[Federal Register Volume 74, Number 110 (Wednesday, June 10, 2009)]
[Proposed Rules]
[Pages 27470-27474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-13620]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1212

RIN 2590-AA19


Post-Employment Restriction for Senior Examiners

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Housing Finance Agency (FHFA) proposes to issue a 
regulation that cross-references the Supplemental Standards of Ethical 
Conduct for Employees of FHFA and that sets forth post-employment 
restrictions for senior examiners of FHFA pursuant to 12 U.S.C. 
4517(e).

DATES: Comments regarding the Notice of Proposed Rulemaking must be 
received on or before July 27, 2009. For additional information, see 
SUPPLEMENTARY INFORMATION.

ADDRESSES: You may submit your comments on the proposed rulemaking, 
identified by ``RIN 2590-AA19,'' by any of the following methods:
    <bullet> U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA19, Federal 
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, 
DC 20552.
    <bullet> Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA19, 
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. The package should be logged at the Guard Desk, 
First Floor, on business days between 9 a.m. and 5 p.m.
    <bullet> E-mail: Comments to Alfred M. Pollard, General Counsel, 
may be sent by e-mail to <a href="/cdn-cgi/l/email-protection#e9bb8c8eaa8684848c879d9aa98f818f88c78e869f"><span class="__cf_email__" data-cfemail="e9bb8c8eaa8684848c879d9aa98f818f88c78e869f">[email protected]</span></a>. Please include ``RIN 
2590-AA19'' in the subject line of the message.

[[Page 27471]]

    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by e-
mail to FHFA at <a href="/cdn-cgi/l/email-protection#72201715311d1f1f171c060132141a14135c151d04"><span class="__cf_email__" data-cfemail="74261113371b1919111a000734121c12155a131b02">[email protected]</span></a> to ensure timely receipt by the 
agency. Include the following information in the subject line of your 
submission: Comments/RIN 2590-AA19.

FOR FURTHER INFORMATION CONTACT: Janice A. Kullman, Assistant General 
Counsel, telephone (202) 414-8970 (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. Comments

    The Federal Housing Finance Agency (FHFA) invites comment on all 
aspects of the proposed regulation, and will consider all relevant 
comments before issuing the final regulation. Copies of all comments 
will be posted without change, including any personal information you 
provide, such as your name and address, on the FHFA Web site at http://www.fhfa.gov. In addition, copies of all comments received will be 
available for examination by the public on business days between the 
hours of 10 a.m. and 3 p.m. at the Federal Housing Finance Agency, 
Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an 
appointment to inspect comments, please call the Office of General 
Counsel at (202) 414-3751.

II. Background

    The Housing and Economic Recovery Act of 2008 (HERA), Public Law 
No. 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) 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 and 
the Federal Home Loan Mortgage Corporation (collectively, the 
Enterprises), and the Federal Home Loan Banks (Banks) (collectively, 
the 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, regulation, 
guidelines and orders issued under the Safety and Soundness Act, 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. FHFA also has regulatory authority 
over the Office of Finance under 12 U.S.C 4511.
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    \1\ See Division A, titled the ``Federal Housing Finance 
Regulatory Reform Act of 2008,'' Title I, Section 1101 of HERA.
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    Section 6303(b) of the Intelligence Reform and Terrorism Prevention 
Act of 2004, Public Law No. 108-458 (Dec. 17, 2004), in amending 
section 10 of the Federal Deposit Insurance Act, established a post-
employment restriction for senior examiners of the Office of the 
Comptroller of the Currency, Federal Reserve System, Federal Deposit 
Insurance Corporation, and Office of Thrift Supervision.\2\ In 
response, the Board of Governors of the Federal Reserve System (Federal 
Reserve) and the other financial regulators issued regulations on 
November 17, 2005, to reflect the new post-employment restriction.
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    \2\ 12 U.S.C. 1820(k).
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    The Safety and Soundness Act provides that each examiner of FHFA 
``shall be subject to the same disclosures, prohibitions, obligations 
and penalties as are applicable to examiners employed by the Federal 
Reserve Banks.'' 12 U.S.C. 4517(e). In light of that provision, this 
proposed regulation sets forth post-employment restrictions that are 
essentially the same as the restrictions in the post-employment 
regulation of the Federal Reserve at 12 CFR part 264a, including 
penalty provisions.
    The Federal Reserve relies on section 8 of the Federal Deposit 
Insurance Act (12 U.S.C. 1818) for the penalty enforcement section of 
its regulation. FHFA relies on similar provisions in section 1376 and 
1377 of the Safety and Soundness Act (12 U.S.C. 4636 and 4636a, 
respectively).

III. Section-by-Section Analysis

    The following is a section-by-section analysis of the proposed 
regulation.

Subpart A

    Subpart A would be reserved. FHFA intends to cross-reference the 
Supplemental Standards of Ethical Conduct for Employees of the Federal 
Housing Finance Agency when such standards are published.

Subpart B--Post-Employment Restriction for Senior Examiners

Section 1212.1 Purpose and scope
    Proposed Sec.  1212.1 would provide that the purpose of subpart B 
is to set forth special post-employment restrictions that are 
applicable to senior examiners that are in addition to the post-
employment restriction for FHFA employees under section 12 U.S.C. 4523, 
which is restated in 5 CFR part 9001. The post-employment restriction 
applicable to FHFA employees under 12 U.S.C. 4523 provides that 
officers and employees of FHFA who are compensated at a certain salary 
level are not permitted to accept compensation from the Federal 
National Mortgage Association and the Federal Home Loan Mortgage 
Corporation (Enterprises) for a period of two years after leaving FHFA.
Section 1212.2 Definitions
    This proposed section would set forth definitions applicable to 
subpart B.
    Consultant would be defined as a person who works directly on 
matters for, or on behalf of, a regulated entity, or the Office of 
Finance.
    Director would mean the Director of FHFA or his or her designee.
    Employee would be defined as an officer or employee of FHFA, 
including a special Government employee.
    Federal Home Loan Bank or Bank would be defined as a Bank 
established under the Federal Home Loan Bank Act; the term ``Federal 
Home Loan Banks'' means, collectively, all the Federal Home Loan Banks.
    Office of Finance would be defined as the Office of Finance of the 
Federal Home Loan Bank System.
    Regulated entity would be defined as 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'' would be defined to mean, 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 would be defined as the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992, as amended by 
the Federal Housing Finance Regulatory Reform Act of 2008, Division A 
of the Housing and Economic Recovery Act of 2008, Public Law No. 110-
289, 122 Stat. 2654 (2008).
    Senior examiner would be defined as an FHFA employee who has been:

[[Page 27472]]

    <bullet> Authorized by FHFA to conduct examinations or inspections 
on behalf of FHFA;
    <bullet> Assigned continuing, broad and lead responsibility for 
examining a regulated entity or the Office of Finance; and
    <bullet> Assigned responsibilities for examining, inspecting, and 
supervising the regulated entity or the Office of Finance that--
    [cir] Represents a substantial portion of the employee's assigned 
responsibilities; and
    [cir] Requires the employee to interact routinely with officers or 
employees of the regulated entity or the Office of Finance.
    To be considered a ``senior examiner,'' an employee must meet each 
of the criteria listed above. Thus, an examiner who spends a 
substantial portion of his or her time conducting or leading a targeted 
examination, but who does not have broad and lead responsibility for 
the overall examination program with respect to a regulated entity or 
the Office of Finance would not be considered a ``senior examiner'' 
with respect to that regulated entity or the Office of Finance. An 
examiner who divides his or her time across a portfolio of regulatory 
entities, each of which does not represent a substantial portion of the 
examiner's responsibilities, also would not be considered a ``senior 
examiner.'' Such an examiner is not likely to develop the type and 
degree of relationship with any one regulated entity or the Office of 
Finance that the proposed post-employment restriction is designed to 
address. FHFA believes that an examiner has continuing responsibility 
for a regulated entity or the Office of Finance only when the 
examiner's responsibilities for the regulated entity or the Office of 
Finance are expected to continue for a period of time that would enable 
the examiner to develop a meaningful, dedicated, and sustained 
relationship with the regulated entity or the Office of Finance. FHFA 
believes that such a period of time would be at least two months.
    To help examiners comply with the post-employment restrictions, 
FHFA intends that the designated agency ethics official (DAEO) or the 
alternate DAEO would notify examiners in writing if they are subject to 
either the one-year post-employment restriction or the two-year post-
employment restriction under 12 U.S.C. 4523, or both. The DAEO or 
alternate DAEO would also provide examiners information about how to 
conform to one or both of the restrictions.
    FHFA expects that the examiner-in-charge (EIC) of a Bank or the 
Office of Finance would be subject to the one-year post-employment 
restriction from working at the Bank or Office of Finance for which he 
or she served as EIC, but not necessarily other Banks which he or she 
may examine. In addition, the portfolio managers, who each generally 
oversee four Banks, would be subject to the one-year post-employment 
restriction for each Bank they oversee. These two groups of employees 
are responsible for establishing the scope of annual exams and 
assigning the composite rating for the Banks and therefore meet the 
definition of senior examiner. There may be rare instances of other 
examiners who meet the definition, but FHFA would not expect that an 
examiner supervising one aspect of safety and soundness for all the 
Banks would fall into the definition of the term ``senior examiner.'' 
Such a subject matter examiner would not have substantial enough 
contacts with any one particular bank to warrant a post-employment 
restriction. FHFA estimates that approximately 15 examiners who serve 
as EICs and portfolio managers for the Banks and the Office of Finance 
would be considered ``senior examiners'' for the purposes of this 
proposed regulation.
    Examiners who examine the Enterprises are subject to the two-year 
post-employment restriction set forth in 12 U.S.C. 4523 if they earn a 
certain salary, as is every FHFA employee. This two-year post-
employment restriction would subsume the one-year post-employment 
restriction with respect to accepting employment at the Enterprises 
because any examiner who is a ``senior examiner'' would already be 
precluded from accepting employment from an Enterprise because of his 
or her salary level. While there are approximately 30 examiners whose 
salary is below the threshold that would trigger the two-year post-
employment restriction, those examiners do not have broad and lead 
responsibility for examining a regulated entity or the Office of 
Finance and therefore would not meet the definition of ``senior 
examiner.'' FHFA believes that any examiner of an Enterprise who is a 
``senior examiner'' would also be subject to the two-year post-
employment restriction under 12 U.S.C. 4523.
Section 1212.3 Post-employment restriction for senior examiners
    Proposed Sec.  1212.3 would prohibit a senior examiner from 
knowingly accepting compensation as an employee, officer, director, or 
consultant of a regulated entity or the Office of Finance for one year 
after leaving the employment of FHFA if he or she has examined the 
regulated entity or the Office of Finance for two or more months during 
the last 12 months of employment at FHFA.
    A person would be deemed to be a consultant for purposes of the 
one-year post-employment restriction if such person ``directly works on 
matters for, or on behalf of'' the relevant regulated entity or the 
Office of Finance. FHFA intends this provision to mean that a former 
senior examiner who joins a consulting or other firm or is self- 
employed as a consultant may not, during the one-year post-employment 
period, participate in any work that the firm is conducting for a 
regulated entity or the Office of Finance that the former senior 
examiner would be prohibited from doing directly. The former senior 
examiner would not, however, violate the post-employment restrictions 
by joining a firm that performs work for such a regulated entity or the 
Office of Finance as long as the former senior examiner does not 
personally participate in any such work.
    The proposed post-employment restriction would not apply to any 
officer or employee of FHFA or any former officer or employee of FHFA 
who ceased to be an officer or employee of FHFA before the effective 
date of subpart B of this part.
Section 1212.4 Waiver
    Proposed Sec.  1212.4 would allow the Director, at the written 
request of a former senior examiner, to waive in writing, application 
of the one-year post-employment restriction, on a case-by-case basis, 
if the Director determines that granting the waiver would not affect 
the integrity of the supervisory program of FHFA. FHFA expects that 
waivers would be granted only in special circumstances.
Section 1212.5 Penalties
    Proposed Sec.  1212.5 would require FHFA to seek one or both of the 
following penalties against a former senior examiner who violates the 
one-year post-employment restriction:
    (1) An order removing the individual from his or her position at, 
or prohibiting the individual from further participation in the affairs 
of, the regulated entity or the Office of Finance for a period of up to 
five years, and prohibiting the individual from participating in the 
conduct of the affairs of any regulated entity or the Office of Finance 
for a period of up to five years; or (2) a civil money penalty of not 
more than $250,000.

[[Page 27473]]

    The former senior examiner against whom FHFA seeks to impose these 
penalties would have the procedural rights set forth in 12 U.S.C. 4636 
and 4636a, as applicable, and any implementing regulations issued by 
FHFA.

Regulatory Impacts

Paperwork Reduction Act

    The proposed regulation does not contain any information collection 
requirement that requires the approval of the Office of Management and 
Budget 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 
proposed regulation under the Regulatory Flexibility Act. FHFA 
certifies that the proposed 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 and 
officers and former employees and officers of FHFA, who are not small 
entities for purposes of the Regulatory Flexibility Act.

List of Subjects in 12 CFR part 1212

    Administrative practice and procedure, Conflicts of interest, 
Ethics, Federal Housing Finance Agency.

    Accordingly, for the reasons stated in the preamble, under the 
authority of 12 U.S.C. 4526 and 4517(e), FHFA proposes to amend 12 CFR 
Chapter XII by adding part 1212 to Subchapter A to read as follows:

PART 1212--POST-EMPLOYMENT RESTRICTION FOR SENIOR EXAMINERS

Subpart A--[Reserved]
Subpart B--Post-Employment Restriction for Senior Examiners
Sec.
1212.1 Purpose and scope.
1212.2 Definitions.
1212.3 Post-employment restriction for senior examiners.
1212.4 Waiver.
1212.5 Penalties.

    Authority:  12 U.S.C. 4526, 12 U.S.C. 4517(e).

Subpart A--[Reserved]

Subpart B--Post-Employment Restriction for Senior Examiners


Sec.  1212.1  Purpose and scope.

    This subpart sets forth a one-year post-employment restriction 
applicable to senior examiners of the Federal Housing Finance Agency 
(FHFA). This restriction is in addition to the post-employment 
restriction applicable to employees of FHFA under section 12 U.S.C. 
4523.


Sec.  1212.2  Definitions.

    For purposes of subpart B of this part, the term:
    Consultant means a person who works directly on matters for, or on 
behalf of, a regulated entity or the Office of Finance.
    Director means the Director of FHFA or his or her designee.
    Employee means an officer or employee of FHFA, including a special 
Government employee.
    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.
    Office of Finance means the Office of Finance of the Federal Home 
Loan Bank System, or any successor thereto.
    Regulated entity means the Federal National Mortgage Association 
and any affiliate thereof, the Federal Home Loan Mortgage Corporation 
and any affiliate thereof, 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, as amended by the Federal 
Housing Finance Regulatory Reform Act of 2008, Division A of the 
Housing and Economic Recovery Act of 2008, Public Law No. 110-289, 122 
Stat. 2654 (2008).
    Senior examiner means an employee of FHFA who has been:
    (1) Authorized by FHFA to conduct examinations or inspections on 
behalf of FHFA;
    (2) Assigned continuing, broad and lead responsibility for 
examining a regulated entity or the Office of Finance; and,
    (3) Assigned responsibilities for examining, inspecting and 
supervising the regulated entity or the Office of Finance that--
    (i) Represents a substantial portion of the employee's assigned 
responsibilities; and
    (ii) Requires the employee to interact routinely with officers or 
employees of the regulated entity or the Office of Finance.


Sec.  1212.3  Post-employment restriction for senior examiners.

    (a) Prohibition. An employee of FHFA who serves as the senior 
examiner of a regulated entity or the Office of Finance for two or more 
months during the last 12 months of his or her employment with FHFA may 
not, within one year after leaving the employment of FHFA, knowingly 
accept compensation as an employee, officer, director, or consultant 
from a regulated entity or the Office of Finance unless the Director 
grants a waiver pursuant to Sec.  1212.4.
    (b) Effective date. The post-employment restriction in paragraph 
(a) of this section shall not apply to any officer or employee of FHFA 
or any former officer or employee of FHFA who ceased to be an officer 
or employee of FHFA before the effective date of Subpart B of this 
part.


Sec.  1212.4  Waiver.

    At the written request of a senior examiner or former senior 
examiner, the Director may waive the post-employment restriction in 
Sec.  1212.3 if he or she certifies, in writing, and on a case-by-case 
basis, that granting a waiver of such restriction would not affect the 
integrity of the supervisory program of FHFA.


Sec.  1212.5  Penalties.

    (a) General. A senior examiner who, after leaving the employment of 
FHFA, violates the restriction set forth in Sec.  1212.3 shall be 
subject to one or both of the following penalties--
    (1) An order:
    (i) Removing the individual from office at the regulated entity or 
the Office of Finance or prohibiting the individual from further 
participation in the affairs of the relevant regulated entity or the 
Office of Finance for a period of up to five years; and
    (ii) Prohibiting the individual from participating in the affairs 
of any regulated entity or the Office of Finance for a period of up to 
five years; and/or
    (2) A civil money penalty of not more than $250,000.
    (b) Other penalties. The penalties set forth in paragraph (a) of 
this section are not exclusive, and a senior examiner

[[Page 27474]]

who violates the restrictions in Sec.  1212.3 also may be subject to 
other administrative, civil, or criminal remedies or penalties as 
provided in law.
    (c) Procedural rights. The procedures applicable to actions under 
paragraph (a) of this section are those provided in the Safety and 
Soundness Act under section 1376, in connection with the imposition of 
a civil money penalty; under section 1377, in connection with a removal 
and prohibition order (12 U.S.C. 4636 and 4636a, respectively); and 
under any regulations issued by FHFA implementing such procedures.

    Dated: May 27, 2009.
James B. Lockhart III,
Director, Federal Housing Finance Agency.
[FR Doc. E9-13620 Filed 6-9-09; 8:45 am]
BILLING CODE P


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