3, 2010. 

Edward J. DeMarco, 

Acting Director, Federal Housing Finance 

Agency. 

Approved: August 13, 2010. 

Robert I. Cusick, 

Director, Office of Government Ethics. 

[FR Doc. 2010–21324 Filed 8–26–10; 8:45 am] 

BILLING CODE 8070–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Docket No. NM433; Special Conditions No. 

25–411–SC] 

Special Conditions: Embraer Model 

ERJ 170–100 SU Series Airplanes; 

Seats With Non-Traditional, Large, 

Non-Metallic Panels 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final special conditions; request 

for comments. 

SUMMARY: These special conditions are 

issued for the Embraer Model ERJ 170– 

100 SU series airplanes. These 

airplanes, as modified by C&D Zodiac, 

Inc., will have a novel or unusual design 

feature associated with seats that 

include non-traditional, large, nonmetallic panels that would affect 

survivability during a post-crash fire 

event. The applicable airworthiness 

regulations do not contain adequate or 

appropriate safety standards for this 

design feature. These special conditions 

contain the additional safety standards 

that the Administrator considers 

necessary to establish a level of safety 

equivalent to that established by the 

existing airworthiness standards. 

DATES: The effective date of these 

special conditions is August 18, 2010. 

We must receive your comments by 

September 27, 2010. 

ADDRESSES: You must mail two copies 

of your comments to: Federal Aviation 

Administration, Transport Airplane 

Directorate, Attn: Rules Docket (ANM– 

113), Docket No. NM433, 1601 Lind 

Avenue, SW., Renton, Washington 

98057–3356. You may deliver two 

copies to the Transport Airplane 

Directorate at the above address. You 

must mark your comments: Docket No. 

NM433. You can inspect comments in 

the Rules Docket weekdays, except 

Federal holidays, between 7:30 a.m. and 

4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

Jayson Claar, FAA, ANM–115, 

Transport Airplane Directorate, Aircraft 

Certification Service, 16501 Lind 

Avenue, SW., Renton, WA 98057–3356; 

telephone (425) 227–2194; facsimile 

(425) 227–1232. 

SUPPLEMENTARY INFORMATION: 

The FAA has determined that notice 

of, and opportunity for prior public 

comment on, these special conditions 

are impracticable because these 

procedures would significantly delay 

issuance of the design approval and 

thus delivery of the affected aircraft. In 

addition, the substance of these special 

conditions has been subject to the 

public-comment process in several prior 

instances with no substantive comments 

received. The FAA therefore finds that 

good cause exists for making these 

special conditions effective upon 

issuance. 

Comments Invited 

We invite interested people to take 

part in this rulemaking by sending 

written comments, data, or views. The 

most helpful comments reference a 

specific portion of the special 

conditions, explain the reason for any 

recommended change, and include 

supporting data. We ask that you send 

us two copies of written comments. 

We will file in the docket all 

comments we receive, as well as a 

report summarizing each substantive 

public contact with FAA personnel 

about these special conditions. You can 

inspect the docket before and after the 

comment closing date. If you wish to 

review the docket in person, go to the 

address in the ADDRESSES section of this 

preamble between 7:30 a.m. and 4 p.m., 

Monday through Friday, except Federal 

holidays. 

We will consider all comments we 

receive by the closing date for 

comments. We will consider comments 

filed late if it is possible to do so 

without incurring expense or delay. We 

may change these special conditions 

based on the comments we receive. 

If you want us to acknowledge receipt 

of your comments on these special 

conditions, include with your 

comments a self-addressed, stamped 

postcard on which you have written the 

docket number. We will stamp the date 

on the postcard and mail it back to you. 

Background 

On June 16, 2010, C&D Zodiac, Inc., 

5701 Bolsa Ave,, Huntington Beach, 

California 92647, applied for a 

Supplemental Type Certificate (STC) for 

an interior modification to include seats 

with large, non-metallic panels in the 

cabin interior in the Embraer Model ERJ 

170–100 SU series airplanes. The Model 

ERJ 170–100 SU, which is currently 

approved under Type Certificate No. 

A56NM, is a 76 passenger, twin-engine 

regional jet with a maximum takeoff 

weight of 82,011 pounds. 

The applicable airplane regulations, 

currently approved under Title 14, Code 

of Federal Regulations (14 CFR) part 25, 

do not require seats to meet the morestringent flammability standards 

required of large, non-metallic panels in 

the cabin interior. At the time the 

applicable rules were written, seats 

were designed with a metal frame 

covered by fabric, not with large, nonmetallic panels. Seats also met the thenrecently adopted standards for 

flammability of seat cushions. With the 

seat design being mostly fabric and 

metal, the contribution to a fire in the 

cabin had been minimized and was not 

considered a threat. For these reasons, 

seats did not need to be tested to heatrelease and smoke-emission 

requirements. 

Seat designs have now evolved to 

occasionally include non-traditional, 

large, non-metallic panels. Taken in 

total, the surface area of these panels is 

on the same order as the sidewall and 

overhead stowage bin interior panels. 

To provide the level of passenger 

protection intended by the 

airworthiness standards, these nontraditional, large, non-metallic panels in 

the cabin must meet the standards of 

part 25, Appendix F, parts IV and V, 

heat-release and smoke-emission 

requirements. 

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