Source: http://thefederalregister.com/2005/02/03/05-2029.html
Timestamp: 2018-11-21 03:34:47
Document Index: 566726824

Matched Legal Cases: ['arts 5501', '§ 5501', '§ 5501', '§ 5501', '§ 208', '§ 5501', '§ 5501', '§ 5502', '§ 5502', 'art 2635', '§ 5501', '§ 5501', '§ 5501', '§ 5501', 'arts 2635', '§ 5501', '§ 5501', '§ 5501', '§ 5501', '§ 5501', '§ 5501', 'art 2634', '§ 5501', '§ 5501', '§ 5501', 'art 2635', '§ 5501', '§ 5501', '§ 5501', '§ 5501', 'art 2635', '§ 5501']

Federal Register | Supplemental Standards of Ethical Conduct and Financial Discl
5 CFR Parts 5501 and 5502
Supplemental Standards of Ethical Conduct and Financial DisclosureRequirements for Employees of the Department of Health and Human Services
AGENCY: Department of Health and Human Services (HHS).
SUMMARY: The Department of Health and Human Services, with the concurrence of the Office of Government Ethics (OGE), is amending the HHS regulation that supplements the OGE Standards of Ethical Conduct. This interim final rule specifies additional procedural and substantive requirements that are necessary to address ethical issues at the National Institutes of Health (NIH) and updates nomenclature, definitions, and procedures applicable to other components of the Department. The rule: Revises the definition of a significantly regulated organization for the Food and Drug Administration (FDA); Updates the organization titles of designated separate agencies; Amends the gift exception for native artwork and craft items received from Indian tribes or Alaska Native organizations; Aligns the FDA prohibited holdings limit with thede minimisholdings exemption in OGE regulations; Revises prior approval procedures for outside activities; and, subject to certain exceptions: Prohibits NIH employees from engaging in certain outside activities with supported research institutions, health care providers or insurers, health-related trade or professional associations, and biotechnology, pharmaceutical, medical device, and other companies substantially affected by the programs, policies, or operations of the NIH; Bars NIH employees who file a public or confidential financial disclosure report from holding financial interests in substantially affected organizations; Subjects NIH non-filer employees to a monetary cap on holdings in such organizations; Specifies for NIH employees prior approval procedures for and limitations on the receipt of certain awards from outside sources; and Imposes a one-year disqualification period during which NIH employees are precluded from official actions involving an award donor. In addition, the Department is adding a new supplemental part to expand financial disclosure reporting requirements for certain outside activities and to ensure that prohibited financial interests are identified.
DATES: This interim rule is effective February 3, 2005. Comments received by April 4, 2005, will be considered prior to issuance of a final rule.
ADDRESSES: Send comments in writing to the Office of the General Counsel, Ethics Division, Department of Health and Human Services, Room 700-E, Hubert H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201, Attention: Linda L. Conte. Comments also may be sent electronically to the following e-mail address:ethics@hhs.gov. For e-mail messages, the subject line should include the following reference: "Comments on Interim Final HHS Supplemental Ethics Rule."
FOR FURTHER INFORMATION CONTACT: Edgar M. Swindell, Associate General Counsel, Office of the General Counsel, Ethics Division, Department of Health and Human Services, telephone (202) 690-7258, fax (202) 205-9752.
Post-promulgation comments on this interim final rule are requested. Those comments and experience under theinterim rule will inform the development of a final permanent rule, in consultation with OGE.
II. Analysis of the Amendments A. Supplemental Standards of Ethical Conduct Section 5501.101General
The definition of a “significantly regulated organization” found at § 5501.101(c)(2) is amended to make clear that for entities that do not have a record of sales of FDA-regulated products, and which have not yet commenced operations in a field regulated by FDA, an entity will nonetheless be deemed significantly regulated if its research, development, or other business activities are reasonably expected to result in the development of products that are regulated by FDA.
Section 5501.102Designation of HHS Components as Separate Agencies
The changes to this section reflect the name change of two HHS agencies, the Agency for Healthcare Research and Quality, previously known as the Agency for Health Care Policy and Research, and the Centers for Medicare and Medicaid Services, previously known as the Health Care Financing Administration. The Office of Consumer Affairs was abolished in 1998 and is deleted from the list. In addition, the amendment specifies that the designation of separate agencies will apply in defining a prohibited source for purposes of the new awards rule in § 5501.111 for NIH employees.
Section 5501.103Gifts From Federally Recognized Indian tribes or Alaska Native Villages or Regional or Village Corporations
Section 5501.104Prohibited Financial Interests Applicable to Employees of the Food and Drug Administration
Section 5501.104(a) prohibits FDA employees from holding financial interests in significantly regulated organizations, subject to certain exceptions in § 5501.104(b). The change in paragraph (b)(1) broadens the scope of the exception, which previously covered only pension interests, such as those arising from participation in defined benefit or defined contribution plans. Experience since the issuance of the supplemental regulation indicates that many incoming employees hold financial interests which, like a pension interest, were acquired as a form of compensation from a significantly regulated organization, but which do not qualify as a pension. For example, a recent report by the National Academy of Sciences found that stock and stock options are common employee benefits in small, private technology firms in the fields of engineering and health care, and the report recommended against forced divestiture of such employee benefits for scientists entering public service, as such requirements may unreasonably hamper the recruitment of talented and experienced scientific personnel. National Academy of Sciences,Science and Technology in the National Interest: Ensuring the Best Presidential and Federal Advisory Committee Science and Technology Appointments199-201 (2004). Therefore, the exception has been amended to include not only pensions but other employee benefits.
In addition, like all the exceptions in this section, the provision merely permits retention of a financial interest notwithstanding the prohibited financial holdings provision of this section. The recusal requirements of 18 U.S.C. 208 apply to all financial interests, including those covered by the exceptions in this section. (References to § 208 within this regulation are descriptive and not intended to interpret or expand upon the text of the statute.) Moreover, all financial interests are subject to directed divestiture pursuant to 5 CFR 2635.403(b), when there has been a determination by the agency that holding the particular financial interest, or a class of financial interests, will require the employee's disqualification from matters so central or critical to the performance of his official duties that the employee's ability to perform the duties of his office would be materially impaired, or will adversely affect the efficient accomplishment of the agency's mission because another employee cannot readily be assigned to perform the work from which the employee is recused by reason of the financial interest.
Section 5501.104(b)(2) contains an exception to the prohibited holdings rule for employees who are not required to file a public or confidential financial disclosure report. Non-filers have been permitted to have a financial interest not exceeding $5,000 in significantly regulated organizations. The amendment raises the amount of the allowable holding to $15,000. The change parallels the increase from$5,000 to $15,000 in the OGE regulatory exemption for matters involving parties, found at 5 CFR 2640.202(a), that occurred after the original issuance of the HHS supplemental provision. The OGE exemption allows an employee to participate in any particular matter involving specific parties in which the disqualifying financial interest does not exceed $15,000 in publicly traded securities or long-term Federal Government or municipal securities. Because the allowable holding amount in the HHS Supplement corresponded to the OGEde minimisamount, an increase in the latter justifies an increase in the allowable holding limit in the HHS Supplement. Further, the section will track any future change in the OGEde minimisamount.
Although the dollar amounts are identical, the two provisions substantively are not coextensive. Not all financial interests that may be covered by the FDA exception will be covered by the OGE regulatory exemption. For example, the FDA exception permits a non-filer to hold a financial interest in a non-publicly traded company (assuming all the other criteria in the section are also satisfied), but the OGE regulatory exemption only applies when the corporate securities are publicly traded. Therefore, the financial interest may still be problematic under 18 U.S.C. 208 and require a recusal, a divestiture, or an individual waiver, even though § 5501.104(b)(2) excepts the holding from the FDA automatic divestiture requirement.
In applying the allowable holding amount, the existing section specifies that the asset value is to be measured “at the time of acquisition.” The amendment to this section now defines that phrase. This change is intended to obviate the possibility of unintended situations which, depending on the interpretation of that phrase, could lead to treatment for some employees that is inconsistent with treatment of similarly-situated employees, and lead to results that are inconsistent with the intent of the provision. Specifically, there could be scenarios in which an employee who recently joined the agency, and who had acquired an asset in the distant past, could be permitted to retain an asset, now valued well over $15,000, because it had been valued under $15,000 “at the time of acquisition,” while other new employees who acquired an asset more recently, but at a level above $15,000, are required to divest a much lower valued financial interest in the same or other significantly regulated organizations. Such inconsistent results in the implementation of the regulation could undermine the very purpose of the provision (i.e., that onlyde minimisholdings should be permitted) and undermine employee confidence that the regulation is being applied fairly and uniformly. Accordingly, this change is intended to make clear that for assets that were acquired prior to joining FDA, the “time of acquisition” will be deemed to be the date of the employee's entrance on duty at the agency. The change will prevent unfair and unwarranted inconsistencies in how the prohibited holding regulation is applied and will prevent situations in which employees are treated disparately, as a consequence of investment decisions made prior to their entrance on duty.
New § 5501.104(c) provides that, for purposes of determining the divestiture period specified in 5 CFR 2635.403(d), an employee is not considered to have been directed to divest a financial interest prohibited under paragraph (a) of this section until the due date for disclosure of such interests. For new entrant employees, this disclosure would be submitted on either a public or confidential financial disclosure report or the supplemental report required by new § 5502.106(c), depending upon their filing status. For incumbent employees, the due date of the report required by § 5502.106(c) would be determinative. This rule allows the agency to analyze an employee's holdings and make a determination as to whether a particular financial interest is covered by the prohibition before the requirement to divest becomes applicable. The text codifies existing agency practice and parallels a similar provision in the Department of Housing and Urban Development supplemental ethics regulations at 5 CFR 7501.104(c) which prescribes a divestiture period of 90 days from the date a prohibited financial interest is reported.
Section 5501.106Outside Employment and Other Outside Activities
Existing paragraph (d)(5) has been renumbered as paragraph (d)(6). New paragraph (d)(5) specifies that approval of an outside activity is effective for one year only. Employees must renew their request for approval annually if theydesire to continue any long term outside activity. In addition, employees must submit a revised request for approval if they change positions within the agency or if a significant change occurs in the nature of the outside activity or in the scope of the employees' duties.
Section 5501.109Prohibited Outside Activities Applicable to Employees of the National Institutes of Health
Prior to the publication of this interim final rule, the criteria for approving or disapproving requests for approval of outside activities of NIH employees were set forth in the OGE regulation at 5 CFR part 2635, subpart H, and the Supplemental Standards of Ethical Conduct for Employees of HHS at 5 CFR 5501.106. Both the OGE rules and the HHS provisions in § 5501.106 remain in effect for all NIH employees. This interim final rule imposes additional, more stringent requirements, similar to those in 5 CFR 5501.106(c)(3) for employees of the FDA.
Outside activities with entities substantially affected by NIH programs, policies, or operations must be further restricted in order to avoid the potential for real or apparent conflicts of interest that may threaten the integrity of the critically important research conducted and sponsored by the NIH. This assessment is informed by recommendations of the Advisory Committee to the NIH Director that were presented in the June 22, 2004, Report of the NIH Blue Ribbon Panel on Conflict of Interest Policies (Blue Ribbon Panel Report), available athttp://www.nih.gov/about/ethics_COI_panelreport.htm, but is predicated upon a consideration of various outside activities of NIH employees that have been subject to inquiry and the desire to advance sound public policy. Many of the panel recommendations and related issues were highlighted and discussed at Congressional hearings on outside consulting arrangements by NIH employees. Panel recommendations to liberalize certain current restrictions were not adopted in this rule. Additional restrictions are necessary because NIH operations increasingly require significant interaction with pharmaceutical, biotechnological, biostatistical, and medical device companies (referred to within the regulation as “substantially affected organizations”) and utilization of their products; the size and scope of NIH funding of biomedical and behavioral research, research training, and related activities have grown substantially; and NIH research findings are broad in range and influence within the health care sector. Moreover, in light of recent Congressional oversight and media reports, HHS has determined that the existing rules governing outside activities have not prevented reasonable public questioning of the integrity of NIH employees and the impartiality and objectivity with which agency programs are administered.
Under § 5501.109(c)(1) of this interim final rule, subject to certain exceptions, all NIH employees are also prohibited from engaging in employment (which includes serving as an officer, director, or other fiduciary board member, serving on a scientific advisory board or committee, and consulting or providing professional services) and compensated teaching, speaking, writing, or editing with a substantially affected organization; a hospital, clinic, health maintenance organization, or other health care provider (defined comprehensively to include the types of entities that are eligible to receive payments under the Medicare program for the provision of health care items or services); a health insurer; a health, science, or health research-related trade, professional, consumer, or advocacy association; or a supported research institution.
Section 5501.109(b)(8)(iii) also permits the designated agency ethics official or, in consultation with the designated agency ethics official, the NIH Director or the NIH Director's designee to determine that other entities shall be classified as substantially affected organizations. These determinations will be based upon whether such entities are engaged in activities that are substantially affected by the programs, policies, or operations of the NIH and whether, in view of the ongoing research conducted or sponsored by the NIH, interests in these organizations are likely to pose ethicsconcerns for NIH employees similar to those presented by the entities specifically listed in paragraph (b)(8)(i). This authority might be used, for example, to cover a food, beverage, or tobacco manufacturer, if its products became a pervasive subject of NIH research activities into the health benefits or detriment associated with the product or its ingredients, and the research activities required a substantial coordinated effort across institutes and centers, such that it would be necessary or appropriate to apply a prophylactic rule applicable to all NIH employees. Lists of organizations designated as substantially affected organizations under paragraph (b)(8)(iii) will be maintained by the designated agency ethics official and the NIH deputy ethics counselor and disseminated to employees through appropriate means, including website posting.
If the circumstances would create an appearance of violating ethical standards, for example where the employee appears to have used his official position to obtain an outside compensated business opportunity or his actions reasonably create the impression of using his public office for the private gain of the outside company, then under the principles in the OGE Standards, 5 CFR 2635.101(b), and the rules governing misuse of position, 5 CFR 2635.702, the outside activity may be denied. An arrangement for compensation that far exceeds a market rate or that involves first class or foreign travel or extravagant accommodations, for example, may create the appearance that the offer was made or the remuneration was enhanced due to the employee's official position. Another situation cited in the OGE Standards in example 2 following 5 CFR 2635.802 would be where an employee was recently instrumental in formulating industry standards and will again be so involved. If an affected company offers a consulting contract to the employee to render advice to the company about how it can restructure its operations to comply with the very industrystandards that the employee has just drafted, the consulting arrangement should not be approved even though the employee lacks any current assignments affecting the industry, and even though the outside consulting can be finished before he again works on such matters.
Another regulation, 5 CFR 2635.807 precludes compensation, subject to certain exceptions, if an employee wants to teach a course, deliver a speech, or write a book that relates to his official duties. (Consulting, technically, is not covered by this section, but the analysis in section 807 does provide guidance in evaluating many outside activities.) The “relatedness” test evaluates, among other factors, the subject matter of the activity. For career employees, compensation is precluded if the teaching, speaking, or writing deals insignificantpart with any current assignment (or one completed within the last year) or any ongoing policy, program, or operation of the agency. However, in a note following the provision, OGE observes that a career employee may receive compensation for “teaching, speaking, or writing on a subject within the employee's discipline or inherent area of expertise based on his educational background or experience even though the [activity] deals generally with a subject within the agency's areas of responsibility.” But this textual note does not lessen the applicability of other requirements of section 807, notably that the invitation to engage in the activity must not have been extended to the employee primarily because of his official position or tendered, directly or indirectly, by a person or entity that has interests that may be affected substantially by the performance or nonperformance of the employee's official duties. The circumstances of the invitation and the identity of the inviter are as important as the subject matter of the activity.
This rule in fact expands upon that recommendation by addressing other activities that may pose similar concerns. Compensated teaching, speaking, and writing activities when performed by an NIH scientist for a substantially affected organization or a supported research institution can be no less troubling to the public than employment or consulting with these entities. Where biomedical research and publication activities are involved, any financial connection to affected industries may be perceived adversely. The British charitable trust, Sense About Science, in a recent working paper on scientific peer review observed this phenomenon in the context of sponsored research, stating that often “critical commentators simply emphasi[z]e the source of research funding in order to imply that the researcher's findings may be unreliable in some unspecified way.” Sense About Science,Peer Review and the Acceptance of New Scientific Ideas(2004), p. 18, available atwww.senseaboutscience.org.uk/.
Section 5501.109(c)(1)(ii) addresses this inherent perception problem and solves the difficulty of evaluating scientific content under the “relatedness” test by targeting the prohibition to those sources of compensation for teaching, speaking, and writing activities that are most directly connected to these identified problems, i.e., substantially affected organizations, supported research institutions, health care providers or insurers, or related trade, professional, or similar associations. These sources of compensation by definition have interests that are affected by NIH programs, policies, and operations and may be perceived as exerting influence on an employee's governmental actions whenever a financial relationship exists. Recent press accounts alleging NIH employee participation as compensatedindustry spokespersons or as authors of articles or other presentations that purport to endorse the benefits of specific products highlight this concern. Moreover, these entities, whether in industry or academia, are among those most likely to ask an NIH employee to speak or write on technical subjects related to their official duties, thus presenting the analytical quandary previously described when applying the “subject matter” part of the “relatedness” test in section 807.
National Academy of Sciences,On Being a Scientist.(Washington, D.C.: National Academy Press, 1994). Therefore, it is important to observe that the impact of the regulatory ban on outside activities is mitigated in several significant respects, through a transition period, a waiver provision, textual exceptions, and future actions that the Department has committed to undertake.
Second, a process exists under § 5501.106(e) for the designated agency ethics official to waive the application of the across-the-board rule in appropriate circumstances.
Fifth, the regulations contain exceptions designed to facilitate professional obligations and certain academic endeavors. These exceptions partially lift the absolute bar on outside activities with supported research institutions and other organizations (except substantially affected organizations) described in § 5501.109(c)(1), but they do not affirmatively permit an activity that would otherwise violate Federal law or regulations, including 5 CFR parts 2635, 2636, and 5501. Specifically, exceptions are provided that will allow participation in pursuits that are critical to maintaining technical proficiency, professional licenses, and academic credentials and disseminating scientific information, such as teaching involving multiple presentations at academic institutions, providing individual patient care, moderating or presenting at continuing professional education programs, and writing or editing scientific articles, textbooks, and treatises that are subjected to scientific peer review or a substantially equivalent editorial review process. The rule also contains exceptions for employment with, providing professional or consultative services to, or teaching, speaking, writing, or editing for, a political, religious, social, fraternal, or recreational organization. The rule also recognizes that individuals may be employed in non-problematic roles with outside entities such as providing clerical assistance, janitorial services, or unskilled labor.
The licensing and program accreditation infrastructure established by certain learned professions generally has not been adopted by doctorates in scientific research. Most professional groups have promulgated standards for their educational programs that are designed to avoid conflicts, commercial promotion, and control by industry sponsors. See, for example, American College of Surgeons Guidelines for Collaboration of Industry and Surgical Organizations in Support of Research and Continuing Education, available atwww.facs.org/fellows_info/statements/st-36.html;American Society of Consultant Pharmacists Guidelines for Industry Support of ASCP Educational Activities, available atwww.ascp.com/public/pr/guidelines/indsupp.shtml;and the discussion generally in the Food and Drug Administration publication entitled “Final Guidance on Industry-Supported Scientific and Educational Activities; Notice” at 62 FR 64074, Dec. 3, 1997. These groups police educational activities at which NIH employees may be asked to speak through strict policies limiting industry support to unrestricted educational grants. To provide a similar assurance in all contexts, including at gatherings convened by scientists and researchers from various academic disciplines, the regulations explicitly negate the exception if a substantially affected organization plays a role other than that of a donor of an unrestricted educational grant.
The regulation includes an exception for writing activities subjected to scientific peer review or substantially equivalent editorial processes. Scientific peer review is commonly understood in principle, with the primary purposes being to “evaluate scientific and technical merit,” “screen for obvious errors in methodology and reasoning,” and “ensure that the research is novel and “important”' within the relevant discipline. Effie J. Chan, Note, The “Brave New World” of Daubert: True Peer Review, Editorial Peer Review, and Scientific Validity, 70N.Y.U. L. Rev.100, 119 n.121 (1995). The concept of scientific peer review also generally involves the application of standards governing scientific misconduct and research integrity.E.g.,International Committee of Medical Journal Editors,Uniform Requirements for Manuscripts Submitted to Biomedical Journals: Writing and Editing for Biomedical Publication(2004), available athttp://www.icmje.org.HHS recognizes that actual editorial processes may vary in practice, for example, in terms of number of levels of review and the extent to which the publisher or journal relies on outside reviewers. Therefore, the exception is intended to cover writings subjected to any scientific peer review or substantially equivalent processes that are designed to ensure that the material disseminated is scientifically accurate, has technical merit, demonstrates originality, evinces an important contribution to the body of knowledge, and adheres to research and scientific conduct standards generally accepted within the relevant discipline.
Section 5501.110Prohibited Financial Interests Applicable to Employees of the National Institutes of Health
New § 5501.110 creates, for employees of the NIH who file either a public or confidential financial disclosure report, a prohibited financial holdings regulation that bars owning a financial interest, such as stock, in substantially affected organizations. In accordance with 5 CFR 2635.403(a), the Department has determined that the acquisition or holding of these financial interests would cause a reasonable person to question the impartiality or objectivity with which NIH programs are administered.
Public and confidential filers by definition are senior officials or other employees whose duties involve the exercise of significant discretion in certain critical areas of agency operations. Section 5501.110 is similar to an existing financial holdings restriction applied to FDA employees that dates back to 1972. The current version of the restriction applicable to FDA employees was part of the HHS Supplemental Ethics Regulation as it was first issued in 1996, and is found at § 5501.104. Since the enactment of the HHS Supplement, the work of the NIH has been determined to pose similar unique challenges for the agency ethics program. NIH employees, like FDA employees, participate in particular matters that substantially affect significant sectors of the United States economy, in particular, the pharmaceutical, medical device, and biotechnology industries. Even the food and beverage sector that is more associated with the FDA has begun to come within the NIH sphere through research on obesity and other diet-related conditions. Many NIH employees have access to confidential commercial information and trade secrets, the misuse of which can have serious financial consequences. Unethical conduct in this context, including misuse of information, could have serious public health consequences. In sum, the NIH has a compelling need to monitor, and impose reasonable prophylactic restrictions on, the financial ties between NIH employees and the vast number of entities that are substantially affected by NIH programs.
Therefore, § 5501.110 creates a prohibited financial holdings rule that serves the above-described interests and relieves the NIH of the significant administrative burden of resolving many conflict of interest problems on a case-by-case basis. However, § 5501.110 is narrowly tailored in three important respects. First, § 5501.110 distinguishes between interests in organizations that are substantially affected by NIH programs, policies, or operations,i.e., those organizations principally involved in the pharmaceutical and biotechnology industries, and those interests that are not in such organizations. Second, § 5501.110 imposes the strictest limitations on employees whose duties carry the greatest potential for conflict of interest,i.e., those employees who are required to file either a public financial disclosure statement or a confidential financial disclosure statement, pursuant to 5 CFR part 2634. Third, § 5501.110 incorporates a mechanism to exclude certain confidential filers or classes of confidential filers from the prohibited holdings requirement if the across-the-board prohibition is deemed unnecessary to ensure public confidence in the integrity of agency operations and their positions do not fall in certain enumerated categories nor entail responsibilities that are likely to pose conflicts related to financial holdings.
While the new rule prohibits public and confidential filers at the NIH from holding or acquiring any interest in a substantially affected organization, all other NIH employees (as well as those confidential filers excluded fromcoverage by the rule) will be subject to a $15,000 limit on the holding or acquisition of such interests and certain other restrictions. Currently, in order to avoid a conflict of interest, these employees must monitor their work activities and know the identity and value of their holdings at any given moment. A regulatory exemption at 5 CFR 2640.202 allows employees to work on specific party matters, such as contracts, grants, investigations, or clinical trials, as long as the value of the affected stocks does not exceed $15,000, and on a general matter, such as rulemaking or policy determination, if the value of any one affected holding does not exceed $25,000, subject to a $50,000 cap when cumulating all affected interests. However, if the asset value exceeds these thresholds, employees must recuse from official participation in particular matters that would have a direct and predictable effect on the financial interests of the companies in which they are invested. These monitoring and recusal responsibilities are exacerbated by the increasing number of mergers, acquisitions, joint ventures, partnerships, intellectual property licensing agreements, and even name changes, particularly within the biotechnology and pharmaceutical industries that, on any given day, may make it difficult to know whether one has a conflict to avoid. By imposing a $15,000 cap on such holdings, the employee, the NIH, and the public can be better assured that the participation by NIH employees in their respective work assignments, whether specific or general in scope, does not pose a conflict created by stock holdings. The $15,000 cap will adjust automatically to any change in thede minimisexemption limit for matters involving parties at 5 CFR 2640.202(a).
Although the dollar amounts in the two provisions are linked, substantively they differ in an important respect. Not all financial interests valued at $15,000 or less will be covered by the OGE regulatory exemption. For example, although the NIH exception permits a non-filer to hold a financial interest in a non-publicly traded company (assuming all the other criteria in the section are also satisfied), the OGE regulatory exemption only applies to securities in publicly traded companies or long-term Federal Government or municipal securities. Accordingly, NIH employees are reminded that even though § 5501.110 may allow retention of certain assets that would otherwise be prohibited, the financial interest may nevertheless be problematic under 18 U.S.C. 208. Absent a regulatory exemption that specifically addresses the financial interest, a recusal, a divestiture, or an individual waiver may be required.
The prohibitions relating to financial interests will apply to the spouses and minor children of NIH employees. Inasmuch as the financial interests of these relatives are imputed to employees and pose identical conflicts concerns, the Department has made the determination, pursuant to 5 CFR 2635.403(a), that there is a direct and appropriate nexus between this prohibition as applied to spouses and minor children and the efficiency of the service. It should be noted, however, that § 5501.110 is not intended to prohibit employment by spouses and minor children in the affected industry sectors, although any actual or apparent conflicts of interests created as to NIH employees by such employment must be resolved under other applicable provisions of 5 CFR part 2635.
Section 5501.110(e)(1) permits the holding of financial interests acquired through employment with a substantially affected organization. This exception is intended to parallel the FDA provision at amended § 5501.104(b)(1) that excepts pensions or other employee benefits derived from employment with a significantly regulated organization. This exception is necessary to facilitate recruitment of qualified scientific and professional personnel, many of whom may have begun their careers in industry. Because NIH employees, as opposed to spouses and minor children of employees, are generally prohibited under § 5501.109 from engaging in current employment with a substantially affected organization, the provision will primarily apply to financial interests acquired through employment prior to joining the agency. However, it may apply in the limited number of instances in which NIH employees are permitted to have a concurrent employment relationship with a substantially affected organization, such as a clerical position excepted by § 5501.109(c)(3)(iii), that may provide a pension or other employee benefits.
Furthermore, § 5501.110(e)(3) provides NIH employees with the opportunity to request an individual exception for certain financial interests. Where the employee can demonstrate exceptional circumstances, the NIH may allow an individual to hold a financial interest in a substantially affected organization, provided that the application of the financial interest prohibition is not necessary to ensure public confidence in the impartiality or objectivity with which NIH programs are administered or to avoid a violation of 5 CFR part 2635.
Section 5501.110(g), for the reasons discussed previously in connection with the FDA provision at § 5501.104(c), specifies that the requirement to divest a financial interest prohibited byparagraphs (c) and (d) of this section is not triggered until the due date for reporting prohibited financial interests under the applicable fi