tion shall mean and include the delegated authority to act for the unavailable or incapacitated Commissioners.

(c) Pursuant to the statutes governing the Commission, to Reorganization Plan No. 10 of 1950, and to Public Law 87-592 approved August 20, 1962, the following automatic delegation of authority is made to provide continuity in the event of an emergency:

(1) In the absence or incapacity of the Chairman of the Commission during an emergency of the nature contemplated by this subpart, the authority of the Chairman to govern the affairs of the Commission and to act for the Commission, as provided for by laws and by delegations from the Commission, will pass to the surviving successor highest on the following list until such time as a duly appointed Chairman of the Commission is available:

(i) The senior Commissioner.
(ii) The General Counsel.

(iii) The Director of the Division of Corporate Regulation.

(iv) The Director of the Division of Corporation Finance.

(v) The Director of the Division of Trading and Markets.

(vi) The Chief Accountant.

(vii) The Director of the Office of Opinion Writing.

(viii) The Secretary.

(ix) The Regional Administrator highest on the following list:

(2) If and when a commissioner previously incapacitated or otherwise unavailable, again becomes available, he shall thereupon have all the powers and functions he would have had if he had not been incapacitated or otherwise unavailable.

(d) Actions taken for and in the name of the Commission as described above shall be effective immediately or as specified by the successor acting, but shall be subject to reconsideration by the Commissioners when the Commission has been reconstituted and is functioning.

(e) Except as may be determined otherwise by the Chairman or his successor, the duties of each head of a division or office of the Commission shall be discharged, in the absence or incapacity of such person during the emergency

conditions, by the available staff member next in line of succession. The head of each division or office shall designate the line of succession within his division or office. If no such designation has been made or the designatee is unavailable, such duties shall be assumed by the available subordinate officer or employee in the particular division or office who is highest in grade and in the event that there is more than one such person, in length of service with the Commission. (Sec. 4, 48 Stat. 885, as amended; 15 U.S.C. 78d, sec. 1, 76 Stat. 394; 15 U.S.C. 78d-1. Reorganization Plan No. 10 of 1950; 3 CFR, 1949-1953 Comp., p. 1006) [28 FR. 6970, July 9, 1963, as amended at 28 F.R. 7672, July 27, 1963; 28 FR. 14498, Dec. 31, 1963] § 200.204 Personnel, fiscal, and service functions.

In the absence of unavailability of the appropriate staff officer or his successor, authority to effect temporary appointments of such additional officers and employees, to classify and allocate positions to their proper grades, to issue travel orders, and to effect emergency purchases of supplies, equipment and services shall be exercised by the respective Regional Administrators, their deputies, or staff in line of succession, as may be required for the discharge of the lawful duties of the respective offices.

(Sec. 4, 48 Stat. 885, as amended; 15 U.S.C. 78d, sec. 1, 76 Stat. 394; 15 U.S.C. 78d-1, Reorganization Plan No. 10 of 1950; 3 CFR, 1949-1953 Comp., p. 1006)

§ 200.205 Effect upon existing Commission organization, delegations, and rules.

Except as otherwise provided herein, all outstanding Commission organizational statements, delegations of authority, orders, rules and regulations shall remain in force and effect during emergency conditions, subject to all lawful requirements and such changes as may be authorized by or in the name of the Chairman or the Commission.

The Commission finds that the foregoing sections involve matters of agency organization and procedure which do not require notice and opportunity for comment under section 4(a) of the Administrative Procedure Act. Accordingly, the plan is adopted, effective forthwith.

(Sec. 4, 48 Stat. 885, as amended; 15 U.S.C. 78d, sec. 1, 76 Stat. 394, 15 U.S.C. 78d-1. Reorganization Plan No. 10 of 1950; 3 CFR, 1949-1953 Comp., p. 1006)

Subparts H-L-[Reserved]

Subpart M-Regulation Concerning Conduct of Members and Employees and Former Members and Employees of the Commission

AUTHORITY: The provisions of this Subpart M issued under secs. 19, 23, 48 Stat. 85, 901, as amended, sec. 20, 49 Stat. 833, sec. 319, 53 Stat. 1173, secs. 38. 211, 54 Stat. 841, 855; 15 U.S.C. 77s, 78w, 79t, 77sss, 80a-37, 80b-11; E.O. 11222; 3 CFR, 1964-1965 Comp., 5 CFR 735.104.

SOURCE: The provisions of this Subpart M appear at 31 F.R. 5483, Apr. 7, 1966, unless otherwise noted.

§ 200.735-1 Purpose.

This subpart sets forth the standards of ethical conduct required of members, employees and special Government employees and former members and employees of the Securities and Exchange Commission. It is a revision of a comprehensive conduct regulation first adopted by the Commission in 1953 "to restate the ethical principles which it believes should govern and have governed the conduct of members and employees and former members and employees of the Commission." This revision is necessary to implement Executive Order 11222, May 8, 1965, and Part 735 of the Civil Service Commission regulations (5 CFR Part 735) adopted pursuant thereto. It also contains references to the several applicable statutes governing employee conduct, particularly Public Law 87-849 (76 Stat. 1119, 18 U.S.C. 201 et seq.), and the "Code of Ethics for Government Service," House Concurrent Resolution 175, 85th Congress, 2d session (72 Stat. B12).

§ 200.735-2 Policy.

(a) The Securities and Exchange Commission has been entrusted by Congress with the protection of the public interest in a highly significant area of our national economy. In view of the effect which Commission action frequently has on the general public, it is important that members, employees and special Government employees maintain unusually high standards of honesty, integrity, impartiality and conduct. They must be constantly aware of the need to avoid situations which might result either in actual or apparent misconduct or conflicts of interest and to conduct

A member or employee of the Commission shall not:

(a) Engage, directly or indirectly, in any personal business transaction or private arrangement for personal profit which accrues from or is based upon his official position or authority or upon confidential or nonpublic information which he gains by reason of such position or authority.'

(b) (1) Solicit or accept, directly or indirectly, any valuable gift, gratuity, favor, entertainment, loan, service, or any other thing of monetary value from any person with whom he transacts business on behalf of the United States; who has, or is seeking to obtain, contractual or other business or financial relations with the Commission; who conducts operations or activities regulated by the Commission; or who has interests that may be substantially affected by the per

1 Members of the Commission are subject also to the following prohibition in section 4(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78d(a)): • No Commissioner shall engage in any other business, vocation, or employment than that of serving as Commissioner, nor shall any Commissioner participate, directly or indirectly, in any stock market operations or transactions of a character subject to regulation by the Commission pursuant to this title • •

In addition, members of the Commission are subject to the requirements of Executive Order 11222 of May 8, 1965.

Detailed provisions regarding outside or private employment and transactions in securities and commodities are set forth in and § § 200.735-4 200.735-5 respectively. Further provisions regarding use and disclosure of confidential information are set forth in paragraph (d) of this section and in the note appended thereto.

formance or nonperformance of his official duty. This paragraph does not apply (i) when the circumstances make it clear that it is obvious family relationships rather than the business of the persons concerned which govern and are the motivating factors; (ii) when, on infrequent occasions, free food and refreshments of nominal value are offered in the ordinary course of a luncheon or dinner meeting or other meeting or on an inspection tour where attendance is official and proper; (iii) when unsolicited advertising or promotional material, such as pens, pencils, note pads, calendars and other items of nominal intrinsic value are offered; or (iv) when the Commission, after due consideration, determines that an exception is warranted and appropriate in a particular situation. For purposes of this subpart, "person" means an individual, a corporation, a company, an association, a firm, a partnership, a society, a joint stock company, or any other organization or institution."

(2) Act in any manner, whether or not specifically prohibited by this section, which might result in, or create the appearance of: (i) Using public office for private gain; (ii) giving preferential treatment to any person; (iii) impeding Government efficiency or economy; (iv) losing complete independence or impartiality; (v) making a Government decision outside official channels; or (vi) affecting adversely the confidence of the public in the integrity of the Government.

an

(3) Solicit contributions from other employee for a gift to an employee in a superior official position. An employee in a superior official position shall not accept a gift presented as a contribution from employees receiving less salary than himself. An employee shall not make a donation as a gift to an employee in a superior official position (5 U.S.C. 7351). However, this subparagraph does not prohibit the use of completely voluntary contributions of nominal amounts by employees within the Commission to establish funds for the

Members and employees of the Commission are subject also to provisions of the Federal Criminal Code which prohibits any officer or employee of the United States from asking, accepting or receiving any money or other thing of value in connection with any matter before him in his official capacity (18 U.S.C. § 203).

limited purpose of providing token remembrances or gifts of nominal value in situations such as death, illness, marriage, birth or retirement.

(4) Accept a gift, present, decoration, or other thing from a foreign government unless authorized by Congress as provided by the Constitution and in 5 U.S.C. 7342.

(c) Discuss or entertain proposal for future employment by any person outside the Government with whom he is transacting business on behalf of the United States.3

(d) Divulge confidential or nonpublic commercial, economic or official information to any unauthorized person, or release such information in advance of authorization for its release. Any officer or employee who is served with a subpoena requiring the disclosure of nonpublic information or documents shall, unless the Commission authorizes the disclosure of such information, respectfully decline to disclose the information or produce the documents called for, basing his refusal upon this paragraph. Any officer or employee who is served with such a subpoena shall promptly advise the Commission of the service of such subpoena, the nature of the information or documents sought, and any circumstances which may bear upon the desirability in the public interest of making available such information or documents.*

(e) Act in any official matter with respect to which there exists a personal

3 Detailed provisions regarding negotiations for future employment are set forth in § 200.735-7.

• The prohibitions regarding confidential or nonpublic information stated in paragraphs (a) and (d) of this section are intended to cover cases where, apart from specific prohibitions in any statute or other rule, the disclosure or use of such information would be unethical. Detailed prohibitions regarding disclosure or use of confidential or nonpublic information are set forth in Rule 122 (17 CFR 230.122), under the Securities Act of 1933; section 24 (c) of the Securities Exchange Act of 1934 (15 U.S.C. 78x) and Rule 0-4 thereunder (17 CFR 240.0-4); section 22(a) of the Public Utility Holding Company Act of 1935 (15 US.C. 79v) and Rule 104 thereunder (17 CFR 250.104); section 45(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-44(a)) and Rule 45a-1 thereunder (17 CFR 270.45a-1); and section 210(b) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10).

interest incompatible with an unbiased exercise of official judgment."

(f) Have direct or indirect, personal business or financial affairs which conflict or appear to conflict with his official duties and responsibilities.

(g) Use, or allow the use of, directly or indirectly, Government property of any kind, including property leased to the Government, for other than officially approved activities. An employee has a positive duty to protect and conserve Government property, including equipment, supplies, and other property entrusted or issued to him.

(h) Participate, while on Government-owned or leased property or while on duty for the Government, in any gambling activity, including the operation of a gambling device, in conducting a lottery or pool, in a game for money or property, or in selling or purchasing a numbers slip or ticket.

(i) Engage in criminal, infamous, dishonest, immoral, or notoriously disgraceful conduct, or other conduct prejudicial to the Government.

[31 F.R. 5483, Apr. 7, 1966, as amended at 33 F.R. 2631, Feb. 7, 1968]

§ 200.735-4 Outside or private employ

ment.

(a) No member or employee shall permit his name to be associated in any way with any legal, accounting or other professional firm or office."

(b) (1) No employee shall have any outside or private employment or activity or affiliation incompatible with concurrent employment by the Commission. Incompatible activities include but are not limited to: (i) Employment or association with any registered broker, dealer, public utility holding company, investment company, or investment adviser, or directly or indirectly related to

& Section 200.735-6 of this subpart provides a procedure for relieving employees from assignments in certain cases, including those covered by paragraph (f) of this section

• With respect to members, this paragraph supplements the statutory prohibition of outside employment contained in section 4(a) of the Securities Exchange Act of 1934, quoted in footnote 1. Except as otherwise indicated, the remaining provisions of this section are not made applicable to members in view of the provisions of section 4(a) of the Securities Exchange Act of 1934.

the issuance, sale or purchase of securities; (ii) legal, accounting, or engineering work for compensation involving matters in which the Federal government or any State, Territorial or municipal authority may be significantly interested; (iii) acceptance of a fee, compensation, gift, payment of expense, or any other thing of monetary value in circumstances in which acceptance may result in or create the appearance of, conflicts of interest; or (iv) outside employment which tends to impair the employee's mental or physical capacity to perform his Commission duties and responsibilities in an acceptable manner. For purposes of this paragraph, the private employment or affiliation of an employee's spouse, child or relative living in his immediate household, with any registered broker, dealer, investment adviser, investment company, public utility holding company or affiliate, or directly or indirectly related to the issuance, sale, purchase or investment of securities is deemed to be incompatible with the employee's concurrent employment by the Commission, except as determined otherwise by the Commission in a specific case.

(2) No employee shall accept or perform outside employment under a State or local government prohibited by law, regulations of the Civil Service Commission or the rules in this subpart.

(3) No employee shall receive any salary or anything of monetary value from a private source as compensation for his services to the Government (18 U.S.C. 209).

(4) The Commission encourages employees to engage in teaching, lecturing, and writing activities with or without compensation. However, no employee shall engage in any such activities, including teaching, lecturing, or writing for the purpose of the special preparation of a person or class of persons for an examination of the Civil Service Commission or Board of Examiners for the Foreign Service, which are prohibited by law, the Executive orders, Civil Service Commission regulations, or the rules in this subpart; or which are dependent on information obtained as a result of the employee's Government employment, except when that information has been made available to the general public or will be made available on request, or when the Commission gives formal approval for the use of nonpublic infor

mation on the basis that the use thereof is in the public interest."

(5) As required by Decision B-128527 of the Comptroller General dated March 7, 1967, travel expenses and subsistence of a member or employee who performs official travel under Commission orders must be paid from the Commission's appropriation. Unless prohibited by law, and notwithstanding the provisions of this paragraph (b) and of § 200.735-3, a member or employee who performs travel while on annual leave or while in a nonofficial duty status (administrative leave), may accept such bona fide reimbursement for actual expenses for travel and necessary subsistence from private sources as is compatible with these rules, provided no Government payment or reimbursement is made for any such expenses. However, a member or employee may not be reimbursed, and payment may not be made on his behalf, in any case for excessive personal living expenses, gifts, entertainment, or other personal benefits.

(6) The provisions of this paragraph (b) and § 200.735-3 (b) (1) do not preclude a member or employee from:

(1) Participation in the activities of national or State political parties not proscribed by law;

(ii) Participation in the affairs of, or acceptances of an award for a meritorious public contribution or achievement given by, a charitable, religious, professional, social, fraternal, nonprofit educational and recreational, public service, or civic organization.

(c) No employee shall appear in court or on a brief in a representative capacity (with or without compensation) or otherwise accept or perform legal, accounting, engineering, or similar professional work, unless specifically authorized to do so by the Commission. Acceptance of a forwarding fee shall be deemed to be within the foregoing prohibition. As a matter of general policy,

Since members of the Commission are covered by section 401(a) of Executive Order 11222, they are prohibited by Civil Service Regulations (5 CFR 735.203(c)) from receiving compensation or anything of monetary value for any consultation, lecture, discussion, writing, or appearance, the subject matter of which is devoted substantially to the responsibilities, programs, or operations of their agencies, or which draws substantially on official data or ideas which have not become part of the body of public information.

outside or private professional work or practice by the staff is discouraged and only in unusual cases or circumstances will it be authorized. However, the Commission encourages its employees, in offduty hours and consistent with official responsibilites, to participate, without compensation, in programs to provide legal assistance and representation to indigents. Such participation may include limited appearances in court and on briefs when required in connection with such programs. However, such participation may not involve any activities which are prohibited by law, the Executive Orders, Civil Service Commission regulations, or this Subpart M.

(d) An employee who intends to accept or perform any outside or private employment or professional work shall obtain necessary authorization in advance of such acceptance or performance. A request for such authorization shall be submitted to the division or office head or regional administrator concerned, together with all pertinent facts regarding the proposed employment, such as the name of the employer, the nature of the work to be performed, its estimated duration, and the fee or compensation to be received. Division and office heads and regional administrators shall forward all requests, together with their recommendations thereon, to the Director of Personnel.

(e) No employee shall accept a fee from an outside source on account of a public appearance, speech, lecture or publication if the public appearance or the preparation of the speech, lecture, or publication was a part of the official duties of the employee.

(f) No employee shall publish any article or treatise or deliver any prepared

• Attention is called to Title 18, United States Code, sections 201 through 209 which provide, among other things, that Federal employees are prohibited from acting as agent or attorney in prosecuting any claim against the United States or from aiding or assisting in any way, except as otherwise permitted in the discharge of official duties, in the prosecution or support of any such claim, or from receiving any gratuity, or any share of an interest in any claim from any claimant against the United States; and from directly or indirectly receiving or agreeing to receive any compensation whatever for services rendered or to be renedered to any person in relation to any matter in which the United States is a party or directly or indirectly interested.