Document ID: SEC-2011-0467-0001
Agency: sec
Document Type: Rule
Title: Supplemental Standards of Ethical Conduct for Members and Employees
Posted Date: 2011-04-11T04:00Z

[Federal Register Volume 76, Number 69 (Monday, April 11, 2011)]
[Rules and Regulations]
[Pages 19901-19902]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8485]

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  Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Rules 
and Regulations  

[[Page 19901]]

SECURITIES AND EXCHANGE COMMISSION

5 CFR Part 4401

[Release No. 34-64172]

Supplemental Standards of Ethical Conduct for Members and 
Employees of the Securities and Exchange Commission

AGENCIES:  Securities and Exchange Commission and Office of Government 
Ethics.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission with the concurrence of 
the Office of Government Ethics is amending its Supplemental Standards 
of Conduct for Members and Employees to eliminate a recently 
established prior approval requirement for outside employment.

DATES: Effective Date: May 11, 2011.

FOR FURTHER INFORMATION CONTACT: Shira Pavis Minton, Ethics Counsel, 
Office of the General Counsel, (202) 551-5170, Securities and Exchange 
Commission, 100 F Street, NE., Washington, DC 20549-1050.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission with 
the concurrence of the Office of Government Ethics (``OGE'') is 
amending its Supplemental Standards of Conduct for Members and 
Employees to eliminate a recently established prior approval 
requirement for outside employment. Staff members of the SEC are 
already subject to strict limitations regarding the type of employment 
they are allowed to undertake, and staff regularly seeks advice from 
the ethics office prior to taking any outside employment. In addition, 
the requirement appears to be largely cumulative of other measures 
without providing significant additional benefits. These other measures 
include the requirement that SEC staff members submit proposed 
publications or prepared speeches relating to the Commission (or to the 
statutes or rules it administers) to the General Counsel for review. 
These measures also include current financial disclosure regulations 
and current substantive regulations prohibiting conflicting outside 
employment. The requirement to obtain prior approval for outside 
employment has not identified any conflicts or otherwise enhanced the 
ethics program.

I. Administrative Procedure Act, Regulatory Flexibility Act, and 
Paperwork Reduction Act

    The Commission finds, in accordance with section 553(b)(3)(A) of 
the Administrative Procedure Act,\1\ that these rules relate solely to 
agency organization, procedure, or practice. These rules are therefore 
not subject to the provisions of the Administrative Procedure Act 
requiring notice, opportunity for public comment, and publication. The 
Regulatory Flexibility Act \2\ therefore does not apply. Because these 
rules relate to ``agency organization, procedure or practice that does 
not substantially affect the right or obligations of non-agency 
parties,'' they are not subject to the Small Business Regulatory 
Enforcement Fairness Act.\3\ The rules do not contain any new 
collection of information requirements as defined by the Paperwork 
Reduction Act of 1995, as amended.\4\
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    \1\ 5 U.S.C. 553(b)(3)(A).
    \2\ 5 U.S.C. 601 et seq.
    \3\ 5 U.S.C. 804(3)(C).
    \4\ 44 U.S.C. 3501 et seq.
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II. Costs and Benefits of the Amendments

    Taken as a whole, the Commission and the public have a substantial 
interest in the integrity of the Commission's processes. Congress has 
directed the Commission to oversee the securities markets and 
securities professionals and to protect investors. To that end, the 
ethical standards contained in the rules enacted today require the 
Commission's members and employees to maintain high standards of 
honesty, integrity, and impartiality, and to avoid actual, or the 
appearance of, conflicts of interest.
    In general, the costs of the procedures in the Commission's rules 
of practice fall largely on the Commission and its employees. As noted, 
the amendments set forth in this release relate to internal agency 
management. These rules re-codify pre-existing obligations on the 
Commission's members and employees with certain minor modifications. As 
such, the Commission believes that the costs imposed by compliance with 
these amended rules have not substantially increased from the 
obligations of Commission members and employees before these 
amendments.

III. Consideration of Burden on Competition

    Section 23(a)(2) of the Exchange Act, 15 U.S.C. 78w(a)(2), requires 
the Commission, in making rules pursuant to any provision of the 
Exchange Act, to consider among other matters the impact any such rule 
would have on competition. The purposes of the Exchange Act include 
protection of interstate commerce and maintenance of fair and honest 
markets. The degree of trust that investors and the public have in the 
Commission and its employees is critical to these goals. The Commission 
and its employees must adhere to the highest standards of integrity and 
impartiality and avoid the appearance of conflicts of interest. These 
rules affect a relatively small number of persons. Therefore, the 
Commission has determined that the burden on competition is small and 
is necessary and appropriate in furtherance of the purposes of the 
Exchange Act.
    Section 2(b) of the Securities Act, 15 U.S.C. 77b(b); Section 3(f) 
of the Exchange Act, 15 U.S.C. 78c(f); Section 2(c) of the Investment 
Company Act of 1940, 15 U.S.C. 80a-2(c); and Section 202(c) of the 
Investment Advisers Act of 1940, 15 U.S.C. 80b-2(c) require that the 
Commission consider efficiency, competition, and capital formation, in 
addition to the protection of investors, whenever it is required to 
consider or determine whether an action is necessary or appropriate in 
the public interest. As noted above, these rules apply to a relatively 
small number of people and do not substantially alter their pre-
existing obligations. The Commission believes that the amendments that 
the Commission is adopting today will have a small impact on 
competition, the capital markets, or capital formation.

[[Page 19902]]

IV. Statutory Basis and Text of the Rule

    This amendment to the Commission's ethics rules is being adopted 
pursuant to statutory authority granted to OGE and to the Commission. 
These include 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government Act of 
1978); section 19 of the Securities Act of 1933, 15 U.S.C. 77s; section 
23 of the Securities Exchange Act of 1934, 15 U.S.C. 78w; section 319 
of the Trust Indenture Act of 1939, 15 U.S.C. 77sss; section 40 of the 
Investment Company Act of 1940, 15 U.S.C. 80a-39; and section 211 of 
the Investment Advisers Act of 1940, 15 U.S.C. 80b-11.

List of Subjects in 5 CFR Part 4401

    Administrative practice and procedure, Conduct and ethics.

    For the reasons set out in the preamble, Title 5, Chapter XXXIV of 
the Code of Federal Regulations is amended as follows:

PART 4401--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR MEMBERS 
AND EMPLOYEES OF THE SECURITIES AND EXCHANGE COMMISSION

0
1. The authority citation for part 4401 continues to read as follows:

    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 1989 Comp., p. 215, as 
modified by E.O. 12731, 55 FR 42547; 3 CFR, 1990 Comp., p. 306; 5 
CFR 2635.105, 2635.403, 2635.803; 15 U.S.C. 77s, 78w, 77sss, 80a-37, 
80b-11.

0
2. Section 4401.103 is amended by:
0
a. Removing and reserving paragraph (c)(1)(ii);
0
b. Revising paragraph (c)(1)(iii);
0
c. Removing paragraph (d); and
0
d. Redesignating paragraph (e) as paragraph (d).
    The revision reads as follows:

Sec.  4401.103  Outside employment and activities.

* * * * *
    (c) * * *
    (1) * * *
    (iii) No employee shall undertake the following types of employment 
or activities:
    (A) Employment with any entity regulated by the Commission;
    (B) Employment or any activity directly or indirectly related to 
the issuance, purchase, sale, investment or trading of securities or 
futures on securities or a group of securities, except this prohibition 
does not apply to securities holdings or transactions permitted by 
Sec.  4401.102;
    (C) Employment otherwise involved with the securities industry; or
    (D) Employment otherwise in violation of any applicable law, rule 
or regulation.
* * * * *

    Dated: April 4, 2011.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. 2011-8485 Filed 4-8-11; 8:45 am]
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