(a) Prohibited interests. Except as permitted by this section, an employee, or an employee’s spouse or minor child, shall not own or control, directly or indirectly, any debt or equity interest in:

(1) A depository institution or any of its affiliates; or

(2) A primary government securities dealer or any of its affiliates, if such employee has regular, ongoing access to Class I Federal Open Market Committee information.

(b) Exceptions. The prohibition in paragraph (a) of this section does not apply to the ownership or control of a debt or equity interest in the following:

(1) Nonbanking holding companies. A publicly traded holding company that:

(i) Owns a bank and either the holding company or the bank is exempt under the Bank Holding Company Act of 1956, 12 U.S.C. § 1841 et seq., (for example, a credit card bank, a nonbank bank or a grandfathered bank holding company), and the holding company’s predominant activity is not the ownership or operation of banks and thrifts;

(ii) Owns a thrift and its predominant activity is not the ownership or operation of banks and thrifts; or

(iii) Owns a primary government securities dealer and its predominant activity is not the ownership or operation of banks, thrifts or securities firms.

(2) Mutual funds. A publicly traded or publicly available mutual fund or other collective investment fund if:

(i) The fund does not have a stated policy of concentration in the financial services industry; and

(ii) Neither the employee nor the employee’s spouse exercises or has the ability to exercise control over the financial interests held by the fund or their selection.

(3) Pension plans. A widely held, diversified pension or other retirement fund that is administered by an independent trustee.

(c) Waivers. The Board’s Designated Agency Ethics Official, in consultation with Division management, may grant a written waiver permitting the employee to own or control a debt or equity interest prohibited by paragraph (a) of this section if:

(1) Extenuating circumstances exist, such as that ownership or control was acquired:

(i) Prior to Federal Reserve employment;

(ii) Through inheritance, gift, merger, acquisition, or other change in corporate structure, or otherwise without specific intent on the part of the employee, spouse, or minor child to acquire the debt or equity interest; or

(iii) By an employee’s spouse as part of a compensation package in connection with the spouse’s employment or prior to marriage to the employee;

(2) The employee makes a prompt and complete written disclosure of the interest;

(3) The employee’s disqualification from participating in any particular matter having a direct and predictable effect on the institution or any of its affiliates does not unduly interfere with the full performance of the employee’s duties; and

(4) Granting the waiver would be consistent with Division policy.

(d) Disqualification. If an employee or an employee’s spouse or minor child holds an interest in an entity under paragraph (b)(1) or (c) of this section, the employee must consult the Designated Agency Ethics Official in order to determine whether the employee must be disqualified from participating in any particular matter involving that entity or affiliate under the conflicts of interest rules of the Office of Government Ethics.

[61 FR 53828, Oct. 16, 1996, as amended at 64 FR 68616, Dec. 8, 1999]