21 January 2009

[Federal Register: January 21, 2009 (Volume 74, Number 12)]
[Rules and Regulations]               
[Page 3431-3436]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ja09-10]                         

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DEPARTMENT OF THE TREASURY

31 CFR Part 31

RIN 1505-AC05

 
TARP Conflicts of Interest

AGENCY: Departmental Offices, Treasury.

ACTION: Interim rule.

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SUMMARY: This interim rule provides guidance on conflicts of interest 
pursuant to section 108 of the Emergency Economic Stabilization Act of 
2008 (EESA), which was enacted on October 3, 2008.

DATES: Effective Date: January 21, 2009. Comment due date: March 23, 
2009.

ADDRESSES: Interested members of the public are invited to submit 
comments on this interim rule. Comments may be submitted to Treasury by 
either of the following methods: Submit electronic comments through the 
federal government e-rulemaking portal, http://www.regulations.gov, or 
send comments in hard copy to the Executive Secretariat, Office of 
Financial Stability, Department of the Treasury, 1500 Pennsylvania 
Avenue, NW., Washington, DC 20220.
    In general, Treasury will post all comments to http://
www.regulations.gov without change, including any business or personal 
information provided such as names, addresses, e-mail addresses, or 
telephone numbers. The Treasury will also make such comments available 
for public inspection and copying in the Treasury's Library, Room 1428, 
Main Department Building, 1500 Pennsylvania Avenue, NW., Washington, DC 
20220, on official business days between the hours of 10 a.m. and 5 
p.m. Eastern Time. Members of the public can make an appointment to 
inspect comments by telephoning (202) 622-0990. All comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure.

FOR FURTHER INFORMATION CONTACT: For further information regarding this 
interim rule contact the Troubled Asset Relief Program Chief Compliance 
Officer, Office of Financial Stability, Department of the Treasury, 
1500 Pennsylvania Avenue, Washington, DC, 20220, (202) 622-2000, or 
TARP.Compliance@do.treas.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 101(a) of EESA requires the Secretary of the Treasury to 
establish a Troubled Asset Relief Program (TARP) to ``purchase, and to 
make and fund commitments to purchase, troubled assets from any 
financial institution, on such terms and conditions as are determined 
by the Secretary, and in accordance with this Act and policies and 
procedures developed and published by the Secretary.'' Section 120 of 
EESA provides that the TARP authorities generally terminate on December 
31, 2009, unless extended upon certification by the Secretary of the 
Treasury to Congress, but no later than two years from the date of 
enactment (October 3, 2008).
    Section 108 of EESA authorizes the Secretary to issue regulations 
or guidelines necessary to address and manage or to prohibit conflicts 
of interest that may arise in connection with the administration and 
execution of the EESA authorities. On October 6, 2008, Treasury issued 
interim guidelines for potential conflicts of interest related to the 
authorities granted under EESA. This interim rule implements the 
guidelines by addressing conflicts that may arise during the selection 
of individuals or entities seeking a contract or financial agency 
agreement with the Treasury (retained entities), particularly those 
involved in the acquisition, valuation, management, and disposition of 
troubled assets. The interim rule also addresses conflicts and other 
matters that may arise in the course of those services. The interim 
rule does not address post-employment restrictions on Treasury 
employees, which we believe are already adequately covered by existing 
law.

II. This Interim Rule

    The Department is promulgating this interim rule in order to 
implement the interim guidance released on October 6, 2008. The 
procedures in this rule outline the process for reviewing and 
addressing actual or potential conflicts of interest among retained 
entities performing services in conjunction with EESA. The procedures 
set forth in this interim rule are effective immediately. Upon careful 
consideration of public comments, a final rule will be issued.
    Conflicts of interest may arise under EESA in a variety of 
situations, such as when retained entities perform similar work for 
Treasury and private clients. In these situations, retained entities 
may find that their duty to private clients impairs their objectivity 
when advising Treasury, or their judgment about the proper use of 
nonpublic information. Conflicts may also arise from the personal 
interests of individuals employed by retained entities. To address the 
potential for organizational and personal conflicts of interest, it may 
be necessary to restrict the activities of retained entities and key 
employees, to limit the dissemination of information, and to impose 
monitoring and reporting requirements. Treasury imposes these measures 
through its contracts and financial agent agreements, as well as 
through this interim rule. This interim rule does not substitute any 
provisions of the Federal Acquisition Regulation and, to the extent the 
Federal Acquisition Regulation applies to any contracts Treasury has 
with a retained

[[Page 3432]]

entity, this interim rule is in addition to the Federal Acquisition 
Regulation.
    The interim rule addresses conflicts that may arise in connection 
with contracts and financial agency agreements for services under the 
TARP, other than administrative services identified by the TARP Chief 
Compliance Officer. Because some administrative services do not have 
substantial decision-making authority, they are unlikely to present 
conflicts of interest and would not warrant the burden imposed by these 
regulations.
    The interim rule addresses organizational conflicts of interest in 
section 31.211. Before entering an arrangement for services, 
prospective contractors and financial agents must provide Treasury with 
sufficient information to evaluate the potential for organizational 
conflicts of interest and plans to mitigate them. Because the potential 
for conflicts is greatest when the arrangement relates to the 
acquisition, valuation, disposition, or management of assets, private 
entities seeking to perform these services must take special care when 
disclosing conflicts and designing mitigation plans. Once approved, a 
conflicts mitigation plan becomes a binding term of the arrangement.
    Personal conflicts of interest are covered in section 31.212. The 
provisions here recognize that, in some cases, managers and employees 
of retained entities may have personal interests that could impair 
their objectivity. Conflicts may arise from their financial holdings 
and those of close family members, as well as from other personal 
interests. The regulation requires retained entities to obtain 
information from their managers and key employees and evaluate the 
potential for conflicts, and to implement monitoring and reporting 
requirements designed to detect conflicts that might arise during the 
arrangement. Treasury expects retained entities who assist Treasury 
with the acquisition, valuation, management, and disposition of 
troubled assets to have the most stringent programs for detecting and 
preventing conflicts of interest.
    Other provisions in the regulations notify retained entities of 
restrictions on their conduct while working for Treasury. These 
provisions are not designed to be comprehensive; they supplement other 
requirements that may be imposed by contract, financial agency 
agreement, and other federal laws. Section 31.213 includes restrictions 
on giving and accepting gifts, making unauthorized promises, and 
improper uses of government property. Section 31.214 describes general 
prohibitions applying to retained entities who provide services for the 
acquisition, valuation, disposition, and management of troubled assets. 
Section 31.216 prohibits certain communications with Treasury employees 
that might improperly influence the process of selecting contractors 
and financial agents. Section 31.217 describes retained entities' duty 
to keep nonpublic information confidential and requires a certification 
of compliance in the form of a nondisclosure agreement. A sample 
nondisclosure agreement is available at www.treas.gov.
    In the course of implementing EESA, Treasury may permit its 
retained entities to use subcontractors (including consultants) to 
assist them in completing the work. Because subcontractors may have the 
same potential for conflicts of interest as those entities having a 
direct relationship with Treasury, these regulations impose 
requirements on ``retained entities,'' which are defined to include 
contractors, financial agents, and their subcontractors. We 
specifically request comments on the practicality of this approach.
    Overall, the regulations recognize that the potential for conflicts 
and measures for mitigating them depend on many factors, such as the 
type of services, a contractor's or financial agent's size and business 
structure, and length of the arrangement. Treasury will take these 
factors into account when reviewing conflict mitigation plans. In rare 
cases, Treasury may need to waive a potential conflict that cannot be 
adequately mitigated. Waiver requests will be considered on a case-by-
case basis, and granted in writing only when Treasury determines, in 
its sole discretion, that stronger measures are unnecessary to protect 
the interests of the Treasury. The standard for considering waivers 
appears in section 31.215. This section does not affect the rules for 
waiving contract provisions in the Federal Acquisition Regulations.
    Section 31.218 describes some of the measures available to Treasury 
to enforce these interim regulations. Measures include rejecting work 
that is tainted by a conflict of interest, terminating the arrangement 
for default, and in serious cases, referring violations to the United 
States Department of Justice for criminal prosecution. When Treasury 
has discretion in selecting or imposing a remedy, it will take into 
account whether the contractor or financial agent promptly disclosed 
the problem.

III. Procedural Requirements

Justification for Interim Rulemaking

    Under the Office of Federal Procurement Policy Act, 41 U.S.C. 418b, 
and Federal Acquisition Regulation (FAR) 48 CFR 1.501-3(b), a 
procurement regulation may take effect prior to notice and comment when 
there are urgent and compelling circumstances that make prior notice 
and comment impracticable. Such a procurement regulation must be 
published in the Federal Register and must include a statement that the 
regulation is temporary pending completion of a minimum 30-day public 
comment period. Under the Administrative Procedure Act, 5 U.S.C. 
553(b)(B), an agency may dispense with notice and comment procedures 
when the agency finds that good cause exists that prior notice and 
comment are unnecessary, impracticable, or contrary to the public 
interest. For the reasons set forth below, a determination has been 
made that urgent and compelling circumstances and good cause exist that 
justify the promulgation of this interim rule without prior opportunity 
for public comment.
    This rule is promulgated pursuant to EESA, the purpose of which is 
to immediately provide authority and facilities that the Secretary of 
the Treasury can use to restore liquidity and stability to the 
financial system of the United States. Specifically, this rule 
implements section 108, which requires the Secretary to develop 
regulations or guidelines for addressing conflicts of interest that may 
arise in connection with the administration and execution of the 
authorities provided under EESA. Because EESA provides such immediate 
authority to the Secretary to restore liquidity and stability to the 
financial system, it is essential that the conflicts of interest 
regulations be issued without delay so that anyone participating in the 
TARP program will have clear conflicts of interest information as soon 
as possible. Pursuant to 5 U.S.C. 553(b)(B), the Treasury finds that it 
would be unnecessary and contrary to the public interest to delay the 
issuance of this rule pending an opportunity for public comment and 
good cause exists to dispense with this requirement. For the same 
reasons, pursuant to 5 U.S.C. 553(d)(3), the Treasury has determined 
that there is good cause for the interim rule to become effective 
immediately upon publication. While this regulation is effective 
immediately upon publication, Treasury is seeking public comment on the 
regulation and will consider all comments in developing a final rule.

[[Page 3433]]

Regulatory Planning and Review

    This regulation is a significant regulatory action as defined in 
3(f)(4) of Executive Order 12866, as amended. Accordingly this interim 
final rule has been reviewed by the Office of Management and Budget 
(OMB).

Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required, this rule is 
not subject to the provisions of the Regulatory Flexibility Act (5 
U.S.C chapter 6).

Paperwork Reduction Act

    The information collections contained in the rule have been 
reviewed and approved by OMB under the Paperwork Reduction Act (44 
U.S.C. chapter 35) and assigned OMB control number 1505-0209. Under the 
Paperwork Reduction Act, an agency may not conduct or sponsor and a 
person is not required to respond to, a collection of information 
unless it displays a valid OMB control number.

List of Subjects in 31 CFR Part 31

    Conflicts of interest, Contracts, Executive compensation, Troubled 
assets.

0
For the reasons set out in the preamble, Title 31 of the Code of 
Federal Regulations is amended as follows:
0
1. Add part 31 to read as follows:

PART 31--TROUBLED ASSET RELIEF PROGRAM

Sec.
31.1 General.
Subpart A--[Reserved]
Subpart B--Conflicts of Interest
31.200 Purpose and scope.
31.201 Definitions.
31.211 Organizational conflicts of interest.
31.212 Personal conflicts of interest.
31.213 General standards.
31.214 Limitations on concurrent activities.
31.215 Grant of Waivers.
31.216 Communications with Treasury employees.
31.217 Confidentiality of information.
31.218 Enforcement.

    Authority: 31 U.S.C. 321; Pub. L. 110-343; 122 Stat 3765.


Sec.  31.1  General.

    This Part sets forth regulations to implement and administer the 
Emergency Economic Stabilization Act of 2008 (Pub. L. 110-343; 122 Stat 
3765).

Subpart A--[Reserved]

Subpart B--Conflicts of Interest


Sec.  31.200  Purpose and scope.

    (a) Purpose. This regulation sets forth standards to address and 
manage or to prohibit conflicts of interest that may arise in 
connection with the administration and execution of the authorities 
under the Troubled Asset Relief Program (TARP), established under 
sections 101 and 102 of the Emergency Economic Stabilization Act of 
2008 (EESA).
    (b) Scope. This regulation addresses actual and potential conflicts 
of interest that may arise from contracts and financial agency 
agreements between private sector entities and the Treasury for 
services under the TARP, other than administrative services identified 
by TARP Chief Compliance Officer.


Sec.  31.201  Definitions.

    As used in this part:
    Arrangement means a contract or financial agency agreement between 
a private sector entity and the Treasury for services under the TARP, 
other than administrative services identified by the TARP Chief 
Compliance Officer.
    EESA means the Emergency Economic Stabilization Act of 2008.
    Key individual means an individual providing services to a private 
sector entity who participates personally and substantially, through 
decision, approval, disapproval, recommendation, or the rendering of 
advice, in the negotiation or performance of, or monitoring for 
compliance under, the arrangement with the Treasury. For purposes of 
the definition of key individual, the words ``personally and 
substantially'' shall have the same meaning and interpretation as such 
words have in 5 CFR 2635.402(b)(4).
    Management official means an individual within a retained entity's 
organization who has substantial responsibility for the direction and 
control of the retained entity's policies and operations. With respect 
to organizations that have a management committee or executive 
committee that has been given such responsibilities, this means the 
members of those committees and, if no such committee exists, this 
means each of the general partners.
    Organizational conflict of interest means a situation in which the 
retained entity has an interest or relationship that could cause a 
reasonable person with knowledge of the relevant facts to question the 
retained entity's objectivity or judgment to perform under the 
arrangement, or its ability to represent the Treasury. Without limiting 
the scope of this definition, organizational conflicts of interest may 
include the following situations:
    (1) A prior or current arrangement between the Treasury and the 
retained entity that may give the retained entity an unfair competitive 
advantage in obtaining a new arrangement with Treasury.
    (2) The retained entity is, or represents, a party in litigation 
against the Treasury relating to activities under the EESA.
    (3) The retained entity provides services for Treasury relating to 
the acquisition, valuation, disposition, or management of troubled 
assets at the same time it provides those services for itself or 
others.
    (4) The retained entity gains, or stands to gain, an unfair 
competitive advantage in private business arrangements or investments 
by using information provided under an arrangement or obtained or 
developed pursuant to an arrangement with Treasury.
    (5) The retained entity is a potential candidate for relief under 
EESA, is currently participating in an EESA program, or has a financial 
interest that could be affected by its performance of the arrangement.
    Personal conflict of interest means a personal, business, or 
financial interest of an individual, his or her spouse, minor child, or 
other family member with whom the individual has a close personal 
relationship, that could adversely affect the individual's ability to 
perform under the arrangement, his or her objectivity or judgment in 
such performance, or his or her ability to represent the interests of 
the Treasury;
    Related entity means the parent company and subsidiaries of a 
retained entity, any entity holding a controlling interest in the 
retained entity, and any entity in which the retained entity holds a 
controlling interest.
    Retained entity means the individual or entity seeking an 
arrangement with the Treasury or having such an arrangement with the 
Treasury, but does not include special government employees. A 
``retained entity'' includes the subcontractors and consultants it 
hires to perform services under the arrangement.
    Special government employee means any employee serving the Treasury 
with or without compensation for a period not to exceed 130 days during 
any 365-day period on a full-time or intermittent basis.
    Treasury means the United States Department of the Treasury.
    Treasury employee means an officer or employee of the Treasury, 
including

[[Page 3434]]

a special government employee, or an employee of any other government 
agency who is properly acting on behalf of the Treasury.
    Troubled assets means residential or commercial mortgages and any 
securities, obligations, or other instruments that are based on or 
related to such mortgages, that in each case originated or was issued 
on or before March 14, 2008; and any other financial instrument that 
the Secretary of the Treasury has determined, upon transmittal in 
writing to the appropriate committees of Congress, the purchase of 
which is necessary to promote financial market stability.


Sec.  31.211  Organizational conflicts of interest.

    (a) Retained entity's responsibility. A retained entity working 
under an arrangement shall not permit an organizational conflict of 
interest unless the conflict has been disclosed to Treasury under this 
Section and mitigated under a plan approved by Treasury, or Treasury 
has waived the conflict. With respect to arrangements for the 
acquisition, valuation, management, or disposition of troubled assets, 
the retained entity shall maintain a compliance program designed to 
detect and prevent violations of federal securities laws and 
organizational conflicts of interest.
    (b) Information required about the retained entity. As early as 
possible before entering an arrangement to perform services for 
Treasury under the EESA, a retained entity shall provide Treasury with 
sufficient information to evaluate any organizational conflicts of 
interest. The information shall include the following:
    (1) The retained entity's relationship to any related entities.
    (2) The categories of troubled assets owned or controlled by the 
retained entity and its related entities, if the arrangement relates to 
the acquisition, valuation, disposition, or management of troubled 
assets.
    (3) Information concerning all other business or financial 
interests of the retained entity, its proposed subcontractors, or its 
related entities, which could conflict with the retained entity's 
obligations under the arrangement with Treasury.
    (4) A description of all organizational conflicts of interest and 
potential conflicts of interest.
    (5) A written detailed plan to mitigate all organizational 
conflicts of interest, along with supporting documents.
    (6) Any other information or documentation about the retained 
entity, its proposed subcontractors, or its related entities that 
Treasury may request.
    (c) Plans to mitigate organizational conflicts of interest. The 
steps necessary to mitigate a conflict may depend on a variety of 
factors, including the type of conflict, the scope of work under the 
arrangement, and the organizational structure of the retained entity. 
Some conflicts may be so substantial and pervasive that they cannot be 
mitigated. Retained entities should consider the following measures 
when designing a mitigation plan:
    (1) Adopting, implementing, and enforcing appropriate information 
barriers to prevent unauthorized people from learning nonpublic 
information relating to the arrangement and isolate key individuals 
from learning how their performance under the arrangement could affect 
the financial interests of the retained entity, its clients, and 
related entities.
    (2) Divesting assets that give rise to conflicts of interest.
    (3) Terminating or refraining from business relationships that give 
rise to conflicts of interest.
    (4) If consistent with the terms of the arrangement and permitted 
by Treasury, refraining from performing specific types of work under 
the arrangement.
    (5) Any other steps appropriate under the circumstances.
    (d) Certification required. When the retained entity provides the 
information required by paragraph (b) of this section, the retained 
entity shall certify that the information is complete and accurate in 
all material respects.
    (e) Determination required. Prior to entering into any arrangement, 
the Treasury must conclude that no organizational conflict of interest 
exists that has not been adequately mitigated, or if a conflict cannot 
be adequately mitigated, that Treasury has expressly waived it. Once 
Treasury has approved a conflicts mitigation plan, the plan becomes an 
enforceable term under the arrangement.
    (f) Subsequent notification. The retained entity has a continuing 
obligation to search for and to report any potential organizational 
conflict of interest. Within five (5) business days after learning of a 
potential organizational conflict of interest, the retained entity 
shall disclose the potential conflict of interest in writing to the 
TARP Chief Compliance Officer. The disclosure shall describe the steps 
it has taken or proposes to take to mitigate the potential conflict or 
request a waiver from Treasury.
    (g) Periodic Certification. No later than one year after the 
arrangement's effective date, and at least annually thereafter, the 
retained entity shall certify in writing that it has no organizational 
conflicts of interest, or explain in detail the extent to which it can 
certify, and describe the actions is has taken and plans to take to 
mitigate any conflicts. Treasury may require more frequent 
certifications, depending on the arrangement
    (h) Retention of information. A retained entity shall retain the 
information needed to comply with this section and to support the 
certifications required by this section for three (3) years following 
termination or expiration of the arrangement, and shall make that 
information available to Treasury upon request. Such retained 
information shall include, but is not limited to, written documentation 
regarding the factors the retained entity considered in its mitigation 
plan as well as written documentation addressing the results of the 
retained entities' periodic review of the mitigation plan.


Sec.  31.212  Personal conflicts of interest.

    (a) Retained entity's responsibility. A retained entity shall 
ensure that all management officials performing work under the 
arrangement and key individuals have no personal conflicts of interest 
unless mitigation measures have neutralized the conflict, or Treasury 
has waived the conflict.
    (b) Information required. Before management officials and key 
individuals begin work under an arrangement, a retained entity shall 
obtain information from each of them in writing about their personal, 
business, and financial relationships, as well as those of their 
spouses, minor children, and other family members with whom the 
individuals have a close personal relationship that would cause a 
reasonable person with knowledge of the relevant facts to question the 
individual's ability to perform, his or her objectivity or judgment in 
such performance, or his or her ability to represent the interests of 
the Treasury. When the arrangement concerns the acquisition, valuation, 
management, or disposition of troubled assets, the information shall be 
no less extensive than that required of certain new federal employees 
under Office of Government Ethics Form 278. Treasury may extend the 
time necessary to meet these requirements in urgent and compelling 
circumstances.
    (c) Disqualification. The retained entity shall disqualify persons 
with personal conflicts of interests from performing work pursuant to 
the arrangement unless mitigation measures have neutralized the 
conflict to the satisfaction of the TARP Chief

[[Page 3435]]

Compliance Officer. The retained entity may seek a waiver from the TARP 
Chief Compliance Officer to allow an individual with a personal 
conflict of interest to work under the arrangement.
    (d) Initial Certification. No later than ten business days after 
the effective date of the arrangement, the retained entity shall 
certify to the Treasury that all management officials and key 
individuals performing services under the arrangement have no personal 
conflicts of interest, or are subject to a mitigation plan or waiver 
approved by Treasury. In making this certification, the retained entity 
may rely on the information obtained pursuant to paragraph (b) of this 
section, unless the retained entity knows or should have known that the 
information provided is false or inaccurate. Treasury may extend the 
certification deadline in urgent and compelling circumstances.
    (e) Periodic Certification. No later than one year after the 
arrangement's effective date, and at least annually thereafter, the 
retained entity shall renew the certification required by paragraph (d) 
of this section. The retained entity shall provide more frequent 
certifications to Treasury when requested.
    (f) Retained Entities' Responsibilities. The retained entity shall 
adopt and implement procedures designed to discover, monitor, and 
report personal conflicts of interest on a continuous basis.
    (g) Subsequent notification. Within five business days after 
learning of a personal conflict of interest, the retained entity shall 
notify Treasury of the conflict and describe the steps it has taken and 
will take in the future to neutralize the conflict.
    (h) Retention of information. A retained entity shall retain the 
information needed to comply with this section and to support the 
certifications required by this section for three years following 
termination or expiration of the arrangement, and shall make that 
information available to Treasury upon request.


Sec.  31.213  General standards.

    (a) During the time period in which a retained entity is seeking an 
arrangement and during the term of any arrangement, a retained entity, 
its officers and partners, and its employees shall not:
    (1) Accept or solicit favors, gifts, or other items of monetary 
value from any individual or entity whom the retained entity, officer, 
partner, or employee knows is seeking official action from the Treasury 
in connection with the arrangement or has interests which may be 
substantially affected by the performance or nonperformance of duties 
to the Treasury under the arrangement.
    (2) Improperly use or allow the improper use of Treasury property 
for the personal benefit of any individual or entity other than the 
Treasury.
    (3) Make any unauthorized promise or commitment on behalf of the 
Treasury.
    (b) Any individual who acts for or on behalf of the Treasury 
pursuant to an arrangement shall comply with 18 U.S.C. 201, which 
generally prohibits the direct or indirect acceptance by a public 
official of anything of value in return for being influenced in, or 
because of, an official act. Violators are subject to criminal 
penalties.
    (c) Any individual or entity who provides information or makes a 
certification to the Treasury that is relating to services under EESA 
or required pursuant to 31 CFR Part 31 is subject to 18 U.S.C. 1001, 
which generally prohibits the making of any false or fraudulent 
statement to a federal officer. Upon receipt of information indicating 
that any individual or entity has violated any provision of title 18 of 
the U.S. Code or other provision of criminal law, Treasury shall refer 
such information to the Department of Justice and the Special Inspector 
General provided for under EESA.
    (d) A retained entity shall disclose to the Special Inspector 
General provided for the TARP, or the Treasury Office of the Inspector 
General, any credible evidence, in connection with the designation, 
services, or closeout of the arrangement, that a management official, 
employee, or contractor of the retained entity has committed a 
violation of Federal criminal law involving fraud, conflict of 
interest, bribery, or gratuity violations found in Title 18 of the 
United States Code, or a violation of the civil False Claims Act (31 
U.S.C. 3729-3733).


Sec.  31.214  Limitations on concurrent activities.

    Treasury has determined that certain market activities by a 
retained entity during the arrangement are likely to cause 
impermissible conflicts of interest. Accordingly, the following 
restrictions shall apply unless waived pursuant to Sec.  31.215, or 
Treasury agrees in writing to specific mitigation measures.
    (a) If the retained entity assists Treasury in the acquisition, 
valuation, management, or disposition of specific troubled assets, the 
retained entity, management officials performing work under the 
arrangement, and key individuals shall not purchase or offer to 
purchase such assets from Treasury, or assist anyone else in purchasing 
or offering to purchase such troubled assets from the Treasury, during 
the term of its arrangement.
    (b) If the retained entity advises Treasury with respect to a 
program for the purchase of troubled assets, the retained entity, 
management officials performing work under the arrangement, and key 
individuals shall not, during the term of the arrangement, sell or 
offer to sell, or act on behalf of anyone with respect to a sale or 
offer to sell, any asset to Treasury under the terms of that program.


Sec.  31.215  Grant of waivers.

    The TARP Chief Compliance Officer may waive a requirement under 
this Part that is not otherwise imposed by law when it is clear from 
the totality of the circumstances that a waiver is in the government's 
interest.


Sec.  31.216  Communications with Treasury employees.

    (a) Prohibitions. During the course of any process for selecting a 
retained entity (including any process using non-competitive 
procedures), a retained entity participating in the process and its 
representatives shall not:
    (1) Directly or indirectly make any offer or promise of future 
employment or business opportunity to, or engage directly or indirectly 
in any discussion of future employment or business opportunity with, 
any Treasury employee with personal or direct responsibility for that 
procurement.
    (2) Offer, give, or promise to offer or give, directly or 
indirectly, any money, gratuity, or other thing of value to any 
Treasury employee, except as permitted by Government-Wide Ethics Rules, 
5 CFR part 2635.
    (3) Solicit or obtain from any Treasury employee, directly or 
indirectly, any information that is not public and was prepared for use 
by Treasury for the purpose of evaluating an offer, quotation, or 
response to enter into an arrangement.
    (b) Certification. Before a retained entity enters a new 
arrangement, or accepts a modification to an existing arrangement, the 
retained entity must certify to the following:
    (1) The retained entity is aware of the prohibitions of paragraph 
(a) of this section and, to the best of its knowledge after making 
reasonable inquiry, the retained entity has no information concerning a 
violation or possible violation of paragraph (a) of this section.
    (2) Each officer, employee, and representative of the retained 
entity who participated personally and

[[Page 3436]]

substantially in preparing and submitting a bid, offer, proposal, or 
request for modification of the arrangement has certified that he or 
she:
    (i) Is familiar with and will comply with the requirements of 
paragraph (a) of this section; and
    (ii) Has no information of any violations or possible violations of 
paragraph (a) of this section, and will report immediately to the 
retained entity any subsequently gained information concerning a 
violation or possible violation of paragraph (a) of this section.


Sec.  31.217  Confidentiality of information.

    (a) Nonpublic information defined. Any information that Treasury 
provides to a retained entity under an arrangement, or that the 
retained entity obtains or develops pursuant to the arrangement, shall 
be deemed nonpublic until the Treasury determines otherwise in writing, 
or the information becomes part of the body of public information from 
a source other than the retained entity.
    (b) Prohibitions. The retained entity shall not:
    (1) Disclose nonpublic information to anyone except as required to 
perform the retained entity's obligations pursuant to the arrangement, 
or pursuant to a lawful court order or valid subpoena after giving 
prior notice to Treasury.
    (2) Use or allow the use of any nonpublic information to further 
any private interest other than as contemplated by the arrangement.
    (c) Retained entity's responsibility. A retained entity shall take 
appropriate measures to ensure the confidentiality of nonpublic 
information and to prevent its inappropriate use. The retained entity 
shall document these measures in sufficient detail to demonstrate 
compliance, and shall maintain this documentation for three years after 
the arrangement has terminated. The retained entity shall notify the 
TARP Chief Compliance Officer in writing within five business days of 
detecting a violation of the prohibitions in paragraph (b), above. The 
security measures required by this paragraph shall include:
    (1) Security measures to prevent unauthorized access to facilities 
and storage containers where nonpublic information is stored.
    (2) Security measures to detect and prevent unauthorized access to 
computer equipment and data storage devices that store or transmit 
nonpublic information.
    (3) Periodic training to ensure that persons receiving nonpublic 
information know their obligation to maintain its confidentiality and 
to use it only for purposes contemplated by the arrangement.
    (4) Programs to ensure compliance with federal securities laws, 
including laws relating to insider trading, when the arrangement 
relates to the acquisition, valuation, management, or disposition of 
troubled assets.
    (5) A certification from each management official performing work 
under the arrangement and each key individual stating that he or she 
will comply with the requirements in section 31.217(b). The retained 
entity shall obtain this certification, in the form of a nondisclosure 
agreement, before a management official or key individual performs work 
under the arrangement, and then annually thereafter.


Sec.  31.218  Enforcement.

    (a) Compliance with these rules concerning conflicts of interest is 
of the utmost importance. In the event a retained entity or any 
individual or entity providing information pursuant to 31 U.S.C. Part 
31 violates any of these rules, Treasury may impose or pursue one or 
more of the following sanctions:
    (1) Rejection of work tainted by an organizational conflict of 
interest or a personal conflict of interest and denial of payment for 
that work.
    (2) Termination of the arrangement for default.
    (3) Debarment of the retained entity for Federal government 
contracting and/or disqualification of the retained entity from future 
financial agency agreements.
    (4) Imposition of any other remedy available under the terms of the 
arrangement or at law.
    (5) In the event of violation of a criminal statue, referral to the 
Department of Justice for prosecution of the retained entity and/or its 
officers or employees. In such cases, the Department of Justice may 
make direct and derivative use of any statements and information 
provided by any entity, its representatives and employees or any 
individual, to the extent permitted by law.
    (b) To the extent Treasury has discretion in selecting or imposing 
a remedy, it will give significant consideration to a retained entity's 
prompt disclosure of any violation of these rules.

    Dated: January 14, 2009.
Neel Kashkari,
Interim Assistant Secretary for Financial Stability.
 [FR Doc. E9-1179 Filed 1-15-09; 4:15 pm]

BILLING CODE 4810-25-P